Abbott Labs (ABT) recently signed a definitive agreement with PanGenetics BV for a pain candidate, PG110. Under the terms of the agreement, Abbott will acquire global rights to PG110 which is a novel biologic that targets Nerve Growth Factor (NGF) for the treatment of chronic pain.

PanGenetics will receive an upfront payment of $170 million and $20 million in milestone payments. This agreement should allow Abbott to expand its pain product portfolio and leverage its expertise in biologics. The commercial opportunity in the pain market is significant. There is major demand for the development of a treatment that would provide relief from pain without the potential of addiction and abuse.

It is estimated that there are about 72 million diagnosed chronic pain patients in the U.S. and EU, and up to 30% of chronic pain patients get inadequate relief. Current treatments include non-steroidal anti-inflammatory drugs (NSAIDs), certain Cox-II inhibitors, opioids and other drugs that may have various tolerability and safety issues Incorporatedluding the potential for abuse and addiction.

PG110 is currently in a phase I study in patients with osteoarthritis. The successful completion of this study would allow Abbott to explore the candidate’s potential in other pain indications like chronic lower back pain, cancer pain and diabetic neuropathic pain.

The deal is scheduled to close by year end. Abbott maintained its previously announced guidance for 2009.

We currently have a Neutral rating on Abbott. While economic weakness has slowed sales of a number of products in 2009, Abbott is weathering the storm relatively well. Abbott’s strong business segments, contributions from recent acquisitions and impressive late-stage pipeline should help fortify long-term earnings growth.

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