Pfizer and Allergan abandon merger

US drug maker Pfizer confirmed on Wednesday that its $160bn agreement to buy Allergan has been abandoned by mutual agreement, after the US Treasury announced new measures to curb tax inversions.

On Monday, the US Treasury took additional steps to curb “inversion” deals, which involve a US company reincorporating overseas after the purchase of a foreign firm. Under the new rules, the Treasury will impose a three-year limit on acquisition of American companies by foreign companies looking to be part of an inversion deal.

Allergan shares tanked after the announcement and on Wednesday, the companies said the actions announced by the US Department of Treasury qualified as an “adverse tax law change” under the merger agreement.

Ian Read, chairman and chief executive officer of Pfizer, said: “Pfizer approached this transaction from a position of strength and viewed the potential combination as an accelerator of existing strategies.

“We remain focused on continuing to enhance the value of our innovative and established businesses. Our most recent product launches, including Prevnar 13 in Adults, Ibrance, Eliquis and Xeljanz, have been well-received in the market, and we believe our late stage pipeline has several attractive commercial opportunities with high potential across several therapeutic areas.”

Pfizer said it plans to make a decision about whether to pursue a potential separation of its innovative and established businesses no later than the end of this year, consistent with its original timeframe for the decision prior to the announcement of the potential Allergan transaction.

In a research note put out before the termination of the deal was confirmed, Nomura recommended investors buy Allergan on the likely termination of the agreement.

“Assuming no deal, we believe current share prices do not represent Allergan’s standalone value and would be buyers here,” the Japanese bank said.

“Allergan offers some of the best, most durable assets in the sector, is run by an operationally strong shareholder focused management team, and has a solid mid-to-late stage pipeline that could deliver significant upside to our estimates.”