AbbVie's $18 Billion Blowup Brings Deal Deja Vu to Some Holders

(Bloomberg) -- AbbVie Inc.’s 15% drop after announcing a deal to pay $63 billion for Botox maker Allergan Plc may bring on deja vu for some investors who are still feeling the burn from the drugmaker’s last deal blowup.

While the purchase would provide a band-aid of sorts for beaten-down AbbVie, investors can’t help but remember how the company’s purchase of Stemcentrx Inc. for $5.8 billion went up in flames. That deal, and its subsequent write off in January after drug-development stumbles, drew criticism from Wall Street analysts and ramped up pressure on management.

Fast forward to Tuesday, where AbbVie’s intraday move wiped out as much as $18.4 billion in market value, more than the value ascribed to all but nine companies in the closely-watched Nasdaq Biotech Index. “Financial engineering doesn’t make a more attractive pipeline,” SVB Leerink analyst Geoff Porges wrote in a research note.

Other analysts say the Allergan deal looks more like a cosmetic fix than a long-term solution. “Two turkeys don’t make an eagle,” Piper Jaffray analyst Christopher Raymond said.

To contact the reporter on this story: Bailey Lipschultz in New York at blipschultz@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Scott Schnipper

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