Do not invest more money than you can afford to lose.
Botox maker Allergan and Pfizer Inc on Thursday confirmed they were in preliminary, friendly talks on a potential merger, a deal that would create the world’s largest drugmaker. Following the Actavis tie-up, Allergan sold its generic drugs business to Israel’s Teva Pharmaceutical Industries in July for $40.5 billion in cash and stock.
As of today, Pfizer has a market capitalization of $212 billion and Allergan has a market capitalization of $112 billion. “Allergan is trading lower than it was this summer before all of the pricing and specialty issues that have caused a general downturn, so it’s a good price but Pfizer needs a good premium to convince Allergan shareholders”, Krutoholow said. “Allergan is a great target given its growth and offers an inversion”.
“Also, Allergan would help Pfizer escape the uncompetitive United States corporate tax rate, which has led company after company to domicile away from its shores”.
Allergan has popular drugs like anti-wrinkle treatment Botox and dry-eye therapy Restasis in its portfolio, which would complement Pfizer’s collection of patent-protected medications.
Two of the nation’s three largest drugstore chains, Walgreens Boots Alliance Inc. and Rite Aid Corp., announced a $9.4 billion merger Tuesday. The market cap of Pfizer is presently at $217 billion while Allergan is pegged to be at $112 billion.
Pfizer has been hurt by a wave of generic versions of one-time blockbuster drugs like cholesterol fighter Lipitor entering the market, reducing company sales by a total of $28 billion from 2010 through next year.
“The two organizations are geographically close, and the post-merger integration would therefore be easier than a transatlantic deal”, Anderson wrote. As Chief Executive Ian Read pointed out this week, 2016 United States elections could bring a new Congress inclined to eliminate inversions.
Shares in Allergan jumped 11 percent in premarket trade to $320 by 1120 GMT on the reports. A spokesman for leading Democratic candidate Hillary Clinton told the news service she was “committed to cracking down” on inversions and “believes we should reform our tax code to encourage investment in the United States, rather than shipping earnings and jobs overseas”.
Expert say pharmaceutical and medical insurance companies, drug stores, hospitals and other medical related organizations have started consolidating with one another in order to become more competitive with the passage of the Affordable Care Act.
One of the people said that the discussions are still in the early stages and an agreement may not yet take place.
The industry has seen deals like large drug makers buying smaller rivals, consolidation among generic makers, and tie-ups between insurers.
