Pfizer, Allergan mull largest pharma merger

29 Oct 2015

US drug giant Pfizer Inc and Irish pharmaceutical company Allergan Plc are weighing a merger plan, which would create the world's largest drug company with a market cap of more than $300 billion and would be one of the largest deal in the pharmaceutical industry's history.

The Wall Street Journal yesterday reported, citing people familiar with the matter, Pfizer recently approached Allergan on a merger and the process is at an early stage with the ongoing talks centered on price, job cuts and closing of facilities.

Ireland-based Allergan currently has a market cap of $113 billion and New York-based Pfizer's market value is $219 billion, that would  give the combined company a value of $332 billion.

A completed deal would catapult the merged company ahead of the world's largest healthcare company, Johnson & Johnson, which has a market cap of $277 billion.

A takeover of Dublin-based Allergan will allow Pfizer to relocate in Ireland where corporate taxes are low - the reason why it last year offered to buy AstraZeneca. It was forced to withdraw the bid after the British drug giant and politicians opposed the deal.

Although Allergan has its roots in Ireland, it was acquired by New Jersey-based Watson Pharmaceuticals in 2012, which later merged with Swiss rival Actavis Group in order to fend off  an unsolicited bid from Canada's Valeant Pharmaceuticals International.

It later changed its name to Allergan and shifted its headquarters to Dublin. It again went on an acquisition spree and bought Warner Chilcott plc and Forest Laboratories Inc.

In July, Allergan agreed to sell its generic-drug business to Israel's Teva Pharmaceutical Industries for more than $49 billion.

Founded about 60 years ago, Allergan is a global specialty pharmaceutical company whose portfolio range includes ophthalmic pharmaceutical, dermatology and neurological products.

Apart from its $2 billion blockbuster anti-wrinkle and chronic migraine treatment drug Botox, Allergan's dry-eye drug Restasis generates about $940 million, its breast-implant business $378 million and Latisse, its prescription drug that increases the length of eyelashes contributes $100 million.

Allergan, which spends about 17 per cent or about $1 billion a year of its revenue on research and development of new drugs, has 11,400 employees and manufacturing plants in Texas, Ireland, and Costa Rica.

Founded by cousins Charles Pfizer and Charles Erhart in in 1849, Pfizer is one of the world's largest pharmaceutical companies by revenues.

The company develops and produces drugs and vaccines for a wide range of medical disciplines, including immunology, oncology, cardiology, diabetes, endocrinology, and neurology.

Pfizer's one-time blockbuster drug Lipitor, which generated sales of $9.6 billion in 2011, has seen rapid decline in following patent expiry in December 2011.

Its other well-known drugs are Lyrica for neuropathic pain, Diflucan - an oral antifungal medication, Zithromax - an antibiotic; Viagra for erectile dysfunction, and Celebrex/Celebra - an anti-inflammatory drug.

The company is now looking to overcome the loss of patent protection on some top drugs, and is struggling to find top-line growth.

Pfizer has been working on several new products that could replace diminishing sales of patent-expired drugs like Lipitor and Celebrex, whose sales have dropped by 6 per cent and 31 per cent, respectively, worldwide last year.

Pfizer operates in 180 countries and employs more than 110,000 people worldwide.