Thursday, 29 October 2015

Botox + Viagra = Good times

Pfizer is in early friendly talks to potentially create the world's largest drug company by acquiring Allergan (the owner of Botox). A combination will solve the needs of many with Botox and Viagra being available under one roof! Some shareholders are probably hoping for a shareholder discount plan or a combined loyalty plan. The discount plan is a little tongue in cheek but Allergan does have a brilliant distinctions program that rewards loyal users. It's proved tremendously useful for the company locking users into the brand as it says below earn, save, repeat. You get 200 points for one Botox treatment.


Acquisition has some wrinkles
The merger has plenty of political risk. Pfizer has been motivated by Allergan's lower Irish tax rate of 15%. Acquiring Allergan would reduce Pfizer's 25% tax rate while giving them the growth asset that is Botox and Allergan's development pipeline. It will be Pfizer's second attempt at a tax inversion. The news of Pfizer moving its tax base overseas will generate headline risks and a lot of noise during the presidential debates. The Pfizer CEO Ian Read is well aware of these risks pushing for this deal under the present congress. The underlying problem is the US tax system. All the potential issues are likely to cause a lot of frowns, in that case we all know where to go....

Jason


Decisive has a long position in Allergan (AGN).The material in this article is for informational purposes only and in no way constitutes a solicitation of business or investment advice. The material has been prepared without regard to any client's or other person's investment objectives. Before making an investment decision you should consider the assistance of a financial adviser and whether any investment or service is appropriate in light of your particular investment needs.