AbbVie agrees to buy Allergan, maker of Botox, in one of 2019's
largest mergers
By Cara Lombardo, Jonathan D. Rockoff and Dana Cimilluca
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (June 26, 2019).
AbbVie Inc. agreed to buy Allergan PLC for about $63 billion in
a bet by the two drugmakers that a combination will deliver new
sources of growth that they have struggled to find on their
own.
The takeover is worth about $188 a share in cash and stock, the
companies said. The price represents a 45% premium over Allergan's
closing share price Monday of $129.57. If not for a surge in the
shares in recent days on expectations for a breakup of the company,
the premium would be even bigger.
Buying Dublin-based Allergan would deliver a dominant position
in the $8 billion-plus market for Botox and other beauty drugs, as
well as a number of popular eye treatments, as AbbVie braces for
the end of patent protection for the world's top-selling drug,
Humira.
The companies' portfolios have some overlap in treatments for
brain, women's health, stomach and other disorders, though the
combination would take AbbVie into the new realm of frown-line
smoothing, eyelash lengthening and double-chin removal.
Allergan's nearly $16 billion in yearly revenue would also give
AbbVie another source of cash to hunt for a new generation of
products.
Lately, Wall Street has been clamoring for change at Allergan,
with its shares trading at a fraction of their peak of more than
$330 in the summer of 2015. Analysts have been saying the company
could split into two pieces, but few expected Chief Executive Brent
Saunders to pull off a sale, especially at such a lofty
premium.
AbbVie CEO Richard Gonzalez said the company's board about a
year ago started discussions that led to a decision to pursue a
large acquisition. AbbVie wanted to boost the size of its
non-Humira business, Mr. Gonzalez said Tuesday on a conference call
with reporters.
The company zeroed in on Allergan about five to six months ago,
Mr. Gonzalez said.
Mr. Gonzalez said he let Mr. Saunders know that AbbVie would be
interested if Allergan decided to explore strategic options.
Discussions continued in April, Mr. Gonzalez said, when Mr.
Saunders visited Mr. Gonzalez in Chicago. More talks and due
diligence followed, leading to Tuesday's deal announcement, which
confirmed a report earlier in the day by The Wall Street
Journal.
Mr. Gonzalez will remain chairman and CEO of AbbVie, which will
continue to be based in the Chicago area. Two Allergan directors
including Mr. Saunders will join AbbVie's board when the deal
closes.
About two-thirds of the purchase price is in cash, with Allergan
stockholders receiving 0.8660 AbbVie share and $120.30 in cash for
each share they own, for total consideration of $188.24 a
share.
Allergan stock jumped 25% to $162.43 Tuesday while AbbVie shares
fell 16% to $65.70.
The deal, worth about $80 billion including debt, is the second
this year that would knit together two of the world's biggest
pharmaceutical companies. Earlier this year, Bristol-Myers Squibb
Co. agreed to pay $74 billion for rival cancer drugmaker Celgene
Corp.
AbbVie has been pursuing deals of various sizes in an effort to
diversify beyond Humira ever since the company was split from
Abbott Laboratories in 2013.
Humira, a rheumatoid-arthritis treatment, rang up $19.1 billion
of AbbVie's $32.8 billion of revenue last year. But lower-priced
versions, known as biosimilars, are on sale in Europe and are
scheduled to go on sale in the U.S. in 2023.
AbbVie had tried to strike a big deal in 2014, when it reached
an agreement to buy Irish rare-disease drugmaker Shire for $54
billion. But AbbVie called off the deal later that year amid
efforts by the Obama administration to restrict such tax-lowering
transactions, known as inversions.
Other attempts to find new big-selling cancer, immune and other
drugs have also stumbled, except for a roughly $20 billion deal in
2015 for Pharmacyclics Inc., the maker of the Imbruvica cancer
therapy. AbbVie shares the treatment's rights with Johnson &
Johnson.
But Imbruvica, which generated $3.6 billion in revenue for
AbbVie last year, can't alone make up for the approaching loss of
Humira sales.
In Allergan, AbbVie will take on a once-highflying drugmaker
that has also struggled to find new sales growth.
Allergan's shares soared to more than twice their current level
four years ago as the company and Mr. Saunders became Wall Street
darlings following a series of bold acquisitions. Allergan's luster
has faded in the past few years as opportunities for deal making
have dwindled along with the stock and only its aesthetic-medicine
business grew to investors' satisfaction.
Allergan, which started as a California pharmacy and then carved
a niche as an eye-treatment business, rocketed into the ranks of
big drugmakers after exploiting Botox for smoothing frown lines and
wrinkles.
A combination with Irish drugmaker Actavis in 2015 transformed
the company. Mr. Saunders has been CEO since 2014 and chairman
since 2016.
For a time, Pfizer Inc. was going to buy Allergan for about $150
billion, but that transaction, also an inversion, fell through amid
pushback from the Obama administration.
Then investors soured on the company, partly due to concerns
that it wouldn't be able to replace sales from eye drug Restasis,
which was losing its patent protection.
Investors also drove down the stock on a failed plan to bolster
Restasis by selling its patent rights to an Indian tribe, as well
as mixed messages from management about the company's prospects.
Rivals are trying to edge in on Botox, and the company's efforts to
develop new drugs, such as a depression treatment, faltered.
The concerns triggered pressure from Wall Street. Mr. Saunders
said on an earnings call last month that there is a sense of
urgency within the company and pledged that the board was reviewing
all options.
Analysts predicted Allergan could split itself in two, with one
business dedicated to fast-growing brands and segments such as
aesthetics and eye care, and the other focused on gastrointestinal
and women's health treatments.
Allergan in recent years came into the crosshairs of David
Tepper's activist hedge fund Appaloosa LP, which criticized the
company's performance and pressured it to separate the roles of
chairman and CEO. The company had said it would separate the roles
at its next leadership transition. In May, Allergan shareholders
voted down a shareholder proposal from Appaloosa to separate the
positions.
Also to satisfy investors, Allergan in the past year tried to
sell its women's health and anti-infective drug businesses but said
in January it would keep them.
--Peter Loftus contributed to this article.
Write to Cara Lombardo at cara.lombardo@wsj.com, Jonathan D.
Rockoff at Jonathan.Rockoff@wsj.com and Dana Cimilluca at
dana.cimilluca@wsj.com
(END) Dow Jones Newswires
June 26, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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