RBC Capital Markets analyst Randall Stanicky sees lots of reasons Allergan should pursue a breakup. A women’s health sale that could bring in billions is just one of them.
The way he sees it, Allergan’s women’s health unit is a “~$1 billion revenue franchise.” But if the Dublin drugmaker were to sell it off? The company would have plenty of takers, Stanicky figures, and potentially $6 billion in deal proceeds when all was said and done.
For one, Impax—helmed by former Allergan chairman and Actavis CEO Paul Bisaro—has “stated interest,” Stanicky says, and as the former owner of the women’s health assets, Bisaro knows exactly what he’s dealing with. Lupin, which is looking to play in the women’s health space, could be another possibility, and so could CooperSurgical, which recently snapped up Teva’s Paragard intrauterine copper contraceptive for $1.1 billion.
Then there’s Mylan, which has a “sizeable” women’s health lineup that it last added to in 2015 with a buy of Famy Care. And don’t count out private equity players, either; they’ve been “active recently in the area,” Stanicky notes.
But just because there’s potential interest doesn’t mean Allergan’s necessarily ready to take Stanicky’s advice—and in fact, CEO Brent Saunders has told investors that it isn’t planning to. “Splitting the company is … at least a few years of work, and that’s not something that we’re focused on right now,” he said earlier this month on the company’s third-quarter conference call.
Those remarks didn’t dampen Stanicky’s enthusiasm for a split, though—and according to him, they haven’t dampened investors’ enthusiasm, either. “We continue to hear investor support for potential breakup/split to unlock value, which we think is inevitable,” he wrote to clients on Monday, adding that he thinks that support is actually increasing.
One reason? “More robust Growth-co assets are being diluted by Mature-co,” he figures, with women’s health, gastroenterology and anti-infectives comprising Allergan’s “noncore” assets. He’s “not convinced” of the benefits to selling products in those areas alongside Allergan’s aesthetics moneymakers and pointed out that the setup is the result of M&A transactions past.
“If AGN were establishing a new platform today, it is hard to imagine this would be the ‘ideal’ asset mix it would pursue,” he wrote. “… That should have long-term investors questioning why the platform is not being addressed more aggressively.”