- AbbVie on Wednesday said it will create a subsidiary to market Botox, Juvederm, Coolsculpting and other aesthetics products that it will acquire via its $63 billion buyout of Allergan. The new unit will be headquartered in Irvine, Calif., and be led by the senior vice president for Allergan's aesthetics business, Carrie Strom.
- The Allergan eye care and specialty business, which includes Restasis, Ubrelvy and Botox for therapeutic uses, will be absorbed into the main AbbVie pharmaceutical organization. The changes will take place following the close of the acquisition, which is expected sometime in the first quarter of the year.
- The decision could raise questions about AbbVie's plans for the aesthetics business. Before the AbbVie takeout, some investors pushed Allergan executives to split up the company because they believed the aesthetics business would be worth more as an independent entity.
Wednesday's announcement answers questions investors undoubtedly would have asked AbbVie CEO Richard Gonzalez when he presents at next week's J.P. Morgan Healthcare Conference in San Francisco.
Aesthetics is a new business for AbbVie. Keeping the unit, including its research & development department, intact may ensure that the transaction is not disruptive. But it raises other questions, not least of which is what AbbVie's long-term intentions are.
The Allergan acquisition is largely a revenue play. The more than $3 billion in annual sales from Botox (onabotulinumtoxinA) were a chief draw for AbbVie, as were eyecare and specialty drugs that could help AbbVie sustain itself through expected losses due to future competition to its top-seller Humira (adalimumab). Biosimilar rivals are expected to arrive in the U.S. in 2023.
When AbbVie announced the Allergan acquisition, Gonzalez said Allergan's assets would add between $10 billion and $15 billion in "durable" revenue and offset declines from Humira. "Essentially, Humira is buying the assets that will replace it in the long term," he said at the time.
Through the first nine months of 2019, Allergan's combined sales were $11.7 billion.
Positioning aesthetics as a separate subsidiary could make it easier for AbbVie to sell it off or divest it in the future, though.
Last April, Bernstein analyst Ronny Gal and RBC Capital Markets analyst Randall Stanicky argued the fast-growing aesthetics business would see a greater stock market rise as an independent entity than Allergan would broadly.
This was particularly true then, following several R&D setbacks suffered by Allergan in 2018 and 2019 — an issue that Gonzalez raised when he declared AbbVie wasn't buying Allergan for its pipeline.
Stanicky cited Novartis' spinoff of eyecare subsidiary Alcon — which, like many other healthcare spinoffs, has outperformed the market broadly. As with the Allergan aesthetics business, Alcon was an independent company before Novartis took it over, as was Allergan's aesthetics business before Actavis bought it.