Pfizer to Buy Allergan in $160B Deal


2015 had already surpassed 2014 as the year with the biggest healthcare deals by value. Now, it's not even close.

"Through this combination, Pfizer will have greater financial flexibility that will facilitate our continued discovery and development of new innovative medicines for patients, direct return of capital to shareholders, and continued investment in the United States, while also enabling our pursuit of business development opportunities on a more competitive footing within our industry," said Pfizer chief Ian Read in a statement.

The makers of some of the best-selling pharmaceutical products in the world, including Viagra and Botox, are planning to join forces in an agreement that's bound to raise scrutiny from the White House and federal regulators. The Treasury Department announced last week that it would be releasing new rules to make it more difficult for pharma companies to pursue these precise types of domicile-shifting inversion mergers.

But it's unclear just how much change the government can unilaterally pursue under current tax law. The Treasury implemented a round of new anti-inversion rules last year as well, which did wind up preventing several big-name domicile-shifting deals. But other companies have still blazed forward with attempted inversions.

The current iteration of Allergan is the result of 2014's largest pharma merger, where Actavis purchased the former company for about $65 billion. 

Antitrust regulators in the U.S. and abroad will have plenty of opportunities to challenge the deal. But if push comes to shove, Pfizer and Allergan could likely divest enough interests to pass regulatory muster. The two companies had combined sales of more than $60 billion last year and have negotiated a $3.5 billion breakup fee for the merger.

During an investor call regarding the deal, Read and Saunders also said that it would take three years of audited financials before the company could make any decisions regarding a potential split-up (a move that Wall Street has encouraged Pfizer to pursue for years). That means any potential announced split-up would likely not come until about 2018.

The two CEOs also discussed drug development and pipelines during the call. Saunders praised Pfizer's rare disease and oncology platforms, while Read insisted there would be minimal disruption to Allergan's ongoing R&D efforts on drugs such as the depression therapy Naurex, ophthalmology medications, and irritable bowel syndrome drugs.

The proposed merger will undoubtedly prove controversial amid the consistent and rapid clip of healthcare consolidations over the last several years—particularly as controversies over drug pricing have caught the nation's attention and spilled over into the 2016 presidential campaign as a major issue.

Read didn't seem fazed at the prospect of being blocked by regulators during Monday's investor call. But, knowing full well about the controversy bound to dog this proposed deal, he already sent a letter to the Senate Majority Leader insisting that "Pfizer and Allergan have deep roots and are committed to the United States, and a Pfizer-Allergan combination builds even more the combined companies’ presence in the United States. We will maintain our global operational headquarters in New York City."

The letter goes on to say that there will be more than 40,000 employees of the combined company across 25 U.S. states. There will also be about 5,000 employees in Ireland.

Source: http://www.healthcaredive.com/news/pfizer-allergan-agree-to-historic-160-billion-inversion-merger/409699/

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