Publication Date: August 22, 2019
On 25-Jun-19, AbbVie agreed to acquire Allergan for $63bn, a 45% premium to the target’s undisturbed share price. Since the deal was announced, AbbVie shares have fallen 14%, and while understanding AbbVie’s need to diversify from 2023 patent-threatened Humira, its shareholders have questioned the need for the company to control the leading anti-wrinkle injection manufacturer whose stock price has declined 50% since 2017, partly due to the patent loss of its second best-selling product. The risk arbitrage gross spread has widened to low double digits and, although the size of the deal prevents arbs from controlling the spread, many investors have questioned why strong pessimism remains. We have spoken to multiple doctors and specialists, and in this report, we explore key antitrust risks which are causing uncertainty: in-depth scrutiny from a recently inconsistent FTC; later-stage or marketed drugs, such as Skyrizi, being required for divestiture; wider Spark-like product definitions uncovering unexpected overlaps; and AbbVie’s defined outs to walk away from the deal.
1. Skyrizi, Creon and FTC Demands for Divestments of Later-Stage Drugs 2. US Antitrust: Traditional Market Definitions and Product Overlaps 3. AbbVie’s Outs and Commitments to Consummate 4. Expected Antitrust Outcomes and Timing Implications 5. Risk Arbitrage Trading Thoughts Appendices A. Pipeline and Marketed Product Lists B. Narrow Product Definitions - Details Behind Overlaps C. Wide Product Definitions - Competitors by Indications
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