Who owns Abbott Laboratories? An in-depth look into the company’s rise
Abbott has hogged the headlines in early 2022 due to its contribution to the national baby formula shortage. The shortage arose after the closure of Abbott’s Michigan plant due to contamination issues. Baby formula contaminated with the bacteria Cronobacter sakazakii led to the hospitalization of four infants, two of whom died.
The FDA announced that the Michigan plant should reopen by early May 2022, but it will take about two months before Abbott Nutrition baby formula arrives in stores. Abbott held the largest share in the infant formula market, but this setback gives competitors like Mead Johnson, the manufacturer of Enfamil, a chance to close the gap.
Key Takeaways.
- Abbott was founded in the late 1800s and went public at the start of the Great Depression in the late 1920s.
- Abbott broke into two independent companies in 2013, with the new company AbbVie taking over Abbott’s pharmaceutical department.
- Despite institutional investors holding 3/4s of Abbott’s stock, no individual shareholder has a majority stake in the company.
- CEO Robert B. Ford increased Abbott’s net earnings from $3.7 billion in 2019 to $7 billion in 2021, a growth of nearly 90%.
Dr. Wallace C. Abbott House founded Abbott in the late 1800s
After graduating from the University of Michigan, Wallace Abbott founded the Abbott Alkaloidal Company in Chicago. Abbott pioneered the delivery of alkaloids via granules, which helped patients consume more consistent and effective doses.
The company grew exponentially in the late 1890s and early 1900s, culminating in Abbott’s international expansion in 1907. Abbott opened its first international office in London, England. It currently operates in over 160 countries and is India’s largest healthcare products company.
Abbott grew during World War I as it pioneered the manufacture of Chlorazene, an antiseptic used to treat wounded soldiers. In 1921, Dr. Wallace C. Abbott passed away, and a year later, the company moved from Ravenswood to North Chicago, Illinois.
The company held its initial public offering in 1929, the year of the stock market crash that sparked the Great Depression. The dire financial times didn’t affect Abbott: innovations in vitamins and intravenous solutions kept sales and profits high.
World War II increased Abbott’s income as the government requested pharmaceutical companies to ramp up penicillin production. The industry increased penicillin production by more than 20,000%.
In 1985, Abbott manufactured the first licensed test to identify HIV in blood. The company considers it ‘one of our greatest achievements and the first significant medical victory against what had, until then, seemed an unstoppable threat.’
In 2013, Abbott split from its pharmaceutical wing to focus on nutrition products, diagnostic equipment, and medical devices
Acquisitions contributed to Abbott’s growth before 2013, but its historic split into two companies forms perhaps the most pivotal move by the company. In its 125th year, Abbott spun off from its pharmaceutical wing, which adopted the name AbbVie.
In October 2011, Abbott announced its intention to separate into two independent companies. Abbott would focus on nutrition products, diagnostic equipment, and medical services, while AbbVie expanded as a research-based specialty biopharmaceutical company.
“We wish our colleagues at AbbVie continued success as they become part of a new, independent company that is already making a significant difference, focusing on highly specialized, market-leading therapies for some of the world’s most difficult-to-treat diseases,” then Abbott CEO Miles D. White said.
Via an investor call, White said investors would ‘benefit from two fundamentally different investment opportunities with distinct strategic profiles and business priorities.’
White delivered such assurances to quell investor concern that Abbott divested from its pharmaceutical business due to the imminent expiration of patents for Humira, which formed nearly half of the division’s drug sales. Abbott created Humira, the first fully-human monoclonal antibody drug, in 2002.
AbbVie has performed well, aggressively protecting its Humira patents. The primary patent was set to expire in 2018 but will now expire in 2034. Only manufacturers who’ve negotiated settlements with AbbVie will get an early entry in 2023.
Institutional investors own around 75% of Abbott’s shares
Institutional investors own around 75% of Abbott’s shares, but no institution holds a majority stake. The Vanguard Group, Inc., is the largest shareholder, with 8.4%, followed closely by Capital Research and Management Company, with 8.3% of common stock.
BlackRock, Inc., comes next, holding 7.6% of the stock. The top 25 shareholders hold less than half of Abbott’s stock, meaning they don’t have enough voting power to sway company decisions.
The general public owns 24% of Abbott, a significant chunk, but not enough to sway policy decisions. Abbott’s board will likely pay attention to the institutional investors’ preferences as they hold the largest piece of company stock.
Insiders own the remaining 1% of Abbott shares. This share may seem minimal, but for a company of Abbott’s size, 1% translates to $1.7 billion worth of shares.
Abbott’s CEO helped the company increase its net earnings by 90% during the coronavirus pandemic
Abbott’s CEO Robert B. Ford had big shoes to fill when the company chose him to succeed long-time chief executive Miles White.
Miles became CEO in 1999, taking over from Duane Burnham, a character who valued secrecy, saying that a ‘whale that surfaces gets harpooned.’ White increased Abbott’s value through acquisitions and raised the company’s public profile by investing in community and humanitarian projects.
When Miles took over, Abbott’s market capitalization hovered around $75 billion; he increased it to $149 billion. After guiding Abbott’s split from AbbVie, White oversaw Abbott’s acquisition of medical test maker Alere and device maker St. Jude Medical.
White demonstrated his leadership skills by steering the company through losses occasioned by quality control issues in its diagnostics division. “He has positioned Abbott well for continued top-tier growth and innovation and we thank him for his countless contributions,” William Osborn, an Abbott executive, said.
“It’s my honor to work alongside the board and my global team to deliver on the unprecedented opportunities in front of us, so Abbott continues to lead in the reshaping of the future of healthcare,” Robert Ford said.
Robert Ford took office as the COVID-19 pandemic swung into high gear. He guided the company through the crisis expertly, raising the company’s net earnings by about 90%, from $3.7 billion in 2019 to $7 billion in 2021.
Ford faces another stern test as the Senate Finance Committee looks into the company’s international tax practices and the stock buybacks scheme it authorized in 2019. Committee Chairman Sen. Ron Wyden also requested information on the amount spent to upgrade the company’s Michigan plant before its closure due to bacterial contamination.
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