Analysts have been speculating on where Pfizer might turn its gaze ever since the U.S. company’s $119 billion bid for UK-based AstraZeneca PLC (AZN) collapsed in May 2014. Potential targets, not necessarily off the table until an Allergan deal is actually announced, have included Dublin-based Actavis Plc (ACT) and UK-based GlaxoSmithKline (GSK).
Allergan, headquartered in Dublin, Ireland, would offer significant corporate tax advantages to Pfizer. Ireland has a 4.8 percent effective tax rate as of 2014, compared to the U.S. effective tax rate of 25.5 percent.
An Allergan-Pfizer merger would also reinforce Pfizer’s central nervous system (CNS) and gastrointestinal (GI) market position. Pfizer is probably best known for its erectile dysfunction drug Viagra, and Lipitor, formerly the best-selling cholesterol drug in the world. Allergan is best known for Botox, to remove wrinkles.
If the two companies merged, the company could be worth more than $300 billion. According to Fortune, this would make it the largest healthcare company in the world, which is currently Johnson & Johnson (JNJ).
Allergan has been involved in five major deals since 2012. Most recently, Actavis plc (ACT) acquired Allergan in March 2015. Actavis kept its name in the U.S. and Canada and a few other regions and products, including generics, but otherwise it has changed its name to Allergan.
The Actavis-Allergan deal was initiated in November 2014 and completed in March, and was for $66 billion in a combination of cash and stock. Actavis paid a total of $219 per share, with the remaining 60 percent in cash.
Pfizer has a market capitalization of $218.6 billion. Allergan’s is $113 billion.
“Pfizer has been on the hunt for assets for awhile after the failed AstraZeneca deal,” analyst Elizabeth Krutoholow, with Bloomberg Intelligence said today, according to BloombergBusiness. “Allergan is a great target given its growth and offers an inversion.”
Bloomberg also points out that an Allergan deal would add to its biosimilars portfolio. Biosimilars are drugs that are “biologically similar” to well known drugs. They are differentiated from generics, which are essentially identical to branded drugs that have lost patent protection. Biosimilars act the same way as a branded drug, but are not identical, although are interchangeable. Most recently, on Oct. 2., Novartis (NVS) announced that the U.S. Food and Drug Administration (FDA) has accepted its Biologics License Application (BLA) for a biosimilar to Amgen’s Enbrel (etanercept).
Pfizer’s biggest deal was of Warner-Lambert Co. in 2000 for $116 billion. Allergan’s deals over the last two years have been worth about $131 billion.
If this deal comes together, it would be the biggest of a very busy year, which has marked 302 mergers and acquisitions from January to September 4 totaling about $235 billion.
October 29, 2015
By Mark Terry, BioSpace.com Breaking News Staff