ECON118GROUPASSIGNMENT - Abbott Laboratories Team Sierra's...

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Abbott Laboratories Team Sierra's Mist Sina Sharif Trevor Salas CJ Connolly Jeff Sloan Sierra Eaton Abbott Laboratories (ABT) Financial Analysis PART A ECONOMIC CHARACTERISTICS I. Demand Price Sensitivity In the Pharmaceutical industry, consumers are relatively price sensitive. Consumers are price sensitive, not in the sense of not buying pharmaceutical products, but price sensitive among the different products. As patents begin to expire, generic companies are coming out with comparable products at lower prices. Generic firms have been growing rapidly, whereas the Big Pharma companies overall have been struggling to grow (Saftlas, 14). Medicine is a necessity; therefore consumers will always buy pharmaceutical products, regardless of the price. Growth Profile The demand for the healthcare and pharmaceutical industry as a whole is growing. Global sales rose 7.0% in 2009 to $837 billion, representing improvement from a 5.3% gain in 2008 (Saftlas, 11). This gain in 2009 was better than previously expected, reflecting stronger-than-anticipated patient demand, especially in the US and other developed markets (Saftlas , 11) Abbott Laboratories has a well-diverse business model across a wide variety of drugs, devices, and consumer products, as well as a broad representation in world geographic markets. Since they have product bases in vaccines, medical devices and consumer products, along with branded drugs, the upcoming Medicare will affect them relatively less than pure-play pharmaceutical companies (Saftlas , 5). Abbot Laboratories also will not be affected by many of the patents expiring in the next few years due to this diversity in their products. The pharmaceutical industry as a whole is spreading to new countries, which will be the principle growth driver for the pharmaceutical sector over the coming years. There are also three worldwide demographic trends which bode well for long-term pharmaceutical consumption: the aging of the population in the larger markets, the lengthening of the
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Abbott Laboratories average life expectancy, and a rising incidence of chronic diseases (Saftlas , 14). Along with strength in prescription trends and use of specialty drugs, the pharmaceutical and healthcare industry is on the rise. Cyclicality Demand in the pharmaceutical industry is insensitive to the business cycles. There is no positive or negative correlation with the growth trend of Gross Domestic Product (GDP). In 2009, drug distributors feared fallout in demand because of the weaker economy, so they carried relatively lower inventories. However, they were forced to rebuild stocking quickly, because demand proved stronger than expected and there was an unforeseen temporary ramp up in sales (Saftlas , 12). Since medicine is a necessity, it does not follow with general business trends, with demand holding strong. Seasonality
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ECON118GROUPASSIGNMENT - Abbott Laboratories Team Sierra's...

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