Abbott Laboratories has announced plans to separate into two companies. One will cover “diversified medical products” and the other will handle “research-based pharmaceuticals.” The former group will retain the Abbott name and include the branded generic pharmaceutical, devices, diagnostic and nutritional businesses, while the latter will include Abbott’s proprietary pharma and biopharma portfolio. Its name has not been announced. The plan is not expected to be completed until the end of 2012.

The new research-based pharma unit will have an estimated $18 billion in annual revenues, based on 2011 estimates. In Contract Pharma’s recent Top 20 Pharma report, Abbott was ranked #9 with $19.9 billion in 2010 revenues. However, pharma revenues included generics, which will not be part of the new unit. The “old Abbott” will have approximately $22 billion in revenues. In our report, we noted that the branded generics business, boosted by acquisitions of Solvay and Piramal Healthcare, could grow to $5.0 billion in 2011 sales, but it has already posted $4.0 billion after three quarters.

“Today’s news is a significant event for Abbott, and reflects another dynamic change in our company’s 123-year history, strengthening our outlook for strong and sustainable growth and shareholder returns,” said Miles D. White, Abbott’s chairman and chief executive officer. Mr. White will retain his roles with the new Abbott, while Richard A. Gonzalez, currently executive vice president of Abbott’s Global Pharmaceuticals unit, will become chairman and chief executive officer of the research-based pharmaceutical company.  Mr. Gonzalez has spent more than 30 years at the company and was previously president and chief operating officer of Abbott.

The move to divide the company is planned as a tax-free distribution to Abbott shareholders of a new publicly traded stock for the new company. The stock distribution ratio was not announced. The company contended that the two businesses will each pay a dividend that, when combined, will equal the current Abbott dividend at the time of separation.

The move is not Abbott’s first venture in a major spin-off. In 2004, the company spun out Hospira (including the One 2 One CMO business) as a standalone global hospital products company. At the time, Hospira had 14,000 employees, 14 manufacturing sites and $2.5 billion in annual sales. In 2010, revenues reached $3.9 billion.