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Allergan shares are trading about 8.5% below the value of AbbVie’s takeover offer after the two companies unveiled their surprise deal early Tuesday.
AbbVie (ABBV) is on the hunt for their next big revenue driver as their patent for the world???s top-selling drug, Humira, is nearing its end. AbbVie just made a $63 billion deal to acquire Dublin-based Allergan (AGN) in an attempt to keep their drive alive.
(Bloomberg) -- AbbVie Inc. agreed to pay $63 billion for rival drugmaker Allergan Plc, the latest merger in an industry where some of the biggest companies have been willing to pay a big premium to resolve questions about their growth prospects.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.While they use cost savings from the deal to shore up profits, the companies will still be under pressure to show investors they can come up with the next big thing. AbbVie may be nearing the limits of how far it can boost Humira’s price as cheaper competitors come to market, a problem Allergan is already grappling with as more alternatives to Botox emerge.The companies have developed several potentially promising medicines for a range of diseases, though so far none have convinced investors that they can attract the vast pool of patients that take medications like Humira.On a conference call announcing the deal, AbbVie Chief Executive Officer Richard Gonzalez, who will lead the combined company, said the transaction should ease concerns about future competition to Humira, adding that the drug is lucrative enough to bankroll the purchase of its eventual successor.“This is a transformation transaction that provides important strategic benefits for both AbbVie and Allergan,” Gonzalez said. “This will have a profound impact on AbbVie’s overall growth story.”Gonzalez said on the call with investors that the transaction “isn’t highly dependent on pipeline.”One drug considered to be a contender to replace some of Humira’s sales over the long term is AbbVie’s Skyrizi, a new psoriasis treatment that many patients may find more convenient than Humira, as it needs to be injected less frequently.“Patients love Skyrizi, it’s a big contender,” said Mark Lebwohl, the Waldman Chair of Dermatology at the Icahn School of Medicine at Mount Sinai in New York. “It’s four shots a year and appears to be incredibly effective. AbbVie already knows how to sell this drug.”Size ScrutinyThe drop in North Chicago, Illinois-based AbbVie’s shares Tuesday also reflects investors’ concerns over activist opposition and regulatory scrutiny. Earlier this year, Bristol-Myers Squibb Co. faced opposition from some top investors to abandon its $74 billion acquisition of Celgene Corp. The transaction eventually won the backing of a majority of shareholders, but Bristol-Myers shares are still trading well below their pre-deal value.On Monday, Bristol-Myers said that it had agreed to divest one of Celgene’s top products, the psoriasis pill Otezla, in order to appease regulators at the U.S. Federal Trade Commission. While there are few major areas of overlap between Allergan and AbbVie, the deal is almost certain to get a careful look from regulators. The company does plan to divest two Allergan drugs, IL-23 and Zenpep, to ensure the deal passes muster, Gonzalez said.Still, AbbVie’s acquisition is evidence that the world’s biggest drugmakers believe bigger is better. Along with Bristol-Myers’s deal for Celgene, Japan’s Takeda Pharmaceutical Co. earlier this year completed a $62 billion takeover of Shire Plc. A combined AbbVie and Allergan will have sales of about $48 billion, the companies said in a statement, making it one of the biggest in the industry.Back to the U.S.The deal will return Allergan to the U.S., at least for tax purposes. While the company is run from New Jersey, it moved its domicile to Dublin in 2015 via another merger, partly to take advantage of lower corporate rates abroad. The 2017 U.S. tax overhaul cut corporate levies to 21% from 35%, which reduced incentives for companies to relocate overseas.AbbVie currently pays far less in tax than that, however, and has said it will have an effective rate of 9% this year. It has projected its effective rate will rise to 13%.Allergan CEO Brent Saunders had spent months turning over plans for the drugmaker’s future as its stock price dropped from a 2015 peak of almost $340. Those options included selling off the company’s gastrointestinal drugs or women’s health unit, which would have left it more focused on its profitable medical aesthetics line that includes Botox.AbbVie said it expects at least $2 billion in annual pretax synergies and other cost reductions in year three of the deal.Allergan holders will receive 0.8660 AbbVie shares and $120.30 in cash for each share they hold. AbbVie will take on Allergan’s debt, which totaled about $24 billion at the end of the first quarter.Two Allergan directors, including Saunders, will join AbbVie’s board after the purchase is completed, according to the statement. Gonzalez said on the call that he intends to stay with the company at least through Humira’s loss of exclusivity in the U.S.The deal is expected to close in early 2020, the companies said.Morgan Stanley & Co. acted as AbbVie’s financial adviser and Kirkland & Ellis LLP and McCann FitzGerald were legal advisers. JPMorgan Chase & Co. was AbbVie’s financial adviser, and Wachtell, Lipton, Rosen & Katz and Arthur Cox gave legal advice. PJT Partners Inc. was a co-financial adviser to AbbVie.\--With assistance from Marthe Fourcade, Liana Baker and Cynthia Koons.To contact the reporters on this story: Rebecca Spalding in Boston at email@example.com;Riley Ray Griffin in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Drew Armstrong at email@example.com, Timothy Annett, Mark SchoifetFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Facing competition for the world's top-selling drug, AbbVie is jumping on this year's pharmaceutical merger bandwagon with a $63 billion bid for Botox maker Allergan that's meant to spur future growth.Specialty drugmaker AbbVie said Tuesday that adding Allergan's esthetics products and eye care and other medicines will help AbbVie shore up revenue as near-identical biosimilar drugs start to slash sales of its blockbuster immune disorder treatment, Humira.Humira logged a staggering $20 billion in sales last year, or about 61% of AbbVie's revenue. That dangerous dependence on one drug forced AbbVie to make a big move. Allergan's management likewise has been under pressure to reverse a long stock plunge, from $340 a share in July 2015 to about $130 on Monday.The combination could solve those problems for AbbVie Inc., based in North Chicago, Illinois, and Allergan, which is based in Dublin on paper but operates from headquarters in Madison, New Jersey. The acquisition should also mean Allergan officially moves back home, after having switched its legal headquarters to Ireland in a tax-saving strategy.The deal follows a familiar formula: Snap up a smaller drugmaker to boost revenue and cut jobs and other costs in the short term, while acquiring potential new drugs in testing that will improve results and accelerate growth down the road.That consolidation has the potential to boost prices, said Erik Gordon, a professor at the University of Michigan's Ross School of Business who follows the pharmaceutical industry.AbbVie has repeatedly hiked Humira's monthly list price, from $1,524 in 2009 to $5,174 this year, to squeeze extra billions from it.AbbVie Chairman and CEO Richard Gonzalez told analysts Tuesday that the deal essentially involves Humira "buying the assets that replace it over the long term."Those include Botox, which saw sales jump 50% last year to $3.5 billion, dry eye blockbuster Restatis and medicines for dermatology and gastrointestinal disorders.Humira, which treats rheumatoid arthritis, psoriasis and colitis, saw sales slip in the first quarter due to growing biosimilar competition overseas. It will face at least a half-dozen biosimilar competitors in the United States — by far its largest market — in 2023.Gonzalez said AbbVie examined Allergan's portfolio "product by product" and was particularly impressed with the job Allergan has done with Botox. Along with reducing wrinkles temporarily, Botox is approved to treat a growing number of medical conditions, including migraines and muscle spasms.Industry analysts had been anticipating a move by AbbVie."We are unsurprised by the timing and the target of the deal given (AbbVie's) Humira patent cliff," wrote Citi analyst Andrew Baum.Morningstar analyst Damien Conover wrote that the deal will partially alleviate worries about Humira. He believes AbbVie also is taking advantage of Allergan's low stock price.Shares of AbbVie are down 16% over the past year and shares of Allergan have fallen 24%, amid declining sales growth over the past three quarters and the failure of an experimental depression drug in March.On Tuesday, Allergan shares were up $34.69, or 27%, at $164.26 in afternoon trading, while AbbVie shares fell $12.11, or 15.5%, to $66.32.AbbVie will pay $120.30 in cash and a portion of AbbVie stock for each Allergan share. That amounts to $188.24 per share, or a 45% premium to Allergan's closing price Monday.Gonzalez will remain chairman and CEO at AbbVie. Allergan Chairman and CEO Brent Saunders, plus a second Allergan board member, are to join AbbVie's board.Regulators and Allergan shareholders still have to approve the deal — hardly a slam-dunk, as regulators have been increasingly tough on pharma deals.In early March, Swiss drugmaker Roche won a bidding war for Philadelphia-based gene therapy company Spark Therapeutics. 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 U.K. counterpart.In the biggest deal this year, New York-based Bristol-Myers Squibb is trying to complete its $74 billion deal for Celgene Corp., a New Jersey neighbour also focused on cancer therapies. Bristol-Myers recently said the deal might not close until next year.___Follow Tom Murphy on Twitter: @thpmurphyFollow Linda A. Johnson on Twitter: @LindaJ_onPharmaLinda A. Johnson And Tom Murphy, The Associated Press
AbbVie shareholders will have no say in the Allergan acquisition, which will reshape the biopharmaceutical company as it integrates the maker of Botox into its operations.
On June 25, AbbVie (ABBV) announced that it plans to buy Allergan (AGN) for ~$63 billion. At 10:20 AM ET, Allergan stock rose 27%, while AbbVie stock fell 15%.
(Bloomberg) -- AbbVie Inc.’s $63 billion deal for Allergan Plc will take the company’s debt burden to a level that can rival some junk-rated companies.But both Moody’s Investors Service and S&P Global Ratings are giving the drugmaker the benefit of the doubt in its ability to quickly slash as much as $18 billion of its borrowings. Moody’s signaled it will leave its rating on AbbVie unchanged at Baa2, or two notches above speculative-grade. And S&P said it’s likely to lower its grade one level to BBB+, a step higher than where Moody’s rates the drugmaker.Credit investors aren’t exactly penalizing companies for taking on such debt, either. While AbbVie’s relative borrowing costs increased in trading Tuesday after the deal announcement, companies rated in the lowest tier of investment-grade are paying some of the lowest premiums ever to borrow. Even those companies that tip into junk territory pay relatively little in extra yield.Why? One clue: investors who’ve bought lower-rated debt are being rewarded with some of the best returns in years.“Companies have been given the green light to use a lot of leverage,” said Travis King, head of investment-grade credit at Voya Investment Management. “Debt is cheap so it makes sense from their perspective, and rating agencies are giving them the OK to do that.”Both Moody’s and S&P estimate that the Allergan transaction will push the company’s debt to at least four times its earnings before interest, taxes, depreciation and amortization (Ebitda). In presentations Tuesday, though, AbbVie said it plans to reduce its debt load by as much as $18 billion by the end of 2021. That should cut leverage to about three times Ebitda within two years of the deal’s closing, the ratings firms said.The assumptions underscore a consistent theme in the corporate bond market over the past decade, in which companies have loaded up on relatively cheap debt for acquisitions. While they often sacrifice pristine credit ratings in the process, stable cash flows and the promise of big savings from the mergers have allowed them to keep their ratings in the BBB tier, the lowest rung of investment-grade. More than half of the $5.6 trillion investment-grade bond market is now rated in that tier.Even so, BBBs have been among the best performing assets in fixed income this year, boasting returns of nearly 11% that have outpaced gains on debt issued by speculative-grade companies, data compiled by Bloomberg show. Investors are reaching for higher-yielding assets thanks to the Federal Reserve’s signals that it’s willing to cut interest rates to sustain the economy.“This is the product of a rate environment that will encourage companies to use debt to achieve their strategic goals,” said Scott Kimball, a money manager at BMO Global Asset Management in Miami.Read more: A $1 Trillion Powder Keg Threatens the Corporate Bond MarketInvestors have flagged the potential for a wave of downgrades to junk should the economy worsen, and some say the ratings firms are cutting companies too much slack. Anne Walsh, chief investment officer of fixed income at Guggenheim Partners, said last week that credit raters have baked in too much confidence in BBB companies’ ability to delever even though it’s “not realistic” in a recessionary environment.Plenty of market participants said Tuesday that AbbVie’s debt-cutting plans are entirely plausible.“For better or worse, the ratings agencies must take, in good faith, management’s deleveraging goals as part of these debt-financed mergers, said Mike Holland, a Bloomberg Intelligence credit analyst. “This merger would create a company with substantial free cash flow such that a debt reduction target of $15-$18 billion by the end of 2021 is not unreasonable.”\--With assistance from Natalie Harrison and Katrina Lewis.To contact the reporter on this story: Molly Smith in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Nikolaj Gammeltoft at email@example.com, Shannon D. Harrington, Allan LopezFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- AbbVie Inc.’s 15% drop after announcing a deal to pay $63 billion for Botox maker Allergan Plc may bring on deja vu for some investors who are still feeling the burn from the drugmaker’s last deal blowup.While the purchase would provide a band-aid of sorts for beaten-down AbbVie, investors can’t help but remember how the company’s purchase of Stemcentrx Inc. for $5.8 billion went up in flames. That deal, and its subsequent write off in January after drug-development stumbles, drew criticism from Wall Street analysts and ramped up pressure on management.Fast forward to Tuesday, where AbbVie’s intraday move wiped out as much as $18.4 billion in market value, more than the value ascribed to all but nine companies in the closely-watched Nasdaq Biotech Index. “Financial engineering doesn’t make a more attractive pipeline,” SVB Leerink analyst Geoff Porges wrote in a research note.Other analysts say the Allergan deal looks more like a cosmetic fix than a long-term solution. “Two turkeys don’t make an eagle,” Piper Jaffray analyst Christopher Raymond said.To contact the reporter on this story: Bailey Lipschultz in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Catherine Larkin at email@example.com, Scott SchnipperFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The biopharmaceutical company AbbVie plans to acquire Allergan, the maker of Botox, for approximately $63 billion in cash and stock.
The size of Royal Caribbean Cruises Ltd. (NYSE:RCL), a US$25b large-cap, often attracts investors seeking a reliable...
AbbVie stock has sported an attractive dividend yield since its 2012 spinoff from Abbott. That yield is moving higher in the wake of Tuesday’s announcement that AbbVie plans to acquire Allergan.
Teva and Mylan stock were both up about 2.5%. Other specialty and generic drugmakers did even better. Mallinckrodt and Bausch Health sported gains of nearly 3% and 6%, respectively.
(Bloomberg) -- AbbVie Inc.’s deal to buy Botox maker Allergan Plc for $63 billion is reviving excitement on Wall Street for makers of specialty and generic drugs, at least for today.For now, investors are shrugging off concerns surrounding the opioid crisis and highly leveraged balance sheets to rush back to drugmakers ranging from flailing Teva Pharmaceutical Industries Ltd. to Endo International Plc in the aftermath of AbbVie’s deal as they position for the next multi-billion dollar deal.Shares of drugmakers jumped early Tuesday, led by a 4.7% advance for Endo and a 3.2% gain for Teva. Peers like Mallinckrodt Plc, Mylan NV, Bausch Health Co, Perrigo Co., and Jazz Pharmaceuticals Plc traded higher as the market saw small losses.The relief rally couldn’t be better timed for an industry that has seen share prices crater to five- to 20-year lows across the board as concerns from opioid liability to sinking generic drug prices and pressures from the White House pushed investors to the exits. But with valuation being the main driver for potential investor interest, Barclays analyst Balaji Prasad advised investors to “resist the temptation” in a note earlier this month.The announcement split Wall Street analysts with Cantor analyst Louise Chen saying the deal brings Perrigo into light as a potential target “given their move toward pureplay consumer and an activist shareholder in the stock.” While Citi’s Andrew Baum disagreed, calling the deal more AbbVie specific “rather than heralding a broader wave of large cap M&A across the sector.”It’s worth noting that the large cap-skewed Nasdaq Biotechnology exchange-traded fund, (IBB), rose 0.9% after the open, while the equal-weighted SPDR S&P Biotech ETF (XBI) gained close to 1% in a sign that investors are expecting a further uptick in deal volume for the blossoming biotech sector. Biogen Inc. -- one of the drugmakers that investors now think may fit the profile of a company looking for a rescue -- outperformed, climbing 4%.(Updates share movement in third paragraph, adds analyst commentary in final paragraph.)To contact the reporter on this story: Bailey Lipschultz in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Catherine Larkin at email@example.com, Scott SchnipperFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
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(Bloomberg) -- The lifeline thrown to Allergan Plc investors looks like a loss for one investing legend -- and a gain for another.Seth Klarman’s Baupost Group stands to lose about $100 million based on AbbVie Inc.’s offer price for the botox maker. David Tepper’s Appaloosa Management would gain about $87 million, according to regulatory filings.Baupost owned 4.8 million Allergan shares at the end of the first quarter at a cost basis of $208.61, data compiled by Bloomberg show. Under the deal announced Tuesday, investors in the company would get $188.24 a share in cash and stock.Klarman initiated the position by purchasing a $461 million stake in the first quarter of 2016. Back then, Allergan was on the verge of a merger with Pfizer Inc. That deal fell apart and the shares plunged 22% during the final nine months of 2016.Tepper’s Appaloosa held a stake of 3.13 million shares in the first quarter at a cost basis of $160.61 a share.That gain didn’t come easy. Over the last year, Tepper has waged an activist campaign against Allergan, calling for the company’s board to separate the chairman and chief executive officer roles. Tepper has also been critical of the company’s strategy.Representatives for Baupost and Appaloosa weren’t immediately available to comment.To contact the reporter on this story: Brandon Kochkodin in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Alan Mirabella at email@example.com, Vincent BielskiFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Allergan's (AGN) shares up following a conference call with one of the company's executives, which led an analyst to believe that a split of the company's business is in the cards.