Drugmakers to merge in $63B deal
Two major, global pharmaceutical companies are merging in a deal worth approximately $63 billion. AbbVie, a biopharma company, is acquiring Dublin-based Allergan, a global pharma company that makes products in four main therapeutic areas––medical aesthetics, eye care, central nervous system and gastroenterology. In 2018, the two companies generated $19 billion in operating cash flow.
According to a press release, AbbVie sees the merger as a significant growth opportunity to diversify and expand revenue base, with immediate scale and profitability for the company. It gives AbbVie an immediate presence as a leader in the Botox and beauty drug sector at a time when its patent protection for Humira, a top-selling drug, runs down in 2023.
AbbVie’s growth platform is expected to grow by a “high-single digit annual growth rate” over the next decade from its 2020 level of $30 billion. The deal is expected to close in early 2020, pending regulatory and Allergan’s shareholder approvals.
"This is a transformational transaction for both companies and achieves unique and complementary strategic objectives," Richard A. Gonzalez, AbbVie chairman and CEO, said in a statement. "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."
Under terms of the definitive transaction agreement, AbbVie will buy allergen in a cash and stock transaction, based on the closing price of AbbVie of $78.45 on June 24. AbbVie will pay $188.24 per share of Allergen––a 45% premium to its June 24 closing price.
"This acquisition creates compelling value for Allergan's stakeholders, including our customers, patients and shareholders,” Brent Saunders, chairman and CEO of Allergan, said in a statement. “With 2019 annual combined revenue of approximately $48 billion, scale in more than 175 countries, an industry-leading R&D pipeline and robust cash flows, our combined company will have the opportunity to make even bigger contributions to global health than either can alone.”
Rumors of the merger were previously reported by The Wall Street Journal. After the deal is done, Gonzalez will continue to lead AbbVie in his role as chairman and CEO, while two members of Allergan’s board, including Saunders, will join AbbVie’s board.
AbbVie expects the deal to be 10% accretive to adjusted earnings per share over the first full year after the transaction closes, with peak accretion of 20%. In addition, synergies and other cost reductions are expected to be at least $2 billion in year three.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."