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2020-05-11| M&AManufacturing

AbbVie Completes Acquisition of Botox Manufacturer, Allergan

by Ruchi Jhonsa
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By Ruchi Jhonsa, Ph.D.

With the merger, AbbVie becomes the fourth-largest drugmaker in the world.

After a yearlong wait, the two drugmakers, AbbVie and Allergan, have closed the merger deal worth US$ 63 billion following a green signal from Federal Trade Commission (FTC) and approval by Irish High Court. Under the financial terms of the tie-up, each Allergan shareholder will receive 0.8660 Abbvie shares and cash compensation of US$ 120.30 per share.

The deal allows Abbvie to expand its revenue bases, by gaining access to Allergan’s neuroscience products and gain a place in the global aesthetics business with leading brands, Botox and Juvederm. This diverse portfolio is set to bring approximately U$ 30 billion in revenues this year for the company, along with enhanced long-term growth and growing dividends. AbbVie has elected Thomas C Freyman, retired Executive VP, and CFO of Abbott, to join its board after CEO and Chairman of Allergan Brent Saunders decided to step down.

The new AbbVie will be a well-diversified leader in many important therapeutic categories, with both on-market and pipeline assets, and our financial strength will allow us to continue to invest in innovative science and continue to serve unmet medical needs of patients that rely upon us. I am proud of both organizations and look forward to the opportunities ahead,” said Richard Gonzalez, the Chairman, and CEO of AbbVie.

 

The Delay

Late last year, when AbbVie announced plans for the acquisition, many consumer groups and unions pushed back fearing monopoly. According to them, AbbVie and Allergan control 95% of the market for medication treating exocrine pancreatic insufficiency, a condition that leads to difficulty in digesting food.

Additionally, these are the only two companies besides Eli Lilly, who are developing IL-23 inhibitors for treating ulcerative colitis and Crohn’s disease. If the acquisition were to go through, it would reduce the competition and affect the pricing of the drug, making it unaffordable for many patients. The consumer groups filed a complaint with the FTC to investigate this matter and potentially block the deal.

 

Path to FTC Clearance

After an extensive investigation, the FTC concluded that the proposed acquisition would likely cause competitive harm to consumers receiving treatment for exocrine pancreatic insufficiency. Moreover, it would eliminate direct competition between the two companies in the development and US sales of IL-23 inhibitor drugs for the treatment of moderate to severe Crohn’s disease and colitis.

In early March, both parties decided to resolve the matter in the European Union by closing a deal with AstraZeneca for the IL-23 inhibitor, Brazikumab. Two weeks later, the pharma duo settled the antitrust issue related to EPI drugs by divesting Allergan’s Zenpep and Viokace to Nestle, who according to FTC has the expertise, US sales infrastructure, and resources to maintain the competition that otherwise would have been killed by the deal.

The FTC left no stone unturned in investigating the matter. By conducting several interviews and reviewing more than 430,000 documents over a period of 10-months, the staff explored a wide range of theories of competitive harm, including harm to innovation. The FTC wanted to make sure that competition in the IL-23 inhibitor space prevails by incentivizing AstraZeneca to get the product to the market.

The panel was divided in their assessment whether the merger allows for a sufficiently competitive marketplace. It eventually voted 3-2 in favor of accepting the proposed consent order. While the FTC Chairman Joe Simons, along with Commissioners Noah Joshua Phillips and Christine S. Wilson, voted for the acceptance, Commissioners Rohit Chopra and Rebecca Kelly Slaughter issued dissenting statements.

 

New Additions To Bolster Falling Revenues

Humira is a blockbuster anti-inflammatory drug that treats conditions like rheumatoid arthritis. It is AbbVie’s most popular drug, generating earnings worth US$ 19.94 billion globally in 2018. However, its sales started falling in the European Union due to a sudden surge of biosimilars in their market. A similar downward trend is predicted in the US, following the launch of nearly identical copies of the drug in 2023. The sales are expected to plunge further to US$ 3 billion by 2025.

While AbbVie’s recently launched in house drugs, Skyrizi and Rinvoq, could uplift its earnings, it may not be able to match Humira’s record sales. With this acquisition, Abbvie bets on Allergan’s flagship products chiefly the blockbuster drug, Botox, to offset the falling revenues. Last year, Allergan’s third-quarter results registered sales of US$ 4 billion, about a quarter of which came from Botox. The cosmetic and therapeutic drug reached $927.8 million in sales, which is a 5.8% increment over the previous year.

Besides, Allergan’s neuro drugs Vraylar and Ubrelvy are also hitting the mark. While Vraylar hit a sales revenue of US$ 234 million, just months after bagging an FDA approval for bipolar depression treatment, Ubrelvy, an FDA approved migraine drug, is predicted to reach global sales of US$ 486 million by 2025. The merger is definitely a good exit for Allergan who experienced pressure from investors after suffering a number of setbacks in recent years. While all looks good for Abbvie too, only time will tell if it had made the right choice.

Editor: Rajaneesh K. Gopinath, Ph.D.

Related Article: GeneOnline’s Top Mergers and Acquisitions of 2019

References
  1. https://news.abbvie.com/news/press-releases/abbvie-completes-transformative-acquisition-allergan.htm
  2. https://news.abbvie.com/news/press-releases/abbvie-and-allergan-sign-consent-decree-agreement-with-federal-trade-commission-staff-on-pending-transaction.htm
  3. https://www.ftc.gov/news-events/press-releases/2020/05/ftc-imposes-conditions-abbvie-incs-acquisition-allergan-plc
  4. https://www.ftc.gov/system/files/documents/public_statements/1574619/abbvie-allergan_majority_statement_5-5-20.pdf
  5. https://www.ftc.gov/system/files/documents/public_statements/1574577/191_0169_dissenting_statement_of_commissioner_rebecca_kelly_slaughter_in_the_matter_of_abbvie_and_0.pdf

 

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