Allergan Plc, the $121 billion pharmaceutical company created through a merger with Actavis Plc, is exploring a breakup of the company, people with knowledge of the matter said.
Allergan is leaning toward keeping the branded-drugs business and spinning off or selling parts or all of the generics business, said the people, who asked not to be identified because the information is private. The maker of the blockbuster wrinkle treatment Botox is working with advisers on a possible plan, the people said.
The generics drug and distribution businesses make up about a third of the company’s total revenue, and had sales of $8.43 billion last year. That’s more than Mylan NV, which has a market value of $32.3 billion.
The discussions are ongoing and there is no certainty Allergan will decide to break up the company. It’s unclear if Allergan has identified a potential buyer for the generics business.
A spokesman for Allergan declined to comment. The company is based in Dublin, with operating headquarters in Parsippany, New Jersey.
The volume of announced global pharmaceutical deals so far this year has reached more than $180 billion, according to data compiled by Bloomberg. That’s on pace to beat the record set last year, when drugmakers announced more than $200 billion of acquisitions.
Teva Pharmaceutical Industries Ltd., the world’s largest maker of generic drugs, is pursuing Mylan to help it create a generics powerhouse with more than $27 billion in revenue and solidify Teva’s role as the industry giant. Mylan has so far rejected Teva’s advances and is itself pursuing Perrigo Co., a deal it would have to drop if Teva succeeds. Teva’s head of generics, Siggi Olafsson, is a former Actavis executive.
While generic drugs are a lower margin business, they offer new sources of revenue as patents for branded drugs expire.
Pfizer Inc., which may make a decision about its own split by the end of next year, also is interested in acquisitions.
“We continue to look for business development opportunities that will create value, with a bias towards deals with the potential for creating value in the near term,” Chief Executive Officer Ian Read said on a conference call in April.
Actavis Plc agreed to buy Allergan Inc. for $66 billion in November 2014, after spending months locked in bitter conflict with Valeant Pharmaceuticals International Inc., a rival drugmaker that had started a hostile takeover effort that year. The deal was completed in March.
Last month, Actavis rebranded the combined company Allergan. The combination created a health-care giant, with projected annual sales of more than $20 billion this year.
Actavis, which already had brand-name drugs such as enlarged-prostate treatment Rapaflo, acquired Allergan to bolster the business and further reduce its dependence on its generic division.