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Abbott Laboratories (ABT), Celgene Corporation (CELG) & Three Pharma Companies to Buy in 2013

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Currently, a majority of pharma companies are facing the issue of generic competition. This has forced them to either expand their footprints in different geographical locations or prepare a better product pipeline. This will help these companies maintain their revenue streams once their patents on current top drugs expire.

In this article, I have picked three such companies: Abbott Laboratories (NYSE:ABT), Celgene Corporation (NASDAQ:CELG), and Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA). All three announced strong first-quarter 2013 results. Let’s see how these companies are planning to face the generic threat.

Emerging markets to drive earnings

Abbott Laboratories (NYSE:ABT) reported first-quarter revenue of $5.38 billion with growth of 1.8% year over year. It was mainly driven by emerging markets, contributing 40% of total sales. Its nutrition and diagnostics segments were the revenue drivers in emerging markets. Abbott’s diagnostics segment grew 6.4% year over year. The profit margin continued to improve for this segment and management expects operational growth of 10% because of its core lab sales, which grew 9% year over year.

Abbott Laboratories (NYSE:ABT)With the launch of several new tests and automated solutions, which would improve the efficiency of core lab customers, Abbott Laboratories (NYSE:ABT) projects that its diagnostics segment will be contributing around 20% of the operating margin by 2015. The scope for healthcare expansion in key emerging markets such as China, Russia, and Brazil will provide further growth opportunity for the company. For 2013, the company sees operating margins expanding by 100 basis points from the emerging markets.

Talking about Abbott Laboratories (NYSE:ABT)’s sales in the nutrition segment, it posted stronger sales of $1.7 billion in the first quarter of 2013, up 9% year over year. Out of total nutrition sales, 14% was contributed by international sales, and 45% was accounted from growth in the emerging markets. This growth was mainly driven by increased demand in pediatric and adult sales, which led to year over year increase in sales of 13% and 4%, respectively.

With new product launches in this segment under infant brands such as Similac formula, PediaSure, and a new line of Kidz ZonePerfect bars, the nutrition segment is expected to witness growth in emerging markets. New product launches over a five year period should contribute another $1 billion in sales to the nutrition segment by 2016. Seeing significant growth in this nutrition segment, management expects it to deliver 20% of the operating margin by 2015.

Potential new drug indications

Celgene Corporation (NASDAQ:CELG) announced first-quarter 2013 results with sales of $1.46 billion, an increase of 15% year over year. Its revenue was driven by strong performance of its product Revlimid, which treats multiple myeloma. Revlimid sales were around $1 billion, an increase of 16% year over year. In June 2013, the FDA will announce its decision for Revlimid as an additional treatment of relapsed and refractory mantle cell lymphoma, which will provide it with additional addressable market.

For this year, Celgene Corporation (NASDAQ:CELG)’s key focus is to gain EU label expansion of this product for newly diagnosed myeloma patients below the age of 75 and progression-free survival. With its diversified treatment portfolio, Revlimid will be a key driver for the company’s long-term growth.

In February, the FDA approved Pomalyst for advanced multiple myeloma. Pomalyst reported impressive initial sales of $29 million, above analysts’ expectations of $8 million. Out of total sales, $22 million was from the U.S. and the remaining $7 million was from early access programs in Europe. With so much growth in a short span of time, sales are expected to reach $117 million by the end of 2013. This year, we can expect Pomalyst’s new indications for myelofibrosis and systemic scleroderma too. Analysts expect Pomalyst to be a future blockbuster drug for Celgene Corporation (NASDAQ:CELG), estimating $1 billion-$1.5 billion in sales by 2017, targeting the multiple myeloma market of $6.5 billion.

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