$63bn Allergan deal: ‘Humira is buying the assets that will replace it’

The acquisition of Allergan will bring AbbVie’s growth platform to critical mass as revenues from lead biologic Humira (adalimumab) feel the heat from biosimilar competition.

What is expected to become the second largest megamerger in the pharma space was announced yesterday, with AbbVie entering into a $63 billion (€55 billion) agreement to buy Allergan. (The largest deal is Bristol-Myers Squibb’s proposed $74 billion megamerger with Celgene, announced in January.)

The merger will bring AbbVie numerous assets in the neuroscience, medical aesthetics, women’s health and eye care space, and creates what it describes as “an attractive growth platform” going forward from a combined $29 billion base. Allergan’s lead product is neurotoxic protein Botox (botulinum toxin) that pulled in $3.6 billion across therapeutic and aesthetic indications in 2018.

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These assets, AbbVie management said on a call discussing the merger, will “significantly accelerate the size of that growth platform to get the growth platform to critical mass,” and remove reliance on lead biologic Humira.

Biosimilars on the horizon

Humira pulled in $19.9 billion in 2018, approximately 60% of AbbVie sales. But the monoclonal antibody is already seeing biosimilar in Europe and from 2023 it is likely to be decimated by a bombardment of adalimumab molecules entering the US.

“From day one, we knew Humira was going to go biosimilar, it was just a question of when,” AbbVie CEO Rick Gonzalez told stakeholders on the merger call. “We knew that we had to build a platform that would allow us to be able to grow through that event.”

The firm has carried out several smaller deals to replenish its pipeline ahead of Humira’s loss of exclusivity. However, Gonzalez said, “when we looked at [the Allergan] transaction, what it ultimately allowed us to do is to significantly accelerate the size of that growth platform to get the growth platform to critical mass.”

He added critical mass for AbbVie equates to revenues of around $25 billion to $30 billion.

Humira handing over the reigns

The timing of the transaction is related to the 2023 Humira deadline, Gonzalez continued:

“We have a responsibility as the management of this organization, of this company, to make sure that we have covered that full range of outcomes, meaning either in the worst case, in the bear case, we have to be in a position where the Company is not reliant on that asset [Humira].”

For now, the firm remains in a position that the deal is being funded through Humira’s revenues. “Essentially, Humira is buying the assets that replace it over the long-term,” he said.

“Well it obviously creates a stable business that’s rapidly growing, that’s large, that has scale from a profitability standpoint. And we will continue to run the strategy that we have run since day one of this company of going out and looking for innovative new products that ultimately will allow us to continue to expand our position in immunology, in oncology, in neuroscience. So it really serves a purpose to eliminate any reliance we have on Humira.”

It must be noted that while Humira revenues may pay for Allergan in the long-term, AbbVie intends to syndicate a $38 billion 364-day bridge loan for the acquisition, according to Bloomberg.

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