Morningstar | AbbVie’s Acquisition of Allergan Looks Opportunistic and Offers Diversification From Humira
Narrow-moat AbbVie’s announcement to acquire wide-moat Allergan looks like a strategically sound deal at a reasonable valuation. Adding Allergan’s portfolio of branded drugs should help strengthen AbbVie’s moat that was partly dependent on immunology drug Humira. From a valuation perspective, Allergan’s pipeline and strong entrenchment with Botox did not seem fully factored into the stock price, and we believe AbbVie was both opportunistically taking advantage of Allergan’s low valuation and looking to diversify its cash flows away from Humira, which is currently facing international biosimilar competition and will face U.S. biosimilar competition in 2023. While we are still reviewing the details of the acquisition, we don’t expect a major change in our AbbVie fair value estimate, and we continue to view the stock as undervalued.We believe the increasing concern about AbbVie’s growth potential following the U.S. Humira biosimilar competition in 2023 will be partially alleviated with the increased portfolio of assets that Allergan brings. In particular, we view Allergan’s leading product Botox as well positioned in both the therapeutic and cosmetic settings based on strong clinical data and powerful brand power. From a synergy perspective, the $2 billion in annual savings projected by management looks reasonable with the majority stemming from research and development as well as sales and marketing. We see Allergan’s presence in women’s health as particularly helpful for AbbVie’s launch of endometriosis drug Orilissa.
AbbVie is a research-based biopharmaceutical company. The company's products are focused on treating conditions such as chronic autoimmune diseases in rheumatology, gastroenterology and dermatology; oncology, including blood cancers; virology, including hepatitis C virus and human immunodeficiency virus; neurological disorders, such as Parkinson's disease; metabolic diseases, including thyroid disease and complications associated with cystic fibrosis; pain associated with endometriosis; as well as other serious health conditions. The company also has medicines in clinical development across immunology, oncology and neuroscience, with additional targeted investment in cystic fibrosis and women's health.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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