Changing of the Guard at AbbVie: New Leadership = New Strategy

AbbVie has done a few deals under new CEO, Rob Michael, and these deals could signal a major shift in strategy from the Rick Gonzalez era

AbbVie has long been one of the biggest and most significant acquirers in the Big Pharma sector since its inception in 2012. They have only ever had one CEO, Richard (Rick) Gonzalez, until its recent shift, to his successor, Robert (Rob) Michael. And the new CEO has been busy. Rattling off a small handful of key deals to bolster AbbVie’s future pipeline.

What struck me was not the impetus to “get some deals done” right away. This is a common occurrence when Big Pharma have leadership hand-offs. New leadership means new strategy, and one of the biggest ways you mark the new direction of your ship is by doing some deals. The thing that caught my attention though was the types of deals that AbbVie has done in its new chapter. It’s still early days into Michael’s tenure, but the company’s early maneuvers seem to signal a major departure from the Rick Gonzalez era – one that has left behind the company’s penchant for large late-stage transactions to one that is defined by smaller earlier stage deals.

AbbVie Under Rick Gonzalez: Big Game Hunting

Just take a look at the table above. It is littered with some of the most famous and infamous deals in recent Biopharma history.

Buying Pharmacyclics for $21B was my first ‘WTF?’ moment in my career. $21B for an encumbered drug (J&J owned ex-US rights from previous deal with Pharmacyclics) , but in hindsight IMBRUVICA became one of the most consequential drugs in heme/onc, registering $12B global peak sales. It now faces heavy in-class competition, but it had a multi-year run where it was incredibly unchallenged.

An even bigger ‘WTF?’ moment was AbbVie buying Allergan for $63B. Why would a company with foundational businesses in immunology and heme/con buy an aesthetics, eye care, neuroscience company? This sort of deal was a strategy defining deal in the first chapter of AbbVie. TA synergies didn’t matter as much as topline and bottom-line growth.

What about the deals that didn’t happen? Remember when AbbVie was set to buy Shire during the whole tax inversion craze of the 2010’s? This was a time in biotech history where big US companies would look to buy smaller companies domiciled in tax-favorable nations, enabling them to benefit from lower corporate tax rates, increase profits and potentially make it easier to repatriate foreign dollars. AbbVie was set to take on the rare disease/neuro powerhouse, Shire, for $55B, but the deal fell apart after the US Treasury rules changed to limit the tax benefits of these sorts of transactions. R.I.P. ShAbbVie, but under Gonzalez cash was king and tax rate was queen