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Wall Street is more bullish on Allergan PLC [NYSE:AGN] as the company is on a M&A shopping spree and is selling its slow growth and low margin business. Over the past two years, Allergan was involved in M&A deals worth about $90 billion. In June, they agreed to buy Kythera Biopharmaceuticals Inc. [NASDAQ:KYTH] for about $2.1 billion in cash and stock to access Kythera’s keys drugs, Kybella (deoxycholic acid) and KYTH-105 (setipiprant).
Kybella (deoxycholic acid), an injectable drug, was approved by the U.S. Food and Drug Administration (FDA) in April 2015 for non-surgical treatment for a double chin. KYTH-105 (setipiprant) is being prepared for entering a Phase II / proof-of-concept study on male pattern baldness.
In July, Israeli drug maker Teva Pharmaceutical Industries Ltd.-ADR [NYSE:TEVA] said that the company is in talks to acquire Allergan’s generic-drug business in a transaction valued at $40.5 billion, $33.75 billion in cash and $6.75 billion in Teva shares. If the deal goes through, Allergan will be able to pay off debt from its $66 billion combination with Actavis, allowing it to build its brand-name medicine business with small deals or to pursue larger acquisitions such as Amgen Inc. [NASDAQ:AMGN] or AbbVie Inc. [NYSE:ABBV], said Ken Cacciatore, an analyst with Cowen & Co.
Allergan is already collaborating with Amgen to develop and commercialize, on a worldwide basis, biosimilar versions of Herceptin, Avastin, Rituxan/Mab Thera, and Erbitux. The list of potential acquisition targets for Allergan also includes Novartis AG-ADR [NYSE:NVS] Alcon eye-care and Biogen [NASDAQ:BIIB].
In the second-quarter ended June 2015, Allergan reported net revenues of $5.73 billion, up 116% year-over-year and non-GAAP EPS with ex-items of $4.41 per share, up 29% year-over-year. Wall Street was expecting earnings of $4.41 per share on revenues of $5.77 billion.
For the second-quarter 2015, revenues from top branded products, including Botox, Restasis and Namenda, were $3.7 billion, up 482.8% from $637 million in the comparable prior year quarter. Allergan reported Botox (onabotulinumtoxinA) revenues of $632 million, driven by continued strong growth in both aesthetic and therapeutic indications. Revenues of Restasis (cyclosporine), approved by the FDA in 2002 for treatment of reduced tear production due to inflammation from chronic dry eye disease, was $325 million.
Namenda IR (memantine HCl) sales for the second-quarter 2015 were $232.6 million, while revenues of Namenda XR, approved by the FDA in June 2010 for the treatment of moderate to severe dementia of the Alzheimer’s type, came in at $205 million. Allergan is transitioning all Namenda IR twice-daily tablet patients to a once-daily Namenda XR, the extended release version of the drug.
A federal appeals court issued a preliminary injunction in December 2014 requiring Allergan to continue selling the twice-daily tablet Namenda IR. In late May 2015, the court issued a ruling upholding a December 2014 preliminary injunction. Namenda IR went off patent in April 2015, meaning generic versions of Namenda IR tablets became available, while patents for XR do not expire until 2029.
Total Generic Products Revenues for the quarter were $1.58 billion, down 1.4% from $1.60 billion a year ago. Anda Distribution revenue increased 8.3% to $462.4 million, compared to $427 million in the second-quarter 2014. Allergan's Anda, Inc. Distribution business primarily distributes generic, select brand pharmaceutical products, vaccines, injectables and OTC medicines from more than 200 suppliers to more than 60,000 U.S. locations.
The 12-month target price for AGN on Yahoo Finance is $375.71 per share. Allergan will report its third-quarter 2015 earnings in November. Analysts are expecting earnings of $4.41 per share, up 38.2%, on revenues of $5.69 billion, up 55.6%.
Disclosure: Long Position AGN, ABBV and BIIB. No positions in any of the other companies mentioned. |
