Allergan preludes major selloffs with $650M Almirall dermatology sale

Allergan, which is shopping assets to help turn its stock price around, has taken its first small step into selloff land.

Spain’s Almirall said Friday it had agreed to pick up a portfolio of medical dermatology products from the Dublin drugmaker for up to $650 million in cash, with $550 million of that sum coming up front. The pair expects the transaction to close by year's end, and when it does, Almirall will be the owner of Aczone, Tazorac, Azelex, Cordran Tape and Seysara—offerings that generated $70 million in sales for Allergan through the first half of this year.

To RBC Capital Markets analyst Randall Stanicky, the move is a “positive first step as Allergan takes action on its strategic plan and importantly shoring up its asset base.” And the way he sees it, while “the financial impact to Allergan from the transaction is relatively small,” it could “have an outsized impact on sentiment.”

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Stanicky himself has been “actively advocating” for an Allergan split since last October, and while the company initially resisted, shareholders pressed management into committing to divestments after a cost-cutting drive failed to drum up investor enthusiasm. They may be happy to see Aczone and Tazorac go in particular, Stanicky noted, as both products are “in decline; this is consistent with our thesis that Allergan should divest slower growth businesses,” he wrote.

Meanwhile, Allergan is still looking ahead to bigger selloffs—particularly of its women’s health and infectious disease units. On last week’s second-quarter earnings call, CEO Brent Saunders noted that the infectious disease unit was drawing more interest thanks to a “larger universe of potential buyers” and safety questions surrounding the potential approval of women’s health product Esmya.

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But Allergan isn’t in any rush. “Ultimately … it's important that we get the right value for these businesses,” Saunders said, adding, “There's no fire sale. We're not looking to dump these businesses.”