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Abbott Doesn't Need M&A to Drive Revenue ...

Image by Sergey Dolgikh / Alamy Stock Photo Abbott's cash allocation plans for 2022
Abbott is sitting on a ton of cash. So how will the company prioritize spending in 2022?

Abbott has made a pretty penny during the first two years of the pandemic, thanks not only to its leadership role for COVID-19 testing, but also to its diversified product portfolio. But unlike some of its medtech peers, the company doesn't seem overly eager to hop on the merger and acquisition (M&A) train.

So, how does the company plan to prioritize spending in 2022?

Abbott CEO Robert Ford said the company has always taken a balanced approach between increasing dividends, share buyback, and yes, M&A.

“We don't need M&A to be able to drive our top line," Ford said during the J.P. Morgan Health Care Conference on Tuesday. "I'm confident with our organic, but that puts us in a position of good strategic flexibility."

So, whether or not we see Abbott pull the trigger on tuck-in acquisitions or even larger M&A deals will ultimately depend on timing, cost, and strategic fit.

"If there's something strategic, and it’s the right time, it's the right price, and makes sense for us then … we have that flexibility," he said.

In terms of strategic fit, Ford said Abbott looks for assets that the company can add value to, and the company does tend to look at devices and diagnostics when thinking about potential acquisition targets.

"We will see how things kind of play out," he said. "Last year things were a little bit frothy in in those areas that we were looking at ... we will maintain the financial discipline that we've always maintained and find the right deals that will drive value for us."

The J.P. Morgan Health Care Conference is taking place virtually this week on the heels of the Consumer Electronics Show (CES) where Ford unveiled a brand-new category of consumer biowearables that Abbott is developing under the brand name Lingo. The new products will build on the company's highly-successful FreeStyle Libre platform of continuous glucose monitoring devices for diabetes management. Ford's keynote at CES also marks the first time a healthcare company has delivered the keynote at CES, the most influential tech event in the world.

The Lingo wearables will be designed to measure a wide range of biometric signals including glucose, ketones, lactate, and even alcohol levels, in an effort to provide the user with meaningful wellness insights.

"That was an exciting announcement for us," Ford said at J.P. Morgan, referring to the announcement made at CES. “We put a stake in the ground ... it's time to now start to think about our platform beyond diabetes. ... it'll take a little bit of time, it's a completely different business model than diabetes and you want to be intentional about it, so it's more of a declaration of intention, I would say. ... I know there are a lot of companies that are thinking like this, but we definitely want to be a leader here."

Abbott Actually Hinted About Lingo Years Ago

Last week's announcement of the new Lingo brand of consumer biowearables products that Abbott is developing based on the FreeStyle Libre technology did come as quite a surprise. But perhaps we should have seen it coming back in 2019 when the company's former CEO, Miles White, hinted at the product's broader potential.

"I think it's got enormous potential, and it's got potential beyond glucose," White said during Abbott's second-quarter 2019 earnings call. "It's got potential as a wearable, and in other analytes, and other products over time."

He further foreshadowed the recent news by saying there would be, "... A lot of things that will evolve over the coming years here that today people aren't even contemplating with the product."

 

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