Exasperated Allergan investors recruiting activists to push for asset sales: report

Allergan California
Allergan's shares have plummeted 33% in the last year. (Allergan)

Investors aren’t happy with the steps Allergan has taken to try to remedy its share-price slump—and they’re calling on outsiders to help stir things up.

Top shareholders of the Dublin drugmaker are scouting for activist investors to pressure Allergan into making some changes, sources tell Business Insider, and they just might be succeeding. Sarissa Capital, led by frequent pharma meddler and Carl Icahn protégé Alex Denner, Ph.D., has taken a stake in the company, Credit Suisse analyst Vamil Divan, M.D., wrote to clients late Thursday, and though it’s a small one, it’s “interesting,” Divan said—especially in light of the fact that Sarissa has nabbed a piece of Ironwood, Allergan’s partner on GI med Linzess.

“Tracking the activism of Dr. Denner, we found that in 15 cases of shareholder activism since 2006, each one resulted in either a change in management, a sale of the company, or both,” Divan wrote.

To say Allergan’s had a rough stretch would be putting it mildly. Competitive threats to its two top sellers, Botox and Restasis, have hit the company hard—and a controversial and ultimately unsuccessful attempt to protect Restasis’ IP through tribal licensing didn’t help matters.

Allergan has tried to turn the tide with cost cuts, but the hits have kept on coming, and word that the company was considering a Shire buy may have been the last straw for some investors. Overall, the stock has dropped 33% in the past year, BI notes.

A half-dozen funds with top Allergan positions told BI they had held talks with Allergan’s management about hiving off noncore businesses, and some of them said they had encouraged activists to lay pressure on Allergan’s execs to change things up.

Selling off noncore assets is a move RBC Capital Markets’ Randall Stanicky has been advocating for months. In response to analyst inquiries, CEO Brent Saunders originally said divestments wouldn’t be happening, a position he later publicly backtracked on. But while rumor has it the company has considered a women’s health sale, nothing has materialized yet.

Meanwhile, Massachusetts-based Ironwood earlier said this month that it had received word from Sarissa that it intended to nominate Denner for a seat on its board. And should he successfully snag one, Divan anticipates “a sale of the entire company, a sale of Linzess rights to focus on the pipeline or a sale of one or both of the pipeline assets 3718 and 1973.” If Ironwood does go up for sale, Allergan could come into the conversation, but a standstill agreement dictates that Ironwood would have to initiate talks, Divan noted.