A Botox filler for Abbvie's Humira-shaped hole

Abbvie’s swoop on Allergan looks like a case of opportunism over innovation.

In spending $63bn on Allergan, Abbvie looks like it is making a safe bet after being burned by recent riskier acquisitions. By far the biggest Allergan product in the combined company will be Botox which, unlike Abbvie’s Humira, looks unlikely to be hit hard by loss of exclusivity any time soon.

Abbvie stock dropped 15% this morning, but this is an opportunistically timed move. The $188 per share offer represents a 45% premium to Allergan's share price yesterday but the stock has been performing poorly; as recently as last October Allergan shares were trading for $190.

Good value?

While the deal left some questioning its strategic rationale, Abbvie’s chief executive, Rick Gonzalez, defended it on financial grounds. “Assets of the quality [of Allergan] are not always available, and certainly not at this price,” he told today’s analyst call.

Indeed, Pfizer had been set to pay $160bn for Allergan in 2015 until that acquisition was scuppered by a US clampdown on tax inversion deals. Abbvie is not planning to use the Allergan deal to domicile in Ireland.

The question is what has happened since then to cause nearly a third of Allergan’s value to melt away. Changing sentiment around speciality pharma probably has not helped; this was compounded by Allergan-specific issues, including questions about management strategy and negative publicity following a failed attempt to transfer intellectual property to a Native American tribe.

Abbvie has made the most of these issues to pick up Allergan for only a relatively small premium over Botox’s net present value, which currently sits at $46bn, according to EvaluatePharma. The big pharma group could argue that it is getting Allergan’s remaining products and pipeline for next to nothing.

Still, these products are not much to write home about: Allergan’s antipsychotic Vraylar barely scrapes into the top 10 of Abbvergan by 2024 sales; the next biggest are Linzess and the contraceptive pill Lo Loestrin, with 2024 forecasts of $920m and $715m respectively.

Abbvergan's top 10 products in 2024
      Global sales ($bn)
Product Description Contributing company 2018 2024e
Humira Antirheumatic Abbvie 19.9 11.9
Imbruvica Leukaemia/lymphoma therapy Abbvie 3.0 6.1
Botox Medical aesthetics Allergan 3.6 5.1
Skyrizi Antipsoriasis agent Abbvie - 3.2
Venclexta Leukaemia/lymphoma therapy Abbvie 0.3 3.0
Upadacitinib Antirheumatic Abbvie - 2.5
Mavyret Hep C antiviral Abbvie 3.4 2.1
Juvederm Voluma Medical aesthetics Allergan 1.2 1.9
Orilissa Endometriosis treatment  Abbvie 0.0 1.6
Vraylar Antipsychotic Allergan 0.5 1.4
    Total incl. others 46.0 51.0
Source: EvaluatePharma. 

Further putting Allergan’s contribution to sales into context is the fact that Abbvie is forecast to receive $1.4bn in Imbruvica royalties in 2024, which is not included in this table.

The joint pipeline, meanwhile, has a strong Allergan contribution, though the potential value of these assets is hardly earth shattering.

After the recent blowup of rapastinel Allergan’s most promising clinical-stage candidates are the oral CGRP inhibitors ubrogepant and atogepant, but these could face a tough time in a crowded migraine market despite claims of increased convenience over injectable anti-CGRPs.

And the wet AMD candidate abicipar looks like a non-starter after a new formulation failed to bring ocular inflammation rates below those seen with Regeneron's marketed AMD drug Eylea.

Abbvergan – the big pipeline hitters
Project Details Contributing company  Status 2024e sales ($m)
Upadacitinib RA (Jak 1 inhibitor) Abbvie  Filed 2,518
Ubrogepant Acute migraine (oral CGRP antagonist) Allergan  Filed 425
Atogepant Migraine prevention (oral CGRP antagonist) Allergan  Phase III 287
Bimatoprost SR Glaucoma (sustained-release bimatoprost implant) Allergan  Phase III 178
Abicipar Wet AMD (long-acting anti-VEGF ocular injection) Allergan  Phase III 137
Relamorelin Diabetic gastroparesis (ghrelin agonist) Allergan  Phase III 85
Brimo DDS Geographic atropy, glaucoma (A2A agonist) Allergan  Phase II 68
Veliparib Breast, lung, ovarian cancers (PARP inhibitor) Abbvie  Phase III 49
Bimatoprost Ocular Insert Glaucoma (bimatoprost implant) Allergan  Phase II 31
Cenicriviroc Nash (CCR antagonist) Allergan  Phase III 28
Source: EvaluatePharma.

Still, Allergan's durable medical aesthetics business is a big attraction. Allergan has managed to retain its stranglehold on the neurotoxin market for several reasons, one being that production of the deadly toxin is a costly and complex procedure, and a huge barrier to entry for any wannabe competitors.

Also helping is the fact that Botox is trademarked, so the company has never had to reveal its ingredients or manufacturing processes; and trademarks, unlike patents, do not expire.

Of course, Botox faces threats of its own, including Evolus’s recently launched product Jeuveau, but Mr Gonzalez said he was comfortable with the risk, having studied Allergan’s asset extensively: “It’s a unique molecule that’s not very well characterised; it’s highly unlikely that we would see a biosimilar against Botox for a very, very long time – if ever.”

In any case, biosimilars is “an area we know well”, the chief executive joked, clearly referring to the way his group has been fighting off biosimilar threats against Humira, which are finally set to enter the US market in 2023.

Some analysts speculated that Abbvie might spin off Allergan’s aesthetic business at some point in the future. If it manages to “unlock value” this way Allergan’s shareholders might be understandably aggrieved that the company did not go down this path itself, as had been mooted by Evercore ISI just last week.

Investors who have kept the faith with Allergan for a year or longer look like the obvious losers in this deal. But after facing growing unrest Allergan’s chief executive, Brent Saunders, has been bailed out by Abbvie, which now has a replacement – albeit an uninspiring one – for Humira.

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