What's next for embattled Allergan? Depends on pipeline performance, analysts say

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Key pipeline prospects such as ubrogepant, abicipar and rapastinel could hold the keys to Allergan's future, analysts say. (Allergan)

Allergan is in the middle of making some moves to revive its struggling shares. And what’s next may depend on how some closely watched pipeline products perform in the months to come, analysts say.

The way Credit Suisse’s Vamil Divan sees it, Allergan’s next play may be to split the roles of CEO and Chairman, both currently held by Brent Saunders. Dividing the jobs is one course of action activist investors from Senator Investment Group and Appaloosa called for in a letter earlier this month—along with some boardroom swaps, one of which Allergan has already made.

“We believe splitting the CEO and Chairman roles makes the most sense given some self-inflicted wounds that have damaged management's credibility,” Divan wrote in a Sunday note to clients.

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RELATED: Old CEO, new chairman? Some Allergan investors want Pyott to come back: report

But such a move isn't necessarily part of Allergan's plan. "We did not sense that interest is high," RBC Capital Markets' Randall Stanicky wrote Tuesday after a lunch meeting with Saunders. "We heard a message from AGN around continuing to evolve, with deviation from currently communicated strategy unlikely," he said.

The way Divan sees it, though, Allergan’s R&D ranks—currently led by David Nicholson—could also see some editing if key prospects don’t turn out positive data down the line.

“Continued challenges with the pipeline could lead to further pressure to change the company's R&D leadership,” he wrote.

The candidates investors will be watching? For starters, Allergan’s anti-CGRP migraine up-and-comers, atogepant for migraine prevention and ubrogepant for acute migraine treatment. Last week, a positive showing for atogepant in a phase 2/3 study gave shares a boost, and Bernstein analyst Ronny Gal expects that trend to continue if ubrogepant can hit its marks in two trials reading out later this year.

RELATED: Allergan's ubrogepant aces second phase 3 migraine trial

“The anti-CGRP are gradually getting validated and will be more so with the read of the ubrogepant two trials in 2H18,” he wrote in his own note to clients.

Then there’s abicipar, a wannabe macular degeneration treatment that “is viewed as a minor drug,” and “probably is,” Gal noted. But if it can show its positive effects can hold for three months, it will be a “material upside surprise” that could help buoy shares.

Finally, there’s rapastinel, a depression candidate that “is appreciated, but perhaps not enough appreciated,” Gal said in a video, adding in a note that if it’s “successful, it will transform the Allergan thesis.”

Allergan, for its part, is confident that its pipeline programs are setting it up well for future growth. "Allergan’s No. 1 priority continues to be to deliver value by focusing on therapeutic area leadership and executing on our business objectives, including advancing and expanding the pipeline. The five major positive accomplishments the company has announced in just the past few months highlight the strength of the people at Allergan and the depth and breadth of the programs in our pipeline," a spokeswoman said in an emailed statement. 

All things considered, Gal expects shares to turn around by the end of this year—assuming the pipeline can get the job done. “To the extent these play out in Allergan's favor, then the argument for intermediate term (3-year) growth momentum will strengthen and the stock will begin to close the gap between current price and fair value,” he wrote.

And if it doesn’t? “Growth will be anemic and the company will need to consider more aggressive action to unlock the value of its assets,” he said.

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