Abbott to Spin Off Troubled Nutrition Unit to Focus on Growth

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Abbott Laboratories CEO Robert Ford said the decision to separate its nutrition business in a stand-alone, public company would allow Abbott to focus on its higher-growth portfolio. (Getty Images)

Key Points

Abbott Laboratories plans to spin off its global nutrition business into an independent, publicly traded company by the end of 2027.
The spinoff will house brands like Similac and Ensure, and the new company is expected to generate about $8.5 billion in annual sales.
Abbott shares fell in premarket trading Wednesday despite the spinoff announcement and third-quarter earnings that largely matched estimates.

Abbott Laboratories said Wednesday that it plans to separate its global nutrition business into an independent, publicly traded company by the end of 2027.

The spinoff will create a stand-alone business housing brands such as Similac infant formula and Ensure nutritional supplements. The new company is expected to generate roughly $8.5 billion in annual sales.

Abbott CEO Robert Ford framed the separation as a strategic move to focus on the company’s “core higher-growth” portfolio, which includes medical devices and diagnostics, while giving the nutrition business dedicated resources to operate independently.

The move also allows Abbott to distance itself from a division that has been a drag on its recent financial performance. The nutrition segment has suffered from falling sales and market share losses in pediatric formulas, though second-quarter results showed modest improvement after a prolonged slump.

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The unit has also been a lightning rod for legal controversy. Abbott has faced widespread lawsuits alleging Similac, its infant formula for premature babies, increases the risk of a severe gastrointestinal disease called necrotizing enterocolitis. In late August, the company agreed to pay $670 million to resolve claims involving some 2,000 infants, though it explicitly denied any liability.

Shares fell 4% to $98.33 in premarket trading Wednesday. Futures tracking the benchmark S&P 500 index ticked up 0.2%.

The culprit was likely third-quarter earrings, which largely matched consensus estimates. Before markets opened on Wednesday, Abbott posted adjusted earnings of $1.42 a share, beating analysts’ calls by a penny. Total sales came to $13.01 billion, narrowly ahead of Wall Street’s forecast for $12.99 billion.

The nutrition business brought in $2.26 billion globally in the third quarter, marking a roughly 5% improvement from the same period last year.

For the full year, Abbott continues to forecast roughly 6% comparable sales growth and adjusted earnings in the range of $5.50 to $5.55 a share.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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