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This Neglected Big Pharma Stock Could be About to Explode



7/8/2016 7:46:23 AM

This Neglected Big Pharma Stock Could be About to Explode July 8, 2016
By Alex Keown, BioSpace.com Breaking News Staff

As Allergan (AGN) continues to reshuffle itself following the breakup of its deal with Pfizer and the sale of its generic unit to Israel-based Teva, some analysts are suggesting now may be the time to invest in the Irish company.

John Dowling and Michael Kon of the Golub Group sat down with SumZero to lay out why investors should look to add the stock to their portfolio. When investing, Dowling said he looks for stocks that trade below what he believes is a fair market value, which is what drew him to Allergan. Shares of Allergan were trading at a morning high of $238.81 as of 10:08 a.m. The duo said they believe the stock is worth about $262 per share in their “bear case” scenario and up to $342 per share in a best case scenario.

Although Dowling said there have been some who have compared Allergan to beleaguered Valeant Pharmaceuticals (VRX) due to their high level of debt, he said Allergan is driven by volume growth, rather than an increase in pricing of drugs.

“Allergan has a much more reasonable approach to R&D, and we are actually very excited about the future growth that its new drug pipeline will yield,” Dowling said.
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Kon said he believes the market is “discounting Allergan’s growth opportunities and the quality of its aesthetics franchise.” Allergan’s Botox franchise is well protected, he said, and expects to continue to see growth over the next five years with the cosmetic drug. In addition to Botox, Kon said he likes its eye-care business, which is anchored by the dry eye treatment, Restasis. Kon said Restasis is “insulated from competition by patents and manufacturing complexity.”

Another factor that could boost Allergan’s stock is that the company has planned for a buy back up to $10 billion of its own shares following its revenue jump of 48 percent for the first quarter, driven by an increase in sales of Botox and Restasis, as well as growth newer drugs like Linzess, used for irritable bowel syndrome. The stock repurchase program of up to $10 billion is contingent on the close of its generics unit sale to Teva Pharmaceuticals. Allergan expects to execute $4 to $5 billion in open market repurchases over four to six months subject to favorable market conditions. The Teva deal was expected to close at the end of June, which means it should happen any day now barring any unforeseen complications.

Allergan, which had been one of the biggest deal makers of the past few years, is looking inwardly after its planned merger with Pfizer fell apart. Although, even in the wake of what would have been one of the biggest mergers in the pharma industry, Allergan has still been aggressive in its M&A practices.

In April, Allergan acquired Boston-based Topokine Therapeutics and its lead product, XAF5, a first-in-class topical agent to treat steatoblepharon, better known as bags under the eyes. One day after the Pfizer deal fell through, Allergan entered into an agreement with Heptares Therapeutics for exclusive global rights to a portfolio of novel subtype-selective muscarinic receptor agonists for the treatment of several neurological disorders, including Alzheimer’s disease.


Read at BioSpace.com


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