Allergan's Potential Shopping List Expands

Allergan’s Potential Shopping List Expands
April 19, 2016 (Last Updated: 10:30am PT)
By Mark Terry, Breaking News Staff

Now that the Pfizer and Allergan deal has been declared officially dead, Dublin-based Allergan finds itself with cash just burning a hole in its pocket. It will receive a $150 million breakup fee from Pfizer and another $40 billion from the sale of its generics business to Israel-based Teva . This has led numerous investors and analysts to speculate on just who Allergan might buy.

Of course, only a day after the deal was called off, Allergan announced it had inked an agreement with Heptares Therapeutics, a wholly-owned subsidiary of Sosei Group Corporation. Allergan is paying Heptares $125 million upfront 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. Heptares could receive up to $665 million tied to successful Phase I, II and III clinical trials and the launch of its first three licensed compounds for multiple indications. An additional $2.5 billion is linked to hitting specific annual sales milestones, and double-digit tiered royalties on net sales.

Allergan is also coughing up $50 million in research and development funds, which will be performed jointly by the two companies.

But in the belief that Allergan is just itching to acquire a company or two or three, analysts are providing their own shopping lists.

Writing for The Street, Bret Jensen notes that Canadian firm, Valeant Pharmaceuticals has hired investment bankers to help the company figure out a way to pay down its $30 billion debt load. He’s not the first to mention this. Adam Feuerstein, also writing for The Street, mentioned it earlier this month.

Valeant’s woes are many, and as Feuerstein wrote on April 6, “Given Valeant’s myriad accounting issues and mountain of debt at risk of default, Saunders (Allergan’s chief executive officer) could—and should—probably wait to pick up Valeant’s best assets in a fire sale or bankruptcy.”

Valeant has already floated the idea of selling off its Bausch & Lomb unit. Jensen mentions Valeant’s gastrointestinal products line, assuming they’re eventually put up for sale. He notes that the company’s Relistor, a treatment for opioid-induced constipation and chronic non-cancer pain, has been a solid earner, and although its oral version was pushed back 90 days, it’s expected to be approved in July and would probably do much better than the injectable version already on the market. “The two versions of the drug,” Jensen writes, “could eventually hit peak sales of more than $1 billion, making it a potentially good strategic pick-up.”

Another possible acquisition target would be New York-based Synergy Pharmaceuticals. Today Synergy announced that the U.S. Food and Drug Administration (FDA) had given a PDUFA target of Jan. 29, 2017 for plecanatide, the company’s first uroguanylin analog for the treatment of chronic idiopathic constipation (CIC).

Jensen notes that Synergy’s drug appears to be better than the current market leader, Ironwood Pharmaceuticals ’ Linzess, which makes about $450 million in annual sales, but projects to be able to hit $1 billion by 2020. Synergy has an enterprise value of about $400 million.

And others have offered up Cambridge, Mass.-based Biogen as a potential target, as well as North Chicago, Ill.-based AbbVie , Celgene , Bristol-Myers Squibb or AstraZeneca .

If Allergan opted for smaller buys in the dermatology market, it might consider Revance Therapeutics , Anacor Pharma or Dermira.

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