AbbVie to buy Allergan in a $63bn deal
US pharma giant AbbVie is to acquire the US-based, but Irish-domiciled speciality pharma Allergan, in a cash-and-share deal with an equity value of $63bn. he transaction is designed to expand and diversify AbbVie’s revenue base into new therapeutic areas, including what is termed medical aesthetics – Allergan is the producer of Botox – as well as secure the future of the company beyond the looming 2023 US loss of exclusivity on the top-selling drug Humira.
AbbVie has agreed to offer 0.8660 of its own shares and $120.30 in cash for each Allergan share, for a total consideration value of $188.24/share, a 45% premium to yesterday’s closing price. However, a series of setbacks has meant that Allergan’s stock has fallen in recent months and this sum is rouighly equivalent to the value late last year. The transaction will requie AbbVie to borrow $38bn to fund, which intends to reduce by $15-18bn over the next two years through internal cash generation and presumably disposals.
The merged company will rank fourth in the industry by sales (after Johnson & Johnson, Roche and Pfizer), based on pro forma 2018 revenues of $49bn, and be placed second globally (after Pfizer) in terms of a more strictly-defined pharmaceuticals sales.
AbbVie and Allergan ahev not been widely hed by UK collective investment vehicles so the move is most likely to be of interest to UK investor for the fact that it may spur a further round of consolidation among phamaceutical groups and result in changes to R&D partnerships. It follows the proposed acquisition of Celgene by Bristol-Myers Squibb – which yesterday announced that it would have to sell the psoriasis drug Otezla to satisfy antitrust concerns – as well as the now-completed takeover of Shire by Takeda.
AbbVie expects the merger to generate synergy savings of more than $2bn per year by the third year (2023), slightly more than half of which may come from R&D. These may mean that projects are cut or divested, all of which may create opportunities for smaller biotechs.
Humira is epxected to see its current sales – of c$20bn/year – half in 2023, when biosimilars (copy products akin to generic versions of complex biologicals) become avaiable in the US. AbbVie’s most important R&D asset will remain the JAK1 inhibitor upadacitinib, which is filed with regulators for rheumatoid arthritis and in registrational studies for psoriatic arthritis, Crohn’s disease, ulcerative colitis, atopic dermatitis and giant cell arteritis.