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GSK may move for Botox maker Allergan

By Gareth Macdonald , 25-Mar-2009

 

The pharmaceutical rumour mill is still spinning with the latest speculation that UK drug major GSK is interested in Botox manufacturer Allergan causing the US firm’s share price to leap 13 per cent on the New York Stock Exchange.

 

 

The potential deal, which first emerged on the dealReporter website, would make a certain amount of sense given the firms' existing co-promotion and marketing relationship covering Botox and the UK firm’s migraine drugs Amerge and Imitrex.

Any acquisition would also be in keeping with recent comments by GlaxoSmithKline (GSK) CEO Andrew Witty that the firm would seek to expand its pipelines through small-scale purchases rather than the mega-mergers being undertaken by rivals Pfizer and Roche.

Additionally, Allergan may be looking for a takeover at the moment as it does not appear to be weathering the global downturn particularly well.

The most recent evidence for the firm's difficulties came last month when it revealed a decline in fourth quarter sales on lower demand for both Botox and its range of cosmetic breast implants.

Allergan responded by announcing plans to cut its workforce by around 5 per cent, explaining that it would trim its urology division’s sales and marketing workforce and seek a co-promotion partner for its overactive bladder treatment Sanctura XR.

While neither GSK nor Allergan has commented on the takeover speculation, the general feeling among observers is that Big Pharma buyers interested in Allergan will see the latter’s financial woes as an opportunity for a bargain.

One person to make such comments was Natixis Bleichroeder analyst Corey Davis who told Bloomberg that: “Allergan is having more earnings pressure than I have ever seen them face, and they are having to cut spending just to have any growth.”

Davis added that any potential buyer for the Californian firm will be “chomping at the bit” in the current circumstances.

These thoughts were echoed by Wachovia’s Larry Biegelsen, who, in a note to investors, said that Allergan is “undervalued by at least 20 percent to 40 percent based on recent ophthalmology and medical aesthetics transactions.”

 

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