AbbVie and Allergan Are Going to Be Just Fine
Media coverage of AbbVie’s (NYSE: ABBV) acquisition of Allergan (NYSE: AGN) in June was both bullish and bearish. In our initial coverage, we took a line from the joint press release—“…a transformative move for both companies”—which can’t be wrong no matter what happens.
Let’s look a little at that initial coverage.
First, the bears, some of whom believe AbbVie “drastically overpaid” for Allergan in the $63 billion deal. The bulls, of course, proclaimed the merger to be the best of all pharma deals and unlike some other megamergers in pharma, this one would be a “best bet.” And since the deal was announced, Allergan’s stock has increased 45% …
But what else has happened in the intervening months? Here’s a thumbnail timeline of events since July:
Biosimilars to AbbVie’s Humira (adalimumab), the world’s largest-selling drug, will be allowed on the U.S. market by2023 and will likely impact overall sales for AbbVie. So far, though, the increased competition to Humira may not have made an impact on investors just yet. (Most analysts believe the Allergan purchase was initiated to ease the financial hit AbbVie will take when the biosimilars come to market, even though Humira will still contribute about 40% to the company’s bottom line.)
Since the beginning of the year, Allergan has been divesting drugs outside of its ophthalmic franchise to settle regulatory issues.
And that’s really where the story ends. Or does it? AbbVie management has become keenly aware of the value they have in Allergan. And Allergan’s eye-care business will continue under the careful management AbbVie has at that level, even if AbbVie did spend a 45% premium to gain Allergan’s product line. As for who stays and who goes (and that goes for product lines other than the Botox franchise, too)? Only time will tell.
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