Coverage: AbbVie buys Allergan for $63 bln

Pharma major AbbVie has struck a deal with Botox maker Allergan to take it over for $63 billion.

CNBC’s David Faber had the news:

Drugmaker AbbVie said on Tuesday it would buy Botox-maker Allergan for about $63 billion, grabbing control of by far the biggest name in medical aesthetics to help reduce its reliance on blockbuster arthritis treatment Humira.

The two companies have been in talks for the last six to seven weeks, sources told CNBC’s David Faber. The talks were initiated by AbbVie Chief Executive Richard Gonzalez, sources said.

AbbVie has been under pressure to diversify its portfolio as Humira, the world’s best-selling drug, is already in competition with cheaper versions in Europe and faces expiration of its patents in 2023 in the United States, its most important market.

Humira, which brought in revenue of about $20 billion last year, reported the first fall in quarterly sales in years in the January-March period.

AbbVie’s Gonzalez, 65, will helm the combined company and remain chairman and chief executive through 2023, the companies said. The deal will effectively re-domicile Allergan as a U.S. company.

Allergan Chief Executive Officer Brent Saunders, who put together the current version of his company through a series of deals to roll up several pharmaceutical firms in 2014, will join AbbVie’s board upon completion of the deal.

James Langford reported on the political implications of the deal for the Washington Examiner:

AbbVie’s $63 billion takeover of Botox maker Allergan broadens pharmaceutical industry consolidation that may hinder campaigns by President Trump and both his allies and opponents in Congress to reduce prescription drug prices.

The deal announced Tuesday between Chicago-based AbbVie and Allergan, headquartered in Dublin after its 2015 takeover by Actavis, is the latest of more than 40 pharmaceutical mergers this year with a combined value of $168 billion, according to data compiled by FactSet. Bristol-Myers Squibb agreed to buy Celgene for $74 billion in January, and Pfizer said earlier this month it would pay $11.4 billion for Array BioPharma.

“Assets of the quality of Allergan are not always available and certainly not at this value,” AbbVie CEO Richard Gonzalez told investors during a conference call. “The transaction represents an opportunity to create significant value while putting us in an even stronger position to deliver sustainable long-term growth.”

Bloomberg’s Rebecca Spalding and Riley Griffin noted AbbVie’s stock had dropped sharply on the news:

The price tag caused heartburn on Wall Street, and AbbVie had its worst day of trading since it was spun off from former parent Abbott Laboratories. The stock closed down 16% to $65.70 in New York.

Allergan shares finished the day up 25% to $162.43. AbbVie will pay $188.24 a share in cash and stock, according to a statement, a 45% premium to Allergan’s closing price on Monday.

“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.”

The proposed takeover doesn’t give AbbVie a pipeline full of potential blockbuster drugs, but it buys the company time to develop more. Allergan provides AbbVie with a set of products big enough to diversify its revenue from Humira, the rheumatoid arthritis injection that is the world’s biggest-selling drug worldwide, with about $20 billion in sales last year. Allergan, which is heavily reliant on the wrinkle reducer Botox, will get a profitable exit for shareholders after a four-year slide.