The marriage of convenience is off: Allergan moves on, but is Pfizer on the rebound?

Allergan bounced back from its failed merger with Pfizer by announcing a potential $3.3 billion neurology deal with UK biotech Heptares, while Pfizer admitted it is reconsidering plans to break up.

The Heptares deal involves an upfront payment of $125 million, but milestone payments associated with successful phase 1, 2 and 3 clinical development and launch are $665 million.

Allergan has also committed to payments of up to $2.5 billion if it beats certain annual sales thresholds in the years following launch.

It is also giving $50 million to a joint research and development programme to be conducted jointly by Allergan and Heptares. Allergan will take responsibility for development beyond Phase 2b.

The agreement covers first-in-class selective small molecule agonists targeting muscarinic M1and M4 receptors in the brain, discovered by Heptares.

Allergan CEO Brent Saunders added in a separate statement that a deal to sell its generics business to Teva is still set to close in June, boosting the company’s balance sheet by $40.5 billion before tax.

Pfizer has agreed to pay Allergan $150 million to cover expenses following the collapse of the deal, although this is short of the $400 million suggested by some commentators yesterday.

But in an interview with CNBC, Saunders expressed his anger over the US government’s actions, describing them as “un-American”.

In its statement confirming the end of the deal, Pfizer said it was revisiting plans to split the business that were first mooted before its failed attempt to buy AstraZeneca in 2014.

The plans detailed in 2013 involved spinning off Pfizer’s branded and generics divisions into three separate companies – one focusing on immunology and metabolic diseases, another focusing on vaccines, cancer and consumer healthcare, and a unit for generic products or those nearing the end of their patent life.

Chief executive Ian Read said: “We plan to make a decision about whether to pursue a potential separation of our innovative and established businesses by no later than the end of 2016.”

There is speculation that Pfizer will seek out a new merger partner to help it reinvigorate its business – though this time it won’t be able to use the inversion technique to squeeze new profits from any such union.

Meanwhile, commentators and politicians assessed the fall-out from the termination of the deal.

Democratic presidential hopeful Hillary Clinton tweeted: “Glad to hear Pfizer is calling off the merger. We need to close the loopholes that let corporations escape paying their taxes.”  Republican front-runner Donald Trump, who had previously criticised the merger, made no mention of the deal on Twitter.

Financier Kevin O’Leary, O’Leary Financial Group founder, told CNBC that US firms were unable to develop products because of high tax rates. “We can’t spend as much on R&D because we are paying so much tax,” he said.

President Obama, who was clearly the guiding force behind the Treasury’s move. However he added: “While the Treasury Department’s actions will make it more difficult…to exploit this particular corporate inversion loophole, only Congress can close it for good.”


Related stories:

Pfizer to end $160bn Allergan merger following US tax changes

Allergan deal will go ahead, says Pfizer chief

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