Will Alere Be Abbott's Guidant?

It took Boston Scientific a decade to move on from all the legal and regulatory woes that came with its $27 billion acquisition of Guidant in 2006. Will Alere end up being just as burdensome for Abbott?

Amanda Pedersen

If all goes as planned, Abbott Laboratories will soon close on its $5.3 billion acquisition of Alere Inc. after more than a year of contesting the deal in court. The companies finally found some common ground to reconcile the agreement in April, and the pending acquisition is likely to be a focal point for analysts Thursday, as Abbott unveils its second-quarter results.

Alere checked off one major requirement on its Abbott-related to-do list this week by agreeing to sell some of its assets to Quidel for $400 million plus $40 million in milestone-based payments. The divestiture was necessary in order for Alere to satisfy antitrust requirements in connection with the Abbott deal.

Alere also launched a new rapid urine test this week, the iCup Rx Drug Screen, which is designed to detect five of the most commonly misused and abused prescription drugs. The company said it is the first rapid urine test that can validate these five drugs at one time, streamlining testing and monitoring of patients in medical and addiction management settings.

With all the twists and turns that Abbott and Alere have been through in the past 18 months, the deal brings to mind Boston Scientific's $27 billion acquisition of Guidant in 2006. That deal was dubbed the second-worst merger of all time by Fortune magazine, eclipsed only by AOL's purchase of Time Warner in 2000.

Boston Scientific spent a decade settling extensive legal troubles inherited from Guidant, not to mention paying more than $6.2 billion in goodwill impairments since the deal closed in April 2006. The company's stock didn't recover from that M&A blunder until last year. The company also agreed last year to pay $600 million to settle a lengthy legal battle with Johnson & Jonson. After J&J lost a brutal bidding war over Guidant, it accused the company of feeding due diligence information directly to Abbott. Abbott then bought some of the divested pieces of Guidant, which in turn helped Boston Scientific seal the deal.

Like Boston Scientific, Abbott stands to inherit a myriad of headaches from Alere. In March, just two months after inking the initial $5.8 billion deal with Abbott, Alere revealed that it was under investigation by the U.S. Department of Justice related to its sales practices for 2013 through 2015 in Asia, Africa, and Latin America. The DoJ also investigated Alere for matters related to the U.S. Foreign Corrupt Practices Act. Abbott tried to get out of the deal but Alere refused to budge.

Amanda Pedersen is Qmed's news editor. Contact her at [email protected].