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June 26, 2019

AbbVie acquires Allergan and leaps to world’s fifth largest pharma company

It is not surprising to see AbbVie turning to M&As given that the company is facing the patent expiration of its flagship brand, Humira (adalimumab), which happens to be the world’s top-selling drug. Allergan has a broad offering: roughly 50% of its sales are generated by neurology drugs. It also has drugs for ophthalmology, gastrointestinal, women’s health, and cardiovascular indications.

By GlobalData Healthcare

AbbVie and Allergan provide the latest example of a mega-merger, following the ongoing trend of consolidation to survive looming patent expirations.

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Global investment in 2022 has been majorly dominated by North America, Europe, and Asia Pacific, whereas the Middle East, and South and Central America have recorded low investments comparatively. In light of this, Europe and North America have been identified as the major destinations for Private Equity and Venture Capital (PE/VC) investments.   GlobalData’s whitepaper analyzes which sectors PE/VC firms have been investing in, looking at Technology, Media, and Telecom, with these sectors recording $356 billion and a deal volume of over 10,000 deals in 2022. Healthcare, Financial Services, Business & Consumer Services, and Construction sectors have also seen high investment activity by PE/VC firms, recording a deal value of over $70 billion each.   But what can this mean for you?   Understand how the Deals Database on GlobalData Explorer can be leveraged to:  
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AbbVie/Allergan merger outlook

On June 25, AbbVie announced its intention to acquire Allergan for $63 billion. The last time we saw a deal of these proportions was earlier this year with the announcement of the $74 billion merger between Bristol-Myers Squibb (BMS) and Celgene (a deal that has not completed yet), and previously Takeda’s purchase of Shire for $62 billion – a mega-merger that completed in January, 2019.

As such, it seems that large-scale mergers and acquisitions (M&As) are still very much in vogue.

As illustrated in the figure below, the combined AbbVie/Allergan company is expected to ascend to 5th spot in terms of 2019 sales, overtaking many other competing pharma companies. As with all mega-mergers, size is generally a major driver behind these deals, but there are several other motivations too.

The top 20 pharma companies by sales, 2019

Source: GlobalData © GlobalData

It is not surprising to see AbbVie turning to M&As given that the company is facing the patent expiration of its flagship brand, Humira (adalimumab), which happens to be the world’s top-selling drug. Humira generated approximately $19.9 billion in total sales in 2018 alone, representing 60% of AbbVie’s total sales. Perhaps AbbVie has been too reliant on this drug, but knowing that its main source of revenue is at risk of sales erosion from biosimilars means that an M&A can provide a rapid source of new revenue streams to secure long-term growth.

The most unexpected part of the AbbVie-Allergan deal is that AbbVie has turned to a rather diversified company, therefore the deal is expected to transform the company’s portfolio. Importantly, the deal will also lower its reliance on Humira, meaning that just 41% of the combined company’s sales would be generated by this drug.

Allergan has a broad offering: roughly 50% of its sales are generated by neurology drugs. That said, it also has drugs for ophthalmology, gastrointestinal, women’s health, and cardiovascular indications, just to name a few. Its sole blockbuster brand is Botox (onabotulinumtoxinA), which — similarly to Humira — has been approved in multiple indications.

Notably, Allergan also has several promising pipeline assets that will contribute to future sales growth; for example, ubrogepant and atogepant are two oral calcitonin gene-related peptide (CGRP) receptor antagonists in late-stage development for the lucrative migraine market.

Although there are few areas of overlap in terms of AbbVie’s and Allergan’s portfolio, we can expect regulators to scrutinise this deal and potentially to ask the company to divest some assets, as recently occurred with BMS, which had to divest one of Celgene’s psoriasis drugs in order for its merger to go ahead. After all, there have been recent rumours that Allergan’s business was going to split up; as such, some divestitures from AbbVie-Allergan can be expected in the near future as typically happens with most M&As in order to obtain a leaner product offering.

Related Companies

Free Report
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2022: So far In Venture Capital

Global investment in 2022 has been majorly dominated by North America, Europe, and Asia Pacific, whereas the Middle East, and South and Central America have recorded low investments comparatively. In light of this, Europe and North America have been identified as the major destinations for Private Equity and Venture Capital (PE/VC) investments.   GlobalData’s whitepaper analyzes which sectors PE/VC firms have been investing in, looking at Technology, Media, and Telecom, with these sectors recording $356 billion and a deal volume of over 10,000 deals in 2022. Healthcare, Financial Services, Business & Consumer Services, and Construction sectors have also seen high investment activity by PE/VC firms, recording a deal value of over $70 billion each.   But what can this mean for you?   Understand how the Deals Database on GlobalData Explorer can be leveraged to:  
  • Track the Aggregate Investment Volumes in PE/VC-Stage firms across geographies and sectors, in addition to viewing the specific deals that drove these volumes
  • Identify the top investors already active in any sector-Geography combinations
  • Assess the Performance of Financial and Legal Advisors, supporting the Dealmaking in any segment of choice (Customizable League tables)
  • Understand what is driving the PE/VC fundraising (Deal Rationale)
  Consult our full report here and optimize your business strategy.
by GlobalData
Enter your details here to receive your free Report.

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