Nearly a month after announcing the company's intentions to acquire rival drugmaker Allergan Plc (NYSE:AGN) for a whopping $63 billion U.S., investors in what will become Allergan's parent company, AbbVie Inc. (NYSE:ABBV), have seen their equity investment in the combined firm drop, as could be expected.
The premium AbbVie paid to acquire its competitor has been a cause for concern among some investors, who believe far too much future growth was paid up front for the maker of Botox - a highly profitable business.
AbbVie has been under investor scrutiny, as has many other large pharmaceutical makers, with few blockbuster drugs ready to be released in the near-term, providing pressure for the company's management team to make a splash in a bid to increase earnings in the short term.
This short term mentality has proven to be a danger to the pharmaceutical industry. Canadian investors know all too well the story of former pharmaceutical giant Valeant Pharmaceuticals Inc. (now Bausch Health Companies Inc.).
Acquiring companies for the sake of accretive revenue growth is not beneficial over the long term for investors, many of whom would not have otherwise done these deals.
The pharmaceutical space is one which I believe is still rife with issues, and is one which I am staying away from for the time being, until the next big correction; at that point, I believe all stocks, but especially pharmaceutical stocks, will be on sale - some at a massive discount.
Invest wisely, my friends.
