Allergan Could Set its Sights on Another Transformative M&A Deal With Biogen, Amgen or AbbVie

July 28, 2015
By Alex Keown, BioSpace.com Breaking News Staff

DUBLIN -- Allergan Plc is not done with its dealmaking.

That was the message Brent Saunders, Allergan’s chief executive officer, told reporters during a conference call Monday afternoon following the company’s sale of its generics business to Israel-based Teva Pharmaceutical for $40.5 billion. Saunders said the company is “reloaded and ready to move,” Bloomberg reported this morning.

Allergan’s sale of its generics business to Teva drove pharmaceutical M&A to more than $220 billion, outpacing the previous year’s M&A, Bloomberg noted. Allergan and Saunders have been responsible for or associated with almost half of the M&A activity, with about $90 billion in activity. In an interview with Forbes, Saunders said the changing dynamics in the way generics are sold was a driving factor in the sale of the generics business. With the consolidation of purchasers, such as CVS-Omnicare, Saunders described the generics business as more business to business sales.

The sale of the generics business to Teva will put Allergan in a “positive to neutral net debt position” and the company’s “cash on hand should be larger than debt on hand,” Saunders told Forbes. Saunders said he would like to see the capital invested for future growth, which, going by his track record as a billion dollar dealmaker, means Allergan will be on the hunt for another merger or acquisition, despite just completing a merger with Actavis Plc earlier this year.

The big question then, is where should Allergan look for its next big move? Umer Raffat, the specialty pharmaceuticals analyst at ISI Evercore, said the smart bet is another big transformative move that could include acquisitions of Biogen , Amgen , AbbVie , or the possibility of a merger with Pfizer . Novartis AG’s Alcon eye-care unit could also be a possibility for acquisition, Andrew Finkelstein, an analyst at Susquehanna International Group in New York, said, according to Bloomberg. Likewise, Ken Cacciatore, an analyst with Cowen & Co., said pursuing Amgen or AbbVie “would be well received by both sets of shareholders if the proper vision was articulated and a friendly agreement could be reached,” Bloomberg noted.

While those are possibilities, Saunders told Forbes timing is everything when it comes to dealmaking.

“If the timing isn’t right, then you move onto the next target. If the valuation is too high, you don’t take the deal. But there are always opportunities,” he said to Forbes.

With respect to buying other pharmaceutical companies or portions of pipelines, Saunders told Forbes companies must be disciplined when it comes to buying.

“When you look at some of the things we’ve done, whether they be Forest or Kythera or Furiex, they were things that I think we got at the right price. We’ve always maintained strong financial discipline,” he said.

While the next transformative deal has yet to be announced, and will likely not occur until 2016, Allergan has been at the heart of M&A activity over the past year. Some of the most recent deals include:

• The sale of its generics brand to Teva for $40.5 billion.
• The acquisition of depression drugmaker Naurex for $560 million.
• The purchase of Merck & Co.’s small molecule oral calcitonin gene-related peptide (CGRP) receptor antagonists to treat migraine for more than $250 million.
• The acquisition of Bay Area’s Oculeve, a maker of eye care therapies, for $125 million+.
• The acquisition of Kythera Biopharmaceuticals, which is focused on the treatment of double chins, for approximately $2.1 billion.
• The completion of its merger with Actavis Plc and the official name change to Allergan Plc.