Pfizer, Allergan in merger talks to create global drug giant
TRENTON, N.J. (AP) – Pfizer and Botox maker Allergan are discussing a potential deal that could be the biggest of 2015, a year marked by a rapid-fire pace of megadeals, particularly in health care.
A merger could enable Viagra maker Pfizer, the world's second-biggest drugmaker by revenue, to surpass Switzerland's Novartis AG and regain the industry's top spot.
In separate statements, both companies on Thursday said they were in “preliminary friendly discussions.” Allergan Plc. said there's no certainty that the talks with Pfizer, Inc. will lead to a deal.
The talks come amid the latest wave of health care consolidation, which includes brand-name and generic drugmakers as well as insurers, pharmacy chains and drug wholesalers – all groups trying to boost bargaining clout. Allergan, based in Dublin, is in the process of selling its generics unit to Israel's Teva Pharmacueticals Industries Ltd., the world's top generic drugmaker.
Generic competition to its blockbuster drugs, like cholesterol fighter Lipitor, is expected to cut Pfizer's sales by $28 billion from 2010 through next year. It's done three sizeable deals since 2000 to boost revenue.
A deal for Allergan would allow for additional growth, and Pfizer might pursue an “inversion.” That's a tax-saving maneuver in which a US company reincorporates in a country with a lower corporate tax rate.
Inversions have become a hot political topic, raising the ire of lawmakers in Washington and public interest groups.
Pfizer, based in New York, spent months in the spring of last year pursuing another top 10 drugmaker, Britain's AstraZeneca PLC, in an attempted inversion, but those talks eventually collapsed when the two sides couldn't agree on a price. Pfizer was willing to pay $118 billion.
However, with other companies announcing or pursuing inversions, the Obama administration acted.
By the end of the year, the US Treasury Department had initiated new regulations designed to limit the financial benefits of inversions. The rules bar certain techniques that companies use to lower their tax bills and tighten ownership requirements.
Last week, billionaire investor Carl Icahn announced that he was setting up a $150-million super PAC bent on revising US corporate tax law and ending the practice of inversions, ratcheting up political pressure even more.