Buy Allergan Plc (AGN, $140-160, Mkt Cap: $48-50B)
Company Description: Allergan is a global bio-pharma company with a portfolio of branded and cosmetic products. AGN is focused on 4 key therapeutic areas: Medical Aesthetics, Central Nervous System (CNS), EyeCare, Gastrointestinal (GI). Botox is a key franchise with $3.6B in revenue growing HSD/LDD in both aesthetics and therapeutics. Outside of Botox, AGN is highly diversified across its key areas of focus. 50% of sales have no patent exposure (aesthetics, botox, eyecare/ophthalmology, and other consumer healthcare) and grow HSD to LDD's, 38% of sales are in drug products with patents with various expirations (see model), 12% of sales are in "Other" that includes royalties, patent expired products, non-promoted products
AGN Investment Summary: Pipeline mis-steps and an earlier than expected patent loss (Restasis) has caused AGN to underperform and create an attractive entry for a strong bio-pharma franchise with half of revenues growing HSD's with no patent risk (including Botox, Aesthetics, & Eye Implants). From here, we see AGN as a largely de-risked company with a strong franchise of no-patent products, line of sight on its patented products, and a largely de-risked pipeline of migraine and ophthalmology products. With very little other pipeline remaining, a strong balance sheet, and low confidence in management, we see the focus shifting to either a change in strategy to commercializing assets from R&D or new senior leadership.
Key Metrics to Watch:
Botox growth remains in HSD to LDD range vs cons +7-8% (Watch this one closely)
Migraine oral CGRP gets approval: Efficacy is good, need to watch liver tox, no issue in any trials or safety studies so far but still ongoing
Revenue growing products increase from 61% in 2018 to 71% in 2021 and 77% in 2022. This includes 2 pipeline product areas: migraine and Bimatoprost (lens for glaucoma)
No more material patent surprises after Restasis
Mgt recognizes R&D driven strategy has failed and future M&A will focus on commercialization assets as AGN is a strong selling franchise