AbbVie looks to post-Humira growth with $63bn Allergan buyout
The deal was announced today and will see AbbVie pick up Allergan’s medical aesthetics business, which includes blockbuster product, Botox (botulinum toxin), for $63bn (€55.3bn).
AbbVie will pay a premium of 45% on Allergan’s closing price yesterday, at $188.24 per share.
Despite paying the increased price for shares, the deal is significantly cheaper than if AbbVie had pursued the same deal four years ago, when Allergan’s share price peaked at $331 – not long after, Pfizer pursued and failed with a $160bn deal for the company.
The fall of Allergan’s share price came after a troubled period for the company, with it eyeing and then subsequently backing out of the race to acquire Shire, and significant pressure from investors to change the leadership structure of the business.
Alongside the ability to acquire Allergan at a lower price than previously, AbbVie publicly stated that combining the companies allowed for the creation of ‘new growth platforms’.
The company described how the merged company would take leadership positions in immunology, hematologic oncology, medical aesthetics, neuroscience, women’s health, eye care, and virology.
The combined markets would see an operating cash flow of $19bn, based on 2018 figures, and combined revenue of $48bn based on 2019 guidance.
Richard Gonzalez, chairman and CEO of AbbVie, said, “With our enhanced growth platform to fuel industry-leading growth, this strategy allows us to diversify AbbVie's business while sustaining our focus on innovative science and the advancement of our industry-leading pipeline well into the future.”
It would also allow AbbVie to look past Humira (adalimumab) as a main source of its growth, as this drug’s profitability is hit by biosimilar erosion in Europe. In addition, though it may have locked out rivals with biosimilars in the US, it will still face a number of competitors when patent protection is lost in 2023.
In details announced as part of the deal, AbbVie stated that Humira would represent 40% of the combined revenue of the companies, if 2019 guidance was followed – with the two companies’ combined ‘growth platform’ making up the further 60%.
AbbVie noted that Allergan’s CEO and chairman, Brent Saunders, would join the board member of the company after the closing of the deal, alongside one additional board member of Allergan.
The deal is expected to close by early 2020.
