AbbVie Attempts to Secure Long-Term Growth Via Allergan Mega-Merger

Following the news that AbbVie has acquired Allergan for $63 billion, Maura Musciacco, MSc, Senior Director of Neurology & Ophthalmology at GlobalData, a leading data and analytics company, offers her view on this mega-merger.

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“The combined AbbVie-Allergan company is expected to be catapulted to fifth position in terms of 2019 sales, overtaking many competing pharma companies. As with all mega-mergers, size is generally a major driver behind these deals, but there are several other motivations too.

“It is not surprising to see AbbVie turning to mergers and acquisitions (M&As) given that the company is facing the patent expiration of its flagship brand, Humira, which happens to be the world’s top-selling drug. Humira generated approximately $19.9bn in total sales in 2018 alone, representing 60% of AbbVie’s total sales, according to GlobalData. 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 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, 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 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 scrutinize this deal and potentially ask the company to divest some assets. After all, there have been recent rumors that Allergan’s business was going to split up; as such, some divestures 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.”

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