AbbVie buying Botox maker Allergan in $63 billion deal

Allergan group headquarters in Pringy eastern France.- More

Allergan group headquarters in Pringy eastern France.- More

For AbbVie, the deal is created to relieve pressure that is slowly mounting as 2023 nears - the year when generic competition will appear in the US for its franchise product, the Humira rheumatoid arthritis drug.

The reaction from investors was mixed.

AbbVie shares were down 14% at $67.54, while Allergan's stock was up 27.60% at $165.13 in morning trading. AbbVie stock, for its part, was down more than 15%.

AbbVie shareholders will own 83% of the specialty drug company combination after the deal's completion, while Allergan shareholders will have a 17% stake. Shares of AbbVie are down 16% over the past year and shares of Allergan, with sales growth down over the past three quarters, have fallen 24%.

Allergan remains an industry leader in aesthetics, and is likely to be the cornerstone of AbbVie's valuation, SVB Leerink analyst Geoffrey Porges said in a note.

"This is a transformational transaction for both companies and achieves unique and complementary strategic objectives", he said in a statement. While Saunders has a reputation as a prolific deal maker who chases bolt-on acquisitions, growth from recent drug pipeline additions has been hard to come by.

AbbVie is facing the expiration of patent protection for Humira, which brought in a staggering $20 billion in sales a year ago.

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AbbVie CEO Richard Gonzalez said the company was well positioned to buy Allergan because of the massive amount of cash that Humira generates.

Humira and Botox are such quintessential elements of their respective companies' portfolios that the firms have done everything possible to safeguard their patents and ward off potential rivals from entering the market.

Gonzalez said AbbVie examined Allergan's portfolio "product by product" and was particularly impressed with the job Allergan has done with Botox.

Other analysts say the Allergan deal looks more like a cosmetic fix than a long-term solution.

The takeover, at a value of US$188.24 a share, is a 45% premium to Allergan's closing price on Monday.

But its $4.8 billion deal, expected to close at the end of this month, has been held up repeatedly by information requests from the U.S. Federal Trade Commission and its United Kingdom counterpart.

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