Alere Stock Falls as Abbott CEO Declines to Comment and Confirm $6 Billion Deal

April 21, 2016
By Alex Keown, BioSpace.com Breaking News Staff

WALTHAM, Mass. – Shares of Alere Inc. dropped dramatically by 18 percent Wednesday after rumors of its deal with Illinois-based Abbott Laboratories may not go through.

During a post-earnings conference call Wednesday, Miles White, Abbott’s chief executive officer, declined to comment about the deal that was struck in February. A possible reason the deal may be in jeopardy is related to a U.S. grand jury investigation into Alere’s sales practices in Africa, Asia and Latin America, Reuters reported. At the same time as the grand jury investigation was announced, Alere said it was forced to delay its annual 10-K filing due to the reanalyzing of revenue cutoff, in Africa and China for 2013, 2014 and 2015, Reuters said. There is no word when the company plans to file the report, but the company has six months to file the form with the U.S. Securities and Exchange Commission. Alere received a notice of non-compliance from the New York Stock Exchange in March over the matter.

Because of those concerns, speculation rose over whether or not that jeopardizes the $5.8 billion deal with Abbott. White said it would be inappropriate for him to talk about the deal while things are still up in the air.

Debbie Wang, an analyst with MorningStar, told QMed that Abbott could use Alere’s troubles to back out of the deal.

“We have not been enthusiastic fans of Alere’s point-of-care business and we continue to think it is vulnerable to competitive technology that could leapfrog Alere’s offerings, while at the same time switching costs are negligible,” Wang said in an email to QMed.

In February, Abbott struck the deal with Alere to allow the company to “provide new, flexible, cost-effective, high-quality products to help health systems meet growing demand in both in-patient and out-patient settings.” The company said Alere’s portfolio of products will provide the company entry into new outlets, including doctors' offices, clinics, pharmacies and at-home testing. Abbott said its combination with Alere will offer the broadest point of care menu of infectious disease, molecular, cardiometabolic and toxicology testing, expanding Abbott's platforms to include benchtop and rapid strip tests.

Alere had global sales of $2.5 billion last year, with half of that being in the United States. Alere also has a growing presence in key international markets, where Abbott's capabilities and infrastructure will drive accelerated growth of Alere's portfolio, Abbott said.

In 2015, White said he was interested in pursuing a deal in the medical device arena. In his 13 years helming Abbott, White has been behind several big deals, including the 2006 acquisition of Guidant's coronary stent business for $4.5 billion and the $6.9 billion purchase of Knoll Pharmaceuticals in 2001. In August, Abbott opted not to pursue a deal to acquire St. Jude Medical Inc. for $25 billion.

Since the 2012 spinoff of AbbVie, Abbott has focused on increasing its generic-drug offerings in emerging markets, most particularly China, as well as adding new technology to the company’s device and diagnostics businesses. Abbott management approved plans to realign its vascular manufacturing operations and core diagnostics business in order to reduce costs, the company said in its latest quarterly report.