AbbVie announced on Tuesday that it would buy Allergan in a deal valued at about $63 billion, ana a 45% premium on Allergan’s most recent closing stock price. The proposed M&A shall be one of many most significant health care mergers of the year and produce together a portfolio that features AbbVie’s Humira, the world’s best-selling drug, and Allergan’s flagship beauty treatment Botox.
The response from buyers was blended. Allergan shareholders rejoiced as shares shot up greater than 26% in early Tuesday buying and selling. AbbVie inventory, for its half, was down greater than 15%.
However the AbbVie Allergan deal isn’t just a story about health care consolidation – it’s one concerning the state of innovation amongst huge, legacy biopharma companies scurrying to seek out methods to plug future holes of their revenue streams. Both companies have bled market value last year as investors questioned whether or not AbbVie could make up for falling sales of its psoriasis and arthritis treatment Humira, which brought in nearly $20 billion in 2018 revenues and pushed for a breakup of Allergan amid pipeline struggles.
Chief Brent Saunders is said to join AbbVie’s board if and when the deal closes whereas Gonzalez will stay chairman and CEO of the combined company. Whereas Saunders has a reputation as a prolific deal maker, who chases acquisitions, growth from recent drug additions has been hard to come by.
For AbbVie, the rationale for the acquisition is clear – increase the portfolio and protect the underside line ahead of Humira’s patent expiration within the U.S. in 2023. A lot of AbbVie’s experimental drug hopefuls have hit hitches prior to this year, and Humira has already confronted elevated competitors in markets like Europe.