Allergan plc AGN announced that its shareholders have approved its pending acquisition by AbbVie, Inc. ABBV. Allergan said that approximately 68.6% of shareholders eligible to vote at Allergan’s extraordinary general meeting of shareholders as well as a special court-ordered meeting of shareholders voted in favor of the transaction.
Allergan announced the definitive transaction to be acquired by AbbVie in a cash-and-stock deal in June this year. AbbVie is offering $120.30 in cash and 0.866 of its share (worth $67.94) for each share of Allergan. The total transaction value is nearly $63 billion. The acquisition is expected to close by early 2020, if all necessary approvals are obtained.
Allergan’s share price has risen 26.4% this year so far against the industry’s decrease of 8.8%.
AbbVie’s offer represented a premium of 45% to Allergan’s closing price on Jun 24, thereby proving to be rewarding for its shareholders. Moreover, with blockbuster eye drug, Restasis expected to face generic competition, fears of new competition to Allergan’s key drug, Botox and some recent pipeline setbacks, the merger with AbbVie could prove to be the best way out for Allergan.
Meanwhile, AbbVie’s rationale behind the Allergan deal is to add a new blockbuster product to its portfolio, Botox, ahead of generic competition for its blockbuster inflammatory medicine, Humira. Generic versions of Humira are already denting revenues in Europe and are expected to be launched in the United States in 2023. AbbVie is heavily dependent on Humira and is looking to diversify its portfolio.
Approved for therapeutic and aesthetic use, Botox is a key top-line driver for Allergan and looks fit to be the next revenue driver for AbbVie after Humira loses exclusivity. Overall, the Allergan acquisition should diversify AbbVie’s revenue base to markets/categories outside AbbVie’s present drug portfolio and accelerate its non-Humira business.
However, after the deal was announced, some investors expressed concerns that AbbVie has overpaid for Botox as new competitive pressure looms large.
In February 2019, Evolus, Inc.’s EOLS Jeuveau injection, indicated to improve the appearance of glabellar or frown lines, was approved by the FDA, which can pose competition to Botox. In the fall of 2019, Revance Therapeutics, Inc. RVNC will file for approval of DaxibotulinumtoxinA for Injection (DAXI), a rival treatment to Botox for the frown lines indication. It has demonstrated longer duration of efficacy compared to Botox in late-stage studies.
Allergan currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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