Icahn joins the Brent Saunders fan club with 'large position' in Allergan


Biopharma has been a rich target for activist investors, who typically swoop in, press for changes and if they’re not obeyed, launch a proxy fight. For current exhibits A and B, see Germany-based generics maker Stada and the U.S. pain-drug specialist Depomed.

Now, the combative Carl Icahn has bought up a “large position” in Allergan, whose shares dropped significantly after its $160 billion buyout deal with Pfizer fell through. But this time, Icahn has nothing but sweet words for the drugmaker.

Particularly for its CEO Brent Saunders, who’s no stranger to Icahn’s backing. Amid a campaign to inject new blood into Forest Laboratories’ board several years ago, Icahn and his supporters helped bring Saunders in to take over from longtime chief Howard Solomon.

“Less than a year later Forest was acquired by Actavis … resulting in massive gains for Forest shareholders,” Icahn said in a Tuesday statement, including Icahn himself.

The payoff from his Forest investment apparently has Icahn back looking for more from Saunders. “[W]e still have always maintained great respect for Brent,” Icahn went on to say. “We have every confidence in Brent’s ability to enhance value for all Allergan shareholders.”

Is Icahn's statement about his previous work with Saunders a hint at requests to come? Allergan said Tuesday that it "has no reason to believe that this investment was made for purposes of influencing the actions of management or control of the company."

Saunders has made some shareholder-friendly moves already. Earlier this month, Allergan announced a $10 billion buyback plan, funded by the proceeds from its generics-unit sale to Teva. When that deal closes, and it’s on track to do so this month, Allergan will reap $36 billion in cash.

Besides the buyback, Saunders is set to deploy that cash in a dealmaking campaign. He’s said he’s shopping for “tuck-in” deals that beef up Allergan’s key franchises in dermatology, neurology, ophthalmology and gastrointestinal disorders.

But he’s also said he wouldn’t rule out a big buy, if the right deal presented itself. Analysts have suggested Biogen or even AbbVie, both of which made a list of potential Allergan targets last year. “Brent is a bold guy,” one investor told the Financial Times in a recent interview. “He has a lot of cash and he is not shy about spending it.”

Saunders has also rejigged Allergan’s management structure by tapping insider Robert Stewart to a new COO position and re-naming Bill Meury as chief commercial officer. And he’s done as much as possible to distance Allergan from other pharmas that have bulked up via a series of M&A deals and price hikes--namely Valeant. That sort of dealmaking approach isn’t Allergan’s way, he said during the company’s Q1 conference call.

“When the strategy is flawed, the outcome will be bad, even if it takes time,” Saunders said. “What is left will be high-quality" drugmakers that source R&D from both inside and outside the company and operate with strong “commercial engines”--and “that is how we are running this company,” he told shareholders.

Icahn’s obviously a believer in Saunders’ own strategy, and his public praise sent Allergan shares up almost 3% Tuesday morning.

 - read the Icahn statement

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