Biogen, Regeneron and Valeant Rank High as Potential Takeover Targets for Allergan

Biogen, Regeneron and Valeant Rank High as Potential Takeover Targets for Allergan April 21, 2016
By Mark Terry, Breaking News Staff

Investing would be so much easier if companies would just do what investors and analysts suggest—or maybe not. Ever since the Pfizer -Allergan merger collapsed, investors and analysts have been creating a gradual consensus on just what companies Allergan should acquire and why.

Allergan, after all, left the near-marriage with a $150 million breakup fee and another $40 billion from the sale of its generics business to Israel-based TEVA .

The top picks are clearly Cambridge, Mass.-based Biogen and some of Valeant Pharmaceuticals ’s assets. Tarrytown, NY-based Regeneron Pharmaceuticals is also a popular sale item.

Writing for Bidnessetc, Aliya Kaleem, says, “Allergan can be expected to start its search for high-growth companies that are mainly focused on research and development (R&D). The company had said that it would look for such targets which maintain significant R&D spending before it signed a deal with Pfizer; Allergan Plc can be expected to maintain the same criteria. The company’s management said it seeks opportunities that have longer-term bottomline growth.”

Aside from the fact most analysts and investors seem to want someone with money to buy Biogen, or for Biogen to buy a company with some higher growth, what’s so popular about Biogen? Some of it has to do with synergy. Allergan has a strong pipeline in the central nervous system (CNS) diseases market, but it doesn’t really overlap with Biogen’s. Biogen is the leader in multiple sclerosis (MS) drugs, and is pushing hard into Alzheimer’s drugs and Anti-Lingo1, which is believed to actually repair damage caused by MS.

Also, only a day after the Pfizer merger was called off, Allergan signed an agreement with Heptares Therapeutics, a wholly-owned subsidiary of Sosei Group Corporation, that could be worth $3.3 billion. Allergan paid Heptares $125 million upfront for a portfolio of novel subtype-selective muscarinic receptor agonists for several neurological disorders, including Alzheimer’s. The rest of the money is based on potential clinical trials and various possible sales milestones and royalties.

Valeant is an interesting case, and certainly provides some potential fun for business journalists. Valeant is pretty much a mess right now. The company’s shares have tanked, its biggest investor, William Ackman’s Pershing Square Capital Management, sold about 5 million shares on the last day of trading of 2015, there are numerous ongoing U.S. Securities and Exchange Commission (SEC) investigations, and the company is looking for a new chief executive officer.

The company also needs to pay down about $30 billion in debt, and is potentially considering selling off Bausch & Lomb to help. Analysts think it could bring in as much as $12 billion.

What would keep business journalists entertained is that Pershing Square and Valeant made an unsuccessful and contentious hostile takeover attempt of Allergan in 2014. Allergan returning the favor as Valeant falls apart would be sweet irony and make for easy headlines.

Others have suggested that Valeant’s gastrointestinal product line would be a good asset for Allergan, if it were up for sale. A number of analysts suspect Allergan might be better off picking up pieces of Valeant if the company declares bankruptcy. Writing for The Street earlier this month, Adam Feuerstein, said, “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.”

An acquisition of Regeneron would give Allergan a revenue boost and is also a strong research-and-development company. Analysts project Regeneron sales to grow 17 percent annually from 2016 to 2019, almost double that of Allergan. Regeneron also has a strong pipeline for autoimmune diseases, which would bolster Allergan’s dermatology business.

Regeneron’s dupilimab is being evaluated for severe atopic dermatitis, which is a debilitating, life-altering disease that doesn’t have many treatment options. Kaleem writes, “Apart from dermatology and autoimmune, a potential deal between Allergan and Regeneron would also end up in synergies between Allergan’s eye-care unit and Regeneron’s Eylea commercial efforts.”

Brent Saunders, are you listening?

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