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Allergan share price up 26% after AbbVie's $63 billion buyout

The Botox maker's stock soars after being purchased by AbbVie.

Allergan share price surged after AbbVie bought the company in a $63 billion cash-and-stock deal. The merger is the latest large pharmaceutical deal in 2019.

AbbVie/Allergan merger details

AbbVie sells Humira, the best-selling drug used to treat autoimmune illnesses. Allergan produces Botox, the injection that reduces wrinkles. AbbVie is buying Allergan to diversify its portfolio after the US patent for Humira expires in 2023. Allergan is trying to reverse the slide of its stock after generic versions of some of the company's medications became available. AbbVie shareholders will own 83% of the new company and Allergan stockholders will have 17%.

AbbVie comments on merger with Allergan

AbbVie chief executive officer (CEO), Richard Gonzalez, said that the AbbVie/Allergan merger will create an opportunity for both companies to improve their profits.

‘This is a transformation transaction that provides important strategic benefits for both AbbVie and Allergan. This will have a profound impact on AbbVie’s overall growth story,’ said Gonzalez.

Gonzalez also said that purchasing Allergan for $63 billion will diversify AbbVie’s portfolio.

‘It really serves a purpose to eliminate any reliance on Humira,’ said Gonzalez.

What do financial experts say about the AbbVie/Allergan merger?

Marc Goodman, senior research analyst at investment bank SVB Leerink, said that the deal will help Allergan find stability after a volatile time when stockholders wanted sweeping changes.

‘It looks as though the Allergen shareholders will finally be rewarded for their patience,’ said Goodman.

Erik Gordon, a University of Michigan business professor, believes that after major pharmaceutical mergers like Pfizer buying Array BioPharma, Allergan and AbbVie may raise drug prices and cut back on research and development.

‘When drug companies merge, the first place they look for cost savings is in research and development because it is expensive and the payoffs are uncertain,’ said Gordon.

The merger is expected to be completed in early 2020.


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