Allergan Continues To Focus On Acquisitions And Branded Unit

We issued an updated research report on Allergan plc (NYSE:AGN) on Jun 23.

Acquisitions form an integral part of Allergan’s expansion strategy. Allergan is reshaping its portfolio through strategic acquisitions. With the Allergan, Inc. acquisition, the company finds itself among the top 10 pharma companies worldwide based on sales. Last year, Allergan sold its generics business and the Anda distribution business to Teva Pharmaceutical Industries Limited (NYSE:TEVA) . With the closing of the Teva deal, Allergan has become a “branded biopharmaceutical leader”. As a result, it can now focus on the branded segment and is using the proceeds to buy back shares, pay down debt and pursue additional deals.

In 2017 so far, through the accretive acquisitions of LifeCell and ZELTIQ, Allergan has expanded its medical aesthetics business into regenerative medicine and body sculpting, respectively. Allergan made a string of buyouts last year as well.

Meanwhile, key products like Botox and Linzess and new products like Viberzi and Vraylar backed by strong demand are supporting sales growth.

Allergan also boasts a strong pipeline with nine product launches planned in 2017. In 2016, Allergan launched over 10 new products, including, Vraylar, Viberzi, Kybella, and Namzaric. This year, Allergan is extending its R&D pipeline to adjacent categories like NASH, Parkinson's disease, and gene therapy with many promising phase II/III programs in development.

Biosimilars also represent significant opportunity. Allergan has a collaboration agreement with Amgen, Inc. (NASDAQ:AMGN) for the worldwide development and commercialization of three oncology antibody biosimilars, which include biosimilars of Roche Holding (SIX:ROG) AG’s (OTC:RHHBY) cancer drugs Herceptin and Avastin.

While we remain optimistic about the company’s growth prospects, Allergan is facing patent challenges for quite a few of its products including Generess Fe, Namenda XR and Asacol/Delzicol and Minastrin 24. In 2017, key Namenda franchise sales will continue to erode especially with the expected entry of a generic version of Namenda XR in the fourth quarter of 2017.

Meanwhile, competition for key growth drivers, Restasis and Linzess, is an investor concern. Shire’s dry eye disease drug Xiidra, launched last year, is posing strong competition for Restasis. Meanwhile, Synergy’s Trulance (plecanatide) received FDA approval in Jan 2017 for CIC, which could pose competition to Linzess.

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