Updated, 9:12 p.m. | The pharmaceutical industry is regaining its swagger, as companies turn to big and sometimes daring deals to expand and reshape their operations.
On Tuesday alone, pharmaceutical companies announced $74 billion worth of potential deals, including an unorthodox $45.6 billion bid for Allergan, the maker of Botox, and a flurry of swaps and sales between Novartis of Switzerland and GlaxoSmithKline of Britain.
More deals in the cash-rich industry are expected. In recent months, Pfizer made a number of informal takeover approaches for AstraZeneca, including one that would have been worth over $100 billion, only to be rebuffed.
The moves by drug makers have helped fuel an overall surge in recent mergers volume, which this year has more than doubled from the same period last year, to nearly $1.1 trillion — the best start in deal-making since 2007, according to data from Thomson Reuters. Pharmaceutical deals made up about 9 percent of that activity, or $93.2 billion, its highest level since 2009.
The flurry of deals highlights the most extensive efforts yet by drug makers to bolster their businesses, in many cases pursuing growth as onetime blockbuster products lose patent protection. Instead of spending money researching new products that may yield little success, several companies are instead looking to buy likely winners.
"A couple of the biggest issues are whether or not these firms can continue to be innovative and bring out products that have strong pricing power," said Damien Conover, an analyst with Morningstar. "Innovation is improving from where it was five years ago, but it isn't to the point where these firms can generate strong growth."
After Pfizer lost its patent for Lipitor in 2011, it reported an 11 percent drop in overall sales the next year.
While so-called patent cliffs are not quite the issue they once were — Mr. Conover said the largest drops took place in 2012 — companies are still scrambling to find new profitable products. While many continue to spend money on in-house research and development, those efforts are yielding less fruit than hoped.
"The productivity, while improving, is not improving fast enough," he said.
Some drug makers regard deal-making as a normal course of business. Allergan's pursuer is Valeant, a Canadian pharmaceutical company whose growth strategy revolves around acquisitions. On Tuesday, it unveiled its unsolicited takeover bid for Allergan, hoping to create a powerhouse maker of eye-care and cosmetic treatments like Botox.
Based outside Montreal, Valeant has sought to become a major specialty drug maker over the last six years by buying up businesses that are hard to replicate. Its biggest deal to date was last year's takeover of Bausch & Lomb, the eye-care specialist, for $8.7 billion. Still, it has had its eye on bigger game, first broaching the idea of a merger with Allergan a year and a half ago.
But Valeant's current approach has raised eyebrows, since it has teamed up with William A. Ackman, an outspoken hedge fund mogul known to fight loudly for change at corporations. The two formed one of the most unusual corporate pairings in recent memory: After reaching a handshake agreement in February to back a takeover bid by Valeant, Mr. Ackman began quietly accumulating shares in Allergan, carefully avoiding tripping rules that would require him to disclose his holdings. On Monday evening, he acquired enough shares to give him control of 9.7 percent of Allergan, giving him a powerful perch from which to demand a merger with his partner.
On Tuesday, Valeant took the cover off its bid, offering cash and stock that was worth about $152.89 a share.
During a nearly four-hour presentation for investors, Mr. Ackman and Valeant executives talked up the benefits of the deal. Combined, Allergan and Valeant would have annual sales of more than $15 billion, while enjoying $2.7 billion in cost savings. And the merged drug maker would benefit greatly from Valeant's low tax rate.
Both Mr. Ackman and J. Michael Pearson, Valeant's chief executive, estimated that a combined company would be valued at more than $200 a share.
During the presentation, Mr. Ackman excitedly pointed to what the combined company could do: more mergers.
"We're looking beyond this transaction," the hedge fund manager said.
For its part, Allergan responded in a statement that it was evaluating the offer with its financial and legal advisers. The drug maker is likely to consider its options, including questioning the bidding team's unusually stealthy approach.
Late on Tuesday, Allergan said that it had adopted a shareholder rights plan, a defensive move meant to keep shareholders to stakes of less than 10 percent.
Shares of Allergan surged 15 percent on Tuesday, closing at $163.65. Valeant enjoyed a smaller jump in its stock, which rose 7.5 percent to $135.41, suggesting that its investors approved of its approach. One shareholder that publicly applauded the move was ValueAct Capital, an activist hedge fund that owns a nearly 5.7 percent stake and has a seat on Valeant's board.
Several corporate advisers said that the partnership could provide a new template for cooperative deal-making between activists and companies. By teaming up with skilled veterans of boardroom fights, corporate acquirers would gain invaluable allies. And hedge funds could eliminate time looking for potential buyers of companies in which they have investments, making their bets more certain.
"This structure and this partnership has not been seen before and is raising a lot of eyebrows" among both investors and companies, said David Hunker, a banker at JPMorgan Chase who helps clients defend against activist investors.
But some advisers cautioned that several circumstances made the Valeant-Ackman team unique. The two were introduced by a mutual friend who now works for Mr. Ackman, lending a personal touch to the partnership. The two displayed a warm relationship on stage during the presentation, with Mr. Pearson repeatedly stressing that the expensive setup was being paid for by his hedge-fund friend.
"I want to reassure our investors that we are still trying to save every penny," the Valeant executive joked.
And because the deal is potentially hostile, Mr. Ackman's involvement made sense, given his experience as a Wall Street brawler. As he explained during the presentation: "We buy stakes in companies and help them do the right thing for shareholders. We have ways of doing that."
A number of Wall Street counselors also saw big risks in Valeant's decision to work with Mr. Ackman. The agreement stipulates that should the deal succeed, Mr. Ackman must hold Valeant stock for at least a year. That means Valeant will have an outspoken activist as one of its largest shareholders. And if the deal fails to deliver on its promised cost savings, Mr. Ackman could turn on his partner.
"I don't think you're going to see a rush of these kinds of partnerships," said one corporate adviser not authorized to speak on the record about the matter. "But boardrooms are scared."
A version of this article appears in print on 04/23/2014, on page B1 of the NewYork edition with the headline: Seeking the Right Chemistry .
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