Pharmaceutical giant Pfizer Inc has approached Botox-maker Allergan PLC to discuss what could be the biggest takeover deal this year, the Wall Street Journal said on Wednesday, citing people familiar with the matter.
The healthcare sector has seen an unprecedented wave of deals since early last year, from large drugmakers buying up smaller rivals, to consolidation among makers of generic medicines and tie-ups between insurers.
A bid for Allergan, which has a market value of US$113 billion, would be Pfizer’s second attempt to acquire a European rival, following its unsuccessful courtship last year of Anglo-Swedish pharmaceuticals group AstraZeneca PLC.
After six months of negotiations, AstraZeneca rejected Pfizer’s final bid in May last year. The potential for lowering Pfizer’s tax bill by switching its headquarters from the US to the UK was touted by chief executive officer Ian Read as a key reason for the deal.
A takeover of Allergan could offer similar advantages given that the Botox-maker is based in lower-tax Dublin. A US attempt to crack down on such tax avoidance deals led to the collapse of AbbVie Inc’s bid to buy Shire PLC, but it is unclear whether those rule changes would preclude potential tax advantages from a Pfizer-Allergan deal.
“When you’re the size of Pfizer, an acquisition like this might be the only choice you have in order to be able to move the needle for sequential growth ... so the question now becomes, if not this, what, and if not now, when?” WBB Securities LLC’s analyst Stephen Brozak said.
Pfizer, which has a market value of about US$219 billion, is the largest US drugmaker.
Allergan would give Pfizer, whose revenues are expected to slide 3.3 percent this year, a boost in top-line growth. The Botox-maker’s revenue is seen increasing 39 percent this year, according to Thomson Reuters estimates.
The merger talks are in early stages, and might not yield an agreement, while other details are unclear, the Wall Street Journal said.
Pfizer last month paid US$15 billion to acquire US rival Hospira Inc. The US-based maker of such blockbuster drugs as Lipitor and Viagra was not immediately available for comment.
Allergan, which declined to comment, became the US’ third-largest generic drugmaker after combining with Actavis in March.
Allergan chief executive officer Brent Saunders has been eager to do deals, having first orchestrated the sale of Forest Laboratories Inc to Actavis, then using the latter to seal the US$66 billion purchase of Allergan.
Following the Actavis tie-up, Allergan sold its generic drugs business to Israel’s Teva Pharmaceutical Industries Ltd in July for US$40.5 billion in cash and stock.
In its first full quarter after the Actavis deal, Allergan reported second-quarter revenue of US$5.76 billion, led by US$632 million in sales of wrinkle blocker Botox. Other top-selling drugs include dry eye treatment Restasis and Alzheimer’s drug Namenda.
Pfizer recently reported third-quarter revenue of US$12.1 billion, including US$1.58 billion for its Prevnar pneumococcal vaccines and US$947 million for Lyrica.
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