[Ip-health] Wall Street Journal: AbbVie Strikes Deal to Buy Allergan for About $63 Billion - Acquiring Allergan delivers dominant position in $8 billion-plus market for Botox and other beauty drugs

Thiru Balasubramaniam thiru at keionline.org
Tue Jun 25 13:00:34 PDT 2019


https://www.wsj.com/articles/abbvie-nears-deal-to-buy-allergan-for-more-than-60-billion-11561458504

AbbVie Strikes Deal to Buy Allergan for About $63 Billion

Acquiring Allergan delivers dominant position in $8 billion-plus market for
Botox and other beauty drugs

By Cara Lombardo, Jonathan D. Rockoff and Dana Cimilluca
Updated June 25, 2019 11:14 am ET

AbbVie Inc.agreed to buy Allergan for about $63 billion, as the two big
drugmakers bet a combination will deliver new sources of growth they have
struggled to find on their own.

The takeover is worth about $188 a share in cash and stock, the companies
said in a statement. The price represents a 45% premium over Allergan’s
closing share price Monday of $129.57. If not for a surge in the shares in
recent days on expectations for a breakup of the company, the premium would
be even bigger.

The Wall Street Journal reported earlier Tuesday that the deal was imminent.

Buying Dublin-based Allergan would deliver a dominant position in the $8
billion-plus market for Botox and other beauty drugs, as well as a number
of popular eye treatments, as AbbVie braces for the end of patent
protection for the world’s top-selling drug, Humira.

The companies’ portfolios have some overlap in treatments for brain,
women’s-health, stomach and other disorders, though the combination would
take AbbVie into the new realm of frown-line smoothing, eyelash lengthening
and double-chin removal.

Allergan’s nearly $16 billion in yearly revenue would also give AbbVie
another source of cash to hunt for a new generation of products.

Lately, Wall Street has been clamoring for change at Allergan, with its
shares trading at a fraction of their peak of more than $330 in the summer
of 2015. Analysts have been saying the company could split into two pieces,
but few expected Chief Executive Brent Saunders to pull off a sale,
especially at such a lofty premium.

AbbVie CEO Richard Gonzalez said the company’s board started discussions
about a year ago that led to a decision to pursue a large acquisition.
AbbVie wanted to boost the size of its non-Humira business, Mr. Gonzalez
said Tuesday on a conference call with reporters.

<SNIP>

Mr. Gonzalez will remain chairman and CEO of AbbVie, which will continue to
be based in the Chicago area. Two Allergan directors including Mr. Saunders
will join AbbVie’s board when the deal closes.

<SNIP>

The deal, worth about $80 billion including debt, is the second this year
that would knit together two of the world’s biggest pharmaceutical
companies. Earlier this year, Bristol-Myers Squibb Co.agreed to pay $74
billion for rival cancer drugmaker Celgene Corp.

AbbVie has been pursuing deals of various sizes in an effort to diversify
beyond Humira ever since the company was split fromAbbott Laboratories in
2013.

Humira, a rheumatoid-arthritis treatment, rang up $19.1 billion of AbbVie’s
$32.8 billion of revenues last year. But lower-priced versions, known as
biosimilars, are on sale in Europe and are scheduled to go on sale in the
U.S. in 2023.

AbbVie had tried to strike a big deal in 2014, when it reached an agreement
to buy Irish rare-disease drugmaker Shire for $54 billion. But AbbVie
called off the deal later that year amid efforts by the Obama
administration to restrict such tax-lowering transactions, known as
inversions.

Other attempts to find new big-selling cancer, immune and other drugs have
also stumbled, except for a roughly $20 billion deal in 2015 for
Pharmacyclics Inc., the maker of the Imbruvica cancer therapy. AbbVie
shares the treatment’s rights with Johnson & Johnson .

But Imbruvica, which generated $3.6 billion in revenue for AbbVie last
year, can’t alone make up for the approaching loss of Humira sales.

In Allergan, AbbVie will take on a once-highflying drugmaker that has also
struggled to find new sales growth.

Allergan’s shares soared to more than twice their current level four years
ago as the company and Mr. Saunders became Wall Street darlings following a
series of bold acquisitions. But Allergan’s luster has faded in the past
few years as opportunities for deal making have dwindled along with the
stock and only its aesthetic-medicine business grew to investors’
satisfaction.

<SNIP>

For a time, Pfizer Inc. was going to buy Allergan for about $150 billion,
but that transaction, also an inversion, fell through amid pushback from
the Obama administration.

Then investors soured on the company, partly due to concerns that it
wouldn’t be able to replace sales from eye drug Restasis, which was losing
its patent protection.

Investors also drove down the stock on a failed plan to bolster Restasis by
selling its patent rights to an Indian tribe, as well as mixed messages
from management about the company’s prospects. Rivals are trying to edge in
on Botox, and the company’s efforts to develop new drugs, like a depression
treatment, faltered.

The concerns triggered pressure from Wall Street. Mr. Saunders said on the
company’s earnings call last month that there is a sense of urgency within
the company and pledged that the board was reviewing all options.

Analysts predicted Allergan could split itself in two, with one business
dedicated to fast-growing brands and segments such as aesthetics and eye
care, and the other focused on gastrointestinal and women’s-health
treatments.

Allergan in recent years came in the crosshairs of David Tepper’s activist
hedge fund Appaloosa LP, which criticized the company’s performance and
pressured it to separate the roles of chairman and CEO. The company had
said it would separate the roles at its next leadership transition. In May,
Allergan shareholders voted down a shareholder proposal from Appaloosa to
separate the positions.

Also to satisfy investors, Allergan in the past year tried to sell its
women’s health and anti-infective drug businesses but said in January it
would keep the unit.

—Peter Loftus contributed to this article.

Write to Cara Lombardo at cara.lombardo at wsj.com, Jonathan D. Rockoff at
Jonathan.Rockoff at wsj.com and Dana Cimilluca at dana.cimilluca at wsj.com


-- 
Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International
41 22 791 6727
thiru at keionline.org


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