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In anticipation of the loss of patent exclusivity for Humira, AbbVie makes $63-billion move to acquire Allergan.
With the loss of patent exclusivity for blockbuster Humira on the horizon in 2023, AbbVie announced a “transformational” deal on June 25, 2019 in which it will acquire Allergan in a cash and stock transaction with an equity value of approximately $63 billion. The acquisition will allow the company to reduce reliance on Humira and expand its focus to other therapeutic areas.
AbbVie and Allergan generated approximately $48 billion in combined 2019 revenue and $19 billion in combined operating cash flow in 2018, AbbVie reported in a June 25 press statement announcing the deal.
Upon completion of the deal, which is expected by early 2020, AbbVie will continue to be incorporated in Delaware as AbbVie Inc. with principal executive offices in North Chicago, IL. Richard A. Gonzalez will continue as chairman and chief executive officer through Humira loss of exclusivity in 2023. Two members of Allergan's Board-including chairman and chief executive officer, Brent Saunders-will join AbbVie's Board when the transaction is complete.
A company press statement noted that the transaction was designed to “deliver immediate scale to the AbbVie growth platform with Allergan's on-market diversified product portfolio.” The combined company will have a portfolio of products in immunology, hematologic oncology, medical aesthetics, neuroscience, women's health, eye care, and virology.
"This is a transformational transaction for both companies and achieves unique and complementary strategic objectives," said Gonzalez, in the press statement. "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 Saunders in the press statement. "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."
The transaction is subject to regulatory and Allergan's shareholder approvals. After closing, AbbVie shareholders are expected to own approximately 83% of AbbVie on a fully diluted basis; and the Allergan shareholders will own approximately 17% of AbbVie on a fully diluted basis, as reported in the announcement.
The acquisition “will provide annual pre-tax synergies and other cost reductions of at least $2 billion in year three while leaving investments in key growth franchises untouched,” according to the press statement. Optimizing the research and early-stage portfolio and reducing overlapping R&D resources will account for approximately half of the reductions, AbbVie reports. Other reductions will come from sales, marketing, and support functions, eliminating redundancies in manufacturing and supply chain, and leveraging procurement spending.