AbbVie's Acquisition of Shire Could Save $8 Billion in Taxes

Jul 21, 2014

According to GlobalData, a research and consulting firm, AbbVie’s recent $54 billion acquisition of Shire and subsequent relocation to Ireland will mean substantial tax savings for the US pharmaceutical giant.

Aparna Krishnan, MS, GlobalData’s analyst, and Joshua Owide, GlobalData’s director of Healthcare Industry Dynamics, said the rational for the deal consisted of a mix of portfolio diversification, operating cost synergies, and tax savings. Shire, which itself relocated to Ireland from the UK back in 2008, has since seen a notable drop in its tax expenses, with a five-year average effective tax rate (ETR) of 20.6% between 2008 and 2013, compared with 36.9% in 2008. By comparison, AbbVie’s ETR was 22.6% in 2013.

In terms of underlying assets, Shire will provide AbbVie with a portfolio that includes a number of niche drugs used in orphan diseases. According to GlobalData, the particular importance of Humira to AbbVie’s business should not be understated, as the drug accounted for 56.7% of the company’s top-line sales in 2013.

“Humira could face competition from adalimumab biosimilars as early as December 2016 in the US and April 2018 in other markets. However, even after assuming the entry of these treatments, Humira will remain AbbVie’s leading franchise far into the future, with a net present value of $37.6 billion and a free cash flow of over $60 billion through 2029,” adds Owide.

Source: GlobalData