|Allergan CEO Brent Saunders|
On Thursday, Allergan ($AGN) reported earnings for the first full quarter after the company--once known as Actavis--remade itself, buying up its current namesake and dubbing itself a "growth pharma."
And while management said it wouldn't expect any more "transformational" deals until its latest--a $40.5 billion move to send its generics unit to Teva ($TEVA)--closes, for now, Allergan is doing just fine with its latest branded acquisitions.
Eye product Restasis from Allergan and Alzheimer's therapy Namenda from Forest Labs--another of last year's pickups--helped drive a Q2 revenue beat, with the company's top-line tally hitting $5.76 billion for the quarter. Non-GAAP EPS of $4.41 met expectations, Evercore ISI analyst Umer Raffat wrote in a note to clients.
Aside from Restasis, which pulled in $325 million to top the $284 million that Wall Street forecast, Allergan anchor Botox also performed well, bringing in at $631.5 million--about $6.5 million more than analysts thought it would. "As you go through the performance of legacy Allergan franchises, the ~double digit growth across Botox, fillers, alphagan/combigan is very encouraging," Raffat wrote. "Many long-term investors had looked at this quarter as a potential validation of (Allergan's) business model."
With the generics division heading for the door, it's a good thing Allergan's brands are doing well. Generics, long Actavis' bread and butter, will take a substantial chunk of the company's revenue with them, in return bringing a hefty cash sum the company can use to pay down its dealmaking debt.
Of course, the prospect of a debt-free Allergan already has industry-watchers speculating about what kind of pact the avid dealmaker might strike next--and when. On the Q2 conference call, CEO Brent Saunders noted that "there is certainly more to come on this story," adding that though "anything is possible," the "most likely scenario would be after the close of Teva" if in fact it was to do another transformational deal.
And in terms of what type of partner it's looking for to complete such a deal? It would be hard to do a major tie-up with a company boasting a higher growth rate than Allergan's own, Saunders said--considering that the only one he sees with a higher growth rate is Celgene ($CELG).
"That would really limit the universe," he said.
Allergan is willing to look at drugmakers with slightly lower growth rates as long as they're "highly accretive," he said, and the company wants to make sure its pickups have "longer duration assets." Allergan is a creative problem-solver, too, he pointed out, stressing that just because a company has a piece Allergan doesn't like doesn't mean the serial dealmaker won't find a way to make a transaction work.
And what if a suitor came along wanting Allergan as in inversion target--such as deal-hungry Pfizer ($PFE), which has said in the past that it's eager to shift its tax domicile? Allergan would have a lot of things to discuss with that company, Saunders says. It views its "ability to be nimble and move quickly" as a unique advantage that its Big Pharma peers can't claim--and though that wouldn't be the only bone to pick with a wannabe buyer, "it would be top of mind for debate," he said.
- read Allergan's release
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