independent

Wednesday 24 July 2019

AbbVie looking to the future with buyout of the makers of Botox

Significant move for firm as it agrees a deal for rival US drugmaker Allergen in a multi-million dollar deal

Pictured at the official opening in June 2014 of the newly expanded AbbVie facility on the Manorhamilton Road in Sligo are AbbVie CEO Richard Gonzalez and the then An Taoiseach Enda Kenny
Pictured at the official opening in June 2014 of the newly expanded AbbVie facility on the Manorhamilton Road in Sligo are AbbVie CEO Richard Gonzalez and the then An Taoiseach Enda Kenny

AbbVie has agreed to pay $63 billion for rival drugmaker Allergan Plc, the makers of Botox.

AbbVie, which has two plants in Sligo, will pay $188.24 a share in cash and stock, according to a statement.

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.

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 transformational transaction for both companies and achieves unique and complementary strategic objectives," said Richard A. Gonzalez, chairman and chief executive officer, AbbVie.

"The combination of AbbVie and Allergan increases our ability to continue to deliver on our mission to patients and shareholders.

"With our enhanced growth platform to fuel industry-leading growth, this strategy allows us to diversify AbbVie's business while sustaining our focus on innovative science and the advancement of our industry-leading pipeline well into the future."

"This acquisition creates compelling value for Allergan's stakeholders, including our customers, patients and shareholders.

"With 2019 annual combined revenue of approximately $48 billion, scale in more than 175 countries, an industry-leading R&D pipeline and robust cash flows, our combined company will have the opportunity to make even bigger contributions to global health than either can alone," said Brent Saunders, chairman and chief executive officer, Allergan.

"Our fast-growing therapeutic areas, including our world class medical aesthetics, eye care, CNS and gastrointestinal businesses, will enhance AbbVie's strong growth platform and create substantial value for shareholders of both companies."

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.

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.

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%.

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.

The deal is expected to close in early 2020, the companies said.

In the aftermath of the announcement, Allergan said it remained "committed to Ireland." Allergan makes its leading anti-wrinkle treatment Botox from its manufacturing facilities in Westport.

If the merger succeeds it will form the fourth biggest drugmaker in the world.

AbbVie employs more than 700 people at five manufacturing and commercial sites across Ireland including at on the Manorhamilton Road in Sligo and at Ballytivnan.

Its commercial headquarters is based in Dublin.

It expanded its two Sligo plants, in 2014 and last year, with respective spends of €85m and €113m, to boost its work around cancer treatment.

The company employs a highly skilled workforce specialising in the disciplines of science and engineering, with 80% having a third level education qualification ranging from degree to PhD level.

In Jaunuiary 2018, AbbVie announced a major expansion of its plant at Ballytivnan to create 100 new jobs over the following three years.

The investment was in new sterile manufacturing technology at Ballytivnan to help deliver promising treatments for cancers with significant unmet medical needs.

The new jobs are across a variety of technical and manufacturing positions and the project is being supported by the Government through IDA Ireland.

Allergan has been in Ireland since the late 1970s and employs more than 2,000 people here.

A €65m investment in its Westport facilities, earlier this year, brought the company's total spend in Ireland to around €700m.

It's too early to say if jobs will be affected by the merger here.

A spokesperson for Allergan Ireland said: "At this point in the process it is business as usual.

"It is too early to provide specific details on the impact of the deal in specific markets, other than to say that Allergan remains committed to Ireland."

Industry watchers say both of the company's blockbuster drugs have begun to face pressure in recent times.

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.

Nevertheless, the companies have developed several potentially promising medicines for a range of diseases.

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