American biopharmaceutical firm AbbVie announced this week that it intends to acquire the Irish pharmaceutical company Allergan in a $63 billion cash and stock deal. The move is AbbVie's way of diversifying its portfolio and moving away from its dependence on its blockbuster arthritis drug Humira.
Allergan is currently one of the leading companies in the highly profitable medical aesthetics field. The company, well-known for its Botox treatment, has reportedly been in talks with AbbVie for over six weeks to finalize a merger deal.
According to reports citing sources close to the matter, AbbVie's chief executive officer Richard Gonzalez was apparently the one that initiated the merger talks.
As part of the deal, Allergan shareholders will be getting 0.8660 AbbVie shares and $120.30 per share. AbbVie is effectively paying a 45 percent premium on the company's stock prices as of Monday's close. Including Allergan's debts, the entire deal is estimated to be worth more than $83 billion. Following news of the planned merger, AbbVie stock prices plunged by almost 8 percent, while Allergen stocks surged up by a staggering $31.6 percent.
AbbVie's move has been seen by some market experts as a last ditch effort to find another cash cow given that the patents on its popular arthritis drug end in 2023 in the United States. Humira, which is currently the world's best-selling drug by volume, is also facing stiff competition from new treatments being offered in Europe.
In 2018, Humira had generated revenues of over $20 billion for the company. However, AbbVie reported its first sales decreased in the first quarter of this year. This was a clear sign that its Humira treatment was now being challenged by cheaper versions being offered by rival companies.
AbbVie announced that Gonzales will remain as the chief executive officer of the combined company, at least until 2023. Meanwhile, Allergan's current CEO Brent Saunders will be included in the new company's board once the merger is finalized. The merger will also reestablish Allergan as a US company once again.
Saunders was instrumental in the transforming Allergan into the company that it is today. The executive managed to build up the company through a series of deals and acquisitions. However, the company struggled in 2016 after Pfizer walked away from a $160 billion deal. The company has lost almost half of its market valuation since then. Since its failed deal with Pfizer, Saunders had been under a lot of pressure to either break up or sell the company.
