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The Pfizer-Allergan Merger & the Importance of IP Due Diligence

Pfizer

Update: Pfizer announced on April 6 that it was terminating its deal with Allergan. The biopharmaceutical company has agreed to pay Allergan $150 million for the reimbursement of expenses associated with the transaction.

In what’s being dubbed a “historic merger deal”, pharmaceutical giant Pfizer announced a more than $150 billion takeover of Botox-maker Allergan, creating the world’s largest drug maker. The move would shift Pfizer’s headquarters from New York to Dublin, where it would take advantage of Ireland’s lower corporate tax rate.

The merger is viewed as controversial for various reasons, highlighting the importance of due diligence in areas such as intellectual property (IP), where obtaining an accurate valuation of the deal is critical.

The Popularity of IP Deals in the Healthcare Sector

It’s been a busy two years for movers and shakers in the pharmaceutical industry.

In 2014 we saw one of the most active years for healthcare deals in the past two decades. Before the recent Pfizer-Allergan merger, 2015 was already off to a busy start. In April, Valeant Pharmaceuticals International Inc. announced it bought Salix Pharmaceuticals for $10.96 billion. A few months later, Pfizer acquired a division of GlaxoSmithKline for roughly $130 million.

Many deals in the healthcare sector of been comprised of the acquisition of healthcare IP, which often requires a smaller investment in time and capital, and are often perceived as lower-risk than investing in the typical research and development cycle.

IP Due Diligence Is Critical for Deal Success

Before entering into an IP deal, it’s imperative to have a full understanding of a target company's IP assets. It’s recommended you conduct a thorough investigation into the organization’s trademark, copyright, and patent searches and filings.

The resulting data will help you fully understand what the organization owns, what it’s capable of producing, and what issues may come up down the line. This insight will also give you a full understanding of a company’s potential, and help you come up with the most accurate valuation numbers.

In an interview with Inc., Alexander Poltorak, founder and CEO of General Patent Corporation, said an organization’s IP can be worth considerably more than its hard assets.

He cited the example of telecom giant Nortel’s 2009 bankruptcy. The organization’s equipment, buildings and towers were sold for $2.5 billion.

Their patents went for nearly twice as much.

Poltorak describes access to the information that shows a company’s potential as “the new currency” of our IP-based economy.

LEARN MORE

Learn more about how CT can provide mergers and acquisitions support for every stage of the deal, from due diligence to closing to on-going compliance. Contact a CT representative at 844-701-2064 (toll-free U.S.) or visit ctcorporation.com.

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