AbbVie Buys Class A

AbbVie buys Allergan

Image source: Couperfield, Roman Samokhin - Shutterstock

What's going on?

On Tuesday, American drug kingpin AbbVie announced that it has agreed to purchase Ireland-based pharmaceutical firm Allergan for $63 billion.

What does this mean?

Allergan’s best known for Botox – but it has a range of other drugs used to treat nervous system, eye, and gut disorders. AbbVie, on the other hand, is recognized for making the world’s bestselling drug: Humira (a treatment for arthritis). But Humira’s US patent expires in a few years, exposing it to competition from rivals’ cheaper “generic” products that do the same thing. That’s already happening in Europe – and, Stateside, raising drug prices is becoming a more difficult prospect.



An acquisition, therefore, was perhaps an attractive choice for AbbVie: building “scale” – i.e. producing more drugs while incurring fewer costs across both businesses – should help the combined company continue to grow.

Why should I care?

For markets: Investors took their medicine.


Allergan’s stock took the green pill – it rose almost 30%, reflecting the premium AbbVie’s paying to take it over. Investors fed AbbVie’s stock the red pill, however: it fell 14%. Perhaps they’re worried about the challenges ahead, even as a bigger company. And AbbVie’s plan to continue to reduce its debt may not ignite investors’ excitement – it’ll mean less cash available to invest in research and development of new products.



The bigger picture: AbbVie’s keeping regulators sweet.


The two firms currently have a limited product overlap, restricting the scope of potential cost-cutting synergies. Perhaps AbbVie was beset by the “corporate imperative”, having seen several other pharma companies pen large deals this year – then again, that very drawback may help the tie-up gain competition regulators’ approval (tweet this). Shares of Bristol-Myers Squibb fell on Monday after the company said its $74 billion purchase of Celgene would be delayed while it cleaves off some existing drugs to satisfy regulators.

Originally posted as part of the Finimize daily email.

The top 2 financial news stories in 3 minutes. Join over 600,000 Finimizers

Read next

Capgemini Finds Twin

Sign up to Finimize

Get the two most important global financial news stories each day. Sent at midnight UK time.

Get started with one email a day

The top financial news stories in 3 minutes.