Allergan's Tobira Acquisition Represents The Highest Premium Ever Paid In Biopharma

Allergan plc Ordinary Shares AGN paid a hefty premium of 159 percent to acquire Vitae Pharmaceuticals Inc VTAE last week, but that figure pales in comparison to the premium attached to its acquisition of Tobira Therapeutics Inc TBRA.

Allergan will pay $533 million in up-front costs to acquire Tobira, which represents a nearly 500 percent premium to its closing price the day before the deal was announced. According to Gadfly's Max Nisen, Allergan's acquisition of Tobira will represent bipharma's largest announced premium on record - and this doesn't even include a potential payment of up to $49.84 per share if certain clinical and regulatory milestones are hit.

Nisen noted these are "staggering" numbers and even without a hefty premium, Allergan is taking a big gamble in its acquisitions.

Related Link: NASH Sympathy Plays On Tobira Therapeutics Deal

Tobira's drugs treat Nonalcoholic steatohepatitis (NASH), a common but "silent" liver disease, faces plenty of competition including from the biotech giant Gilead Sciences, Inc. GILD, which boasts four different drug candidates in its pipeline for the treatment of NASH.

Nevertheless, Allergan is flush with cash after selling its generics business to Teva Pharmaceutical Industries Ltd (ADR) TEVA for $40.5 billion.

If anything there are two major takeaways from Allergan's recent acquisition spree. First, biotech value investors and bargain hunters are likely "cursing" Allergan's CEO Brent Saunders for his "expectation-raising aggressiveness, while high-upside biotech targets toast his name." Second, "just about anything is still possible" in the biotechnology sector.