As a modest AbbVie shareholder, its good to see AbbVie (ABBV) and Shire combining, (at least if you are bullish on AbbVie shares) and if you admire the level of innovation they are bringing to big Pharma. Analysts may favour new chemical entity (NCE) rich pipelines as the measure of innovation in Pharma giants, however this is to miss the point of innovation - to add economic value. In fact, heavy R&D investment in Pharma frequently has the opposite effect, investing sizeable fortunes often in speculative drug development. In any event R&D dollars today do not return investment in revenues at least for some 6 to 10 years.
Smart commercial decisions however can provide returns within the year of investment and indeed for subsequent years. A Shire tie-up provides AbbVie with a wider pipeline, a lower tax base and further differentiation away from its flagship brand Humira immediately. Given AbbVie's relatively young culture, (less than 2 years old), accomodating Shire colleagues will be seamless given AbbVie's growth in diversity and people since launch. Naturally such an expensive merger will result in widespread layoffs (synergies), so it will be tough for many existing employees on both sides who may find themselves moving on as a result of "integration".
My bet as a former AbbVie employee, is that despite the turbulence that this merger creates in the short term within the combined company, the innovative approach and the depth of talent already within the business will better exploit the geographic spread and the pipeline and commercial synergies of both sides.
Mergers can be tough and there's no 50:50 if they are to be successful. Provided AbbVie wins out in preserving its commercial ways of working and assuming the combined R&D teams can be properly integrated and aligned, I'd say this merger albeit horrendously expensive, should be good for AbbVie patients and shareholders in the long term. Certainly Shire shareholders can have no quibble as their investment has been handsomely rewarded and they can opt to realise significant gains and participate in the future business. Not a bad deal for them.
I tip my hat to AbbVie CEO Rick Gonzales and CFO Bill Chase. Two of the smartest most down to earth executives you will meet. The company may be young but the leadership has a lot of wisdom and ambition at its heart. I wish them well.
Dave