• by Thom Forbes  @tforbes, June 26, 2019

AbbVie, the North Chicago, Ill.-based maker of psoriasis-and-arthritis treatment Humira, is acquiring Allergan, the Irish maker of crow’s-feet smoother Botox, in a cash and stock transaction valued at $63 billion. The deal will create the fourth-largest drugmaker globally.

“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,” Cara Lombardo, Jonathan D. Rockoff and Dana Cimilluca write  for the Wall Street Journal.

“Allergan’s nearly $16 billion in yearly revenue would also give AbbVie another source of cash to hunt for a new generation of products,” they point out.

“Humira is buying the assets that replace it over the long term,” said AbbVie CEO Richard Gonzalez, who will lead the combined company and remain chairman-CEO through 2023, reports  Reuters’ Michael Erman, Ankur Banerjee and Julie Steenhuysen.

“Chief among those assets is Allergan’s Botox, an injection of a purified form of botulinum toxin that paralyzes muscles, smoothing frown lines and wrinkles in the forehead and around the eyes. It is also approved to treat chronic migraine headaches, overactive bladder and other medical uses.

“But when used as a cosmetic treatment, patients must pay for Botox out of pocket, buffering it from the pricing pressure that health insurers and government health agencies have put on prescription medicines. Gonzalez said he does not expect a biosimilar version of Botox ‘for a long, long time, if ever,’” Reuters adds.

“Allergan chief Brent Saunders will join AbbVie’s board if and when the deal closes. ... While Saunders has a reputation as a prolific deal maker who chases bolt-on acquisitions and growth from recent drug pipeline additions has been hard to come by,” writes  Sy Mukherjee for Fortune.

“For AbbVie, the rationale for the acquisition is clear -- expand the portfolio and preserve the bottom line ahead of Humira’s patent expiration in the U.S. in 2023. Several of AbbVie’s experimental drug hopefuls have hit hitches in the past year. Humira has already faced increased competition in markets like Europe,” Mukherjee adds.

“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,” Bloomberg’s  Rebecca Spalding and Riley Griffin write, while Allergan gained 25% and closed at $162.43.

“For Mr. Saunders, a serial dealmaker who had pieced together Allergan through a succession of takeovers, the deal provided relief from a tumbling share price and attacks from a hedge fund pushing to divide his chief executive and chairman roles. Once the darling of stock-market investors, Allergan’s fall from grace meant the sale at an enterprise value of $83 billion equates to roughly half the value of its previously agreed deal to sell itself to Pfizer back in late 2015,” write  Donato Paolo Mancini and Arash Massoudi for Financial Times.

“That transaction, which was worth $160 billion, would have allowed Pfizer to redomicile to Ireland by merging into Allergan and allow the U.S. drugmaker to escape U.S. taxes. The move was blocked by changes in tax policy by the Obama administration and in hindsight, marked the high-water mark of Mr. Saunders tenure,” Mancini and Massoudi observe.

To be sure, analysts took their shots at yesterday’s announcement.

The headline over Ed Silverman’s analysis  for Stat reads: “The AbbVie and Allergan deal: ‘Two turkeys don’t make an eagle.’”

“Allergan, with its well-known Botox, is being used to smooth the wrinkles this time not of a face but of a company,” said Wells Fargo analyst David Maris, Bloomberg’s Spalding and Griffin report. “While this is a good alternative for Allergan versus the current share price, we are not convinced this is a better long-term alternative for shareholders.” 

But it’s a sign of the broader upheaval going on in Big Pharma. 

“The deal is the second-biggest takeover in the pharmaceutical industry announced this year, after Bristol-Myers Squibb agreed to buy Celgene, a maker of anticancer drugs, for $74 billion, against the backdrop of the health-care industry’s mounting interest in such deals. Buyers have announced $310 billion worth of deals for American health care companies so far in 2019, a record high for the first six months of a year, according to the data provider Dealogic,” observe  Katie Thomas and Michael J. de la Merced for The New York Times.

All of AbbVie’s operations now in North Chicago are expected to remain there, AbbVie spokeswoman Adelle Infante tell s  the Chicago Tribune’s Lisa Schencker. 

“Almost all of AbbVie’s 9,300 Illinois employees are in Lake County. AbbVie spun off from north suburban Abbott Laboratories six years ago and has about 30,000 employees worldwide,” Schencker adds.

Still, AbbVie has identified $2 billion in potential cost cuts, as Eric Sagonowsky reports  for FiercePharma, and that’s putting new worry lines on worker’s brows.