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Allergan investors want up to $200 per share from Valeant

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Valeant CEO J. Michael Pearson

Valeant Pharmaceuticals ($VRX) has already promised it will raise its $47 billion offer for Allergan ($AGN) Wednesday during a webcast for investors. But according to a JPMorgan survey, that new offer had better be at least $180 per share if the Canadian deal machine wants to make some headway.

Polling 123 buyside investors this month, JPMorgan found that 60% of respondents believe Valeant needs to offer a sweetened bid somewhere in the $181-$200 range, Reuters reports. That's more than $14 higher than Friday's $166 close.

That price threshold may seem like good news for Allergan's stand for independence. But about two-thirds of those investors thought Valeant, led by a takeover team of CEO J. Michael Pearson and Bill Ackman, Allergan's largest shareholder, would ultimately prevail.

"We feel confident that VRX can structure such a deal (using a larger cash component, CVR, collar, etc.) which would still be highly accretive," JPMorgan analyst Chris Schott wrote in a research note seen by the news service.

Not if Allergan's management has anything to say about it. The Irvine, CA-based company rolled out an investor presentation Tuesday, slamming the "gains" of a Valeant merger, citing "anemic growth driven by what we believe are unsustainable price increases" and "a depleted R&D engine," among other things.

Bill Ackman

The R&D issue is important to Allergan's argument. The company spends 17% of revenue on research, compared with Valeant's meager 3%. Pearson's company prefers to wheel and deal, acquiring new products instead of developing them in-house.

Take Bausch + Lomb, the eye care giant Valeant picked up last year in an $8.7 billion deal. Under its previous owner Warburg Pincus, B+L spent $222 million a year on R&D, USA Today reports. This year? Valeant expects to spend $250 million companywide. That's a model Allergan has called unsustainable.

And that's not something Allergan wants to see happen to its R&D setup. Its labs have churned out so many label expansions to star product Botox that it's virtually a pipeline within a drug.

But depending on the offer Valeant unveils Wednesday, Allergan may not have a choice. "We would, of course, prefer to pursue the transaction under friendly terms," Valeant spokeswoman Laurie Little told USA Today. "But we believe the value of the combined company is so compelling that the shareholders should be the ones to decide."

- see Allergan's investor presentation (PDF)
- read the Reuters story
- get more from USA Today

Special Reports: Pharma's top 10 M&A deals of 2013 - Valeant/Bausch + Lomb | The most influential people in biopharma today - J. Michael Pearson - Valeant | 20 Highest-Paid Biopharma CEOs of 2012 - David Pyott - Allergan

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