AbbVie to buy Botox-maker Allergan

$63B deal gives drug firm backup for Humira patent loss

The drugmaker AbbVie said Tuesday that it planned to buy Allergan, the maker of Botox, for about $63 billion in one of the biggest mergers in the health care industry this year.

If completed, the deal would give AbbVie a potent source of popular treatments as it faces the loss of patent protection for Humira, a treatment for rheumatoid arthritis that is the world's top-selling drug.

It is the second-biggest takeover in the pharmaceutical industry announced this year, after Bristol-Myers Squibb agreed to buy Celgene, a maker of anti-cancer drugs, for $74 billion.

Under the terms of the deal, AbbVie will pay 0.866 of its shares and $120.30 in cash for each share of Allergan. That is worth about $188.24 a share as of Monday's closing prices, a nearly 45% premium on Allergan's share price.

"This is a transformational transaction for both companies and achieves unique and complementary strategic objectives," Richard A. Gonzalez, AbbVie's chairman and chief executive, said in a statement.

Gonzalez will remain as chief executive. Allergan's chief executive, Brent Saunders, will join AbbVie's board.

Saunders said that the proposed deal "creates compelling value" for his company's shareholders and customers.

The price tag caused some heartburn on Wall Street, with AbbVie falling 16% to $66 in New York, putting the stock on course for its worst single-session drop since the drugmaker was spun off from former parent Abbott Laboratories. Allergan shares climbed 25%.

"Allergan, with its well-known Botox, is being used to smooth the wrinkles this time not of a face but of a company," said David Maris, an analyst with Wells Fargo. "While this is a good alternative for Allergan versus the current share price, we are not convinced that this is a better long-term alternative for shareholders."

In buying Allergan, AbbVie is looking for a way to diversify beyond Humira, which -- with sales of nearly $20 billion last year -- accounted for nearly 60% of the company's total revenue.

AbbVie has built Humira into a huge seller by expanding its approved uses and raising its price, but competing biosimilar versions are already available in Europe and they are scheduled to go on sale in the United States in 2023. Global sales of Humira fell in the first quarter of this year by 23%, even as sales in the United States have continued to climb. Other top products from the company include the cancer treatments Imbruvica and Venclexta as well as drugs that treat hepatitis C.

In a conference call Tuesday morning, Gonzalez said the acquisition "will have a profound impact on AbbVie's overall growth story, while addressing concerns about the company's reliance on Humira."

Though Allergan sells a range of products, it, too, has struggled to diversify beyond its line of aesthetic medications and Botox, which has brought in billions of dollars with its expanded use beyond smoothing frown lines to treat migraine headaches and other health conditions.

Allergan's efforts to protect other brands have stumbled. In 2017, it made an unusual deal to sell its patents for its eye drug, Restasis, to the St. Regis Mohawk tribe in upstate New York in an effort to protect Allergan from a patent challenge. But that effort was challenged and it ultimately failed after the Supreme Court declined to take up the case.

In 2016, Allergan's planned $152 billion merger with Pfizer fell apart after the Obama administration changed the tax rules to make it more difficult for American companies to lower their taxes by using mergers to shift their headquarters overseas. Since then, Allergan, an Irish company whose business is primarily in the United States, has been exploring either a sale or a split.

The Federal Trade Commission, which oversees mergers and acquisitions, appears to be taking a closer look at these deals. On Monday, Bristol-Myers said its deal with Celgene would be delayed and that it planned to sell Otezla, Celgene's multibillion-dollar anti-inflammatory drug, to address antitrust concerns.

Still, AbbVie's acquisition is evidence that the world's biggest drugmakers believe bigger is better. Along with Bristol-Myers's deal for Celgene, Japan's Takeda Pharmaceutical Co. earlier this year completed a $62 billion takeover of Shire PLC. A combined AbbVie and Allergan will have sales of about $48 billion, the companies said in a statement, making it one of the biggest in the industry.

The deal will return Allergan to the U.S., at least for tax purposes. While the company is run from New Jersey, it moved its domicile to Dublin in 2015 via another merger, partly to take advantage of lower corporate rates abroad. The 2017 U.S. tax overhaul cut corporate levies to 21% from 35%, which reduced incentives for companies to relocate overseas.

Information for this article was contributed by Michael J. de la Merced and Katie Thomas of The New York Times; and by Rebecca Spalding and Riley Ray Griffin of Bloomberg News.

Business on 06/26/2019

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