Abbott to Carve Out Nutrition Business Into Independent Company — 3rd Update

By Connor Hart

Abbott Laboratories plans to separate its nutrition business into an independent company by the end of next year, distancing itself from an embattled unit that has dragged down earnings and been the subject of years of litigation.

The newly created company, set to house brands including Pedialyte electrolyte beverages and Similac infant formula, is expected to generate about $8.5 billion in annual sales.

Chief Executive Robert Ford said the separation will allow both companies to sharpen focus and direct resources more effectively. Abbott will dial in on its core portfolio, which includes higher-growth categories such as medical devices and diagnostics, while the nutrition company will aim to capitalize on growing demand in the global nutrition market.

"We believe both businesses will be better positioned for the future as independent organizations," Ford said on a call with analysts.

Abbott shares fell 2.1%, to $100.26, on Wednesday. The stock has lost nearly a fifth of its value year to date.

The separation will distance Abbott from a division that has suffered from sluggish sales, as well as market-share losses in pediatric formulas. The unit has additionally drawn significant legal scrutiny.

The Justice Department spent years investigating Abbott over how it managed a baby-formula facility where potentially deadly bacteria was discovered and suspected of causing infant deaths, The Wall Street Journal previously reported.

Abbott has denied a link between the plant's conditions and the children who fell ill, previously stating that no unopened, distributed Abbott infant formulas have tested positive for the bacteria that sickened the babies.

Still, Abbott last month agreed to pay $385 million to settle allegations related to its management of the facility in question. And in August, the company agreed to pay $670 million to resolve a lawsuit over its specialty formulas for premature infants, as well as about 2,000 related claims. In both instances, the company didn't admit liability or fault, and said it stands by the safety of the products.

The spinoff isn't expected to affect Abbott's full-year outlook, or the 2027 guidance it plans to disclose in January. Phil Boudreau, finance chief, said Abbott does anticipate separation costs tied to the spinoff, which will be quantified at a later date.

Daniel Salvadori, who currently serves as executive vice president and group president of Abbott's established pharmaceuticals and nutritional products division, is slated to lead the new company, which will go public through a tax-free spinoff.

Upon completion, Abbott shareholders will own shares of both Abbott and the new nutrition company, Boudreau said. The new nutrition company will raise debt, and a portion of the proceeds will be distributed to Abbott. Both the amount of debt to be raised and the amount to be distributed will be determined at a later date, he added.

The spinoff's announcement came as Abbott reported lower profit in the recent quarter, as higher costs more than offset an increase in sales.

Abbott posted a third-quarter profit of $920 million, or 53 cents a share, down from $1.64 billion, or 94 cents a share, a year earlier. On an adjusted basis, quarterly earnings came in at $1.42 a share, in line with analyst expectations, according to FactSet.

Sales climbed more than 14%, to $13.01 billion, just topping Wall Street models for $12.99 billion. Total operating costs and expenses jumped 25%, to $11.66 billion, in part reflecting higher input costs and research-and-development spending.

For the year, Abbott guided for adjusted earnings to come in between $5.50 and $5.55 a share on comparable sales growth of about 6%.

Write to Connor Hart at connor.hart@wsj.com

(END) Dow Jones Newswires

October 21, 2026 11:13 ET (15:13 GMT)