Pfizer Inc. is a huge drug company from the United States. Allergan Plc makes Botox, a medicine used for wrinkles and other health problems. In 2015, Pfizer told Allergan that it wanted to talk about buying the company.
What Is the Pfizer‑Allergan Talk?
Pfizer has a market value of about $219 billion. Allergan is worth about $113 billion. The Wall Street Journal reported that the two companies started private talks in early 2015. The talks are about a possible takeover, which means Pfizer could buy Allergan and become even bigger.
Both companies said they would not comment publicly. Their share prices moved only a little after the news. Pfizer shares are up about 12% this year, and Allergan shares are also up about 12%.
Why Would Pfizer Want Allergan?
Allergan is based in Dublin, Ireland. Ireland has lower corporate taxes than the United States. This is called a tax inversion. By moving its main office to Ireland, Pfizer could lower the amount of tax it pays.
Allergan also makes products that Pfizer does not have. Botox brings in about $632 million in quarterly revenue. Other Allergan drugs include Restasis for dry eye and Namenda for Alzheimer’s disease. Adding these products could help Pfizer grow its sales.
Pfizer’s own sales are expected to fall about 3.3% this year. Allergan’s sales are expected to rise about 39% . The two companies think they could help each other grow.
How Have Similar Deals Gone Before?
Pfizer tried a similar deal in 2014 with AstraZeneca, a European drug maker. After six months of talks, AstraZeneca rejected Pfizer’s offer in May 2014.
In 2015, Pfizer bought Hospira for $15 billion. Hospira makes injectable medicines. That deal was completed quickly.
Allergan itself has been active in deals. In March 2015, Allergan joined with Actavis in a $66 billion merger. After that, Allergan sold its generic drug business to Teva for $40.5 billion.
Later news shows that the Pfizer‑Allergan talks did not finish with a deal. In April 2016, The Guardian reported that the merger collapsed and Pfizer looked for a new target. In November 2015, some reports said the two companies were close to a $150 billion merger, but the deal was later abandoned because of U.S. tax‑inversion rules.
In 2019, AbbVie bought Allergan for $63 billion, ending Allergan’s independence. This shows that big drug companies often change owners.
What Could the Deal Mean for Patients and Shareholders?
If the merger had happened, Pfizer would have added Botox and other specialty drugs to its lineup. Patients might have seen new combinations of medicines and possibly lower prices because of bigger scale.
Shareholders of both companies would have seen their stocks move. In the short term, both stocks rose about 12% after the news. A successful deal could have increased Pfizer’s earnings and possibly paid higher dividends.
However, tax‑inversion deals are controversial. Critics say they move jobs and profits away from the United States. Supporters say they keep companies competitive globally.
Pfizer also hoped the deal would help its research pipeline. Adding Allergan’s dermatology and eye‑care drugs could give Pfizer more options for future growth.
FAQ
What is a tax inversion?
A tax inversion is when a company moves its legal headquarters to a country with lower taxes. This can lower the amount of tax the company pays on its worldwide earnings.
Why did the Pfizer‑Allergan deal not happen?
U.S. regulators tightened rules on tax inversions in 2016. The new rules made the proposed deal riskier for Pfizer, and the companies eventually stopped talks.
Will Pfizer still buy other companies?
Pfizer has a history of buying other drug makers, such as Hospira in 2015. It is likely to keep looking for opportunities that fit its strategy.
How does a merger affect drug prices?
A merger can lead to lower prices if the new company can produce drugs more efficiently. It can also lead to higher prices if the company gains more market power.
Conclusion
Pfizer’s talks with Allergan in 2015 were a big story in the drug industry. The deal would have been worth over $150 billion and could have lowered Pfizer’s taxes. Past attempts, such as the AstraZeneca offer, show that big mergers are hard to finish. Later, the deal fell apart because of new U.S. tax rules, and Allergan was later sold to AbbVie. The episode shows how drug companies use mergers to grow, but also how government policies can stop big deals.