A Step Ahead of Medicine: Allergan, Plc
Large Cap Pharmaceuticals: Eye Care, CNS, Aesthetics, Women’s Health
Current Drug Outlook: A
Pipeline Diversity: A
Pipeline Risk: A
Pipeline Competition: B
Financial Security: B
Pros: Allergan has extremely diverse drugs and pipelines in many different fields of medicine. In addition, Allergan has strengthening financial security, an extremely favorable valuation and has large growth potential in almost all of its primary fields.
Allergan is positioned in all the right fields in healthcare and medicine. It has majority of its income coming from the fields of eye care*, central nervous system, aesthetics*, gastroenterology, and women's health*. All of its main segments have grown remarkably YOY and will continue to do so. Women’s health is its fastest growing sector with a 19% growth rate and with increased awareness to women's health, the growth will not slow down. Allergan recently sold its generics unit to Teva Pharmaceuticals for $40.5B. This cash was used to buy $15B of its own stock, $10B to repay its own debt and the remaining $15B was used to acquire companies in the forefront of medicine such as LifeCell. LifeCells purchase adds to Allergan’s future pipeline in regeneration and reconstructive tissue therapy; one of the hottest sectors of medicine. Additionally, Allergan is sitting on $13.2B in cash to further advance its pipeline.
*Explained further below
Cons: Allergan currently has $52.7B in liability of which $32.8B in debt. While Allergan is expected to reduce it by $6.5B in the next 18 mo., this load still represents a heavy percent of the company itself and its interest expense is above $1B each year. Allergan’s Namenda XR, which used to treat dementia symptoms associated with Alzheimers currently generating revenue of $627.6M and its treatment for ulcerative colitis, Asacol/Dezicol, have also been facing tremendous generic competition, hurting Allergan's future top line.
Overall: Allergan is an extremely diverse company spanning through many fields of medicine. It is well positioned to keep growing and has a very low single drug risk. Many of its newly introduced drugs are extremely useful to patients especially in the eye care and aesthetics segments and will continue to be adopted thoroughly and quickly. Allergan’s CEO has initiated and signed a pledge to keep Allergan’s drug price increases in control, improving the company’s perception and reducing government overlook. With the enormous cash pile as well as its acquisitions of front runners such as LifeCell, Allergan is posed to continue to well outgrow its peers and is well suited to continue rising.
Women’s Health: There has been a population shift in healthcare, where women’s health is being brought to the front line and society is becoming more aware of women's health. It has been long thought that men and women have the same diseases and face the same symptoms but with recent studies it has been proven that that is not the case. This inspired further studies to explore the differences and there has been a push to raise awareness of women's health. Companies in this sector will be able to see a steady rise in women seeking more specialized care and a rise in prescriptions.
Allergan’s Lo LoEstrin Fe is a low dose birth control pill that is growing at an extremely large rate. A large concern towards birth control pills have been their dosage, which were thought to lead to other unwanted side effects, but due to the low dosage of this pill it reduces that concern. In addition, with the world becoming more aware of women's health, more women every day are becoming aware of methods like these for birth control. Allergan is also submitting, for approval, Esmya, following strong results in comparison to the placebo. Esmya is a drug aimed to reduce uterine bleeding in women with fibroids. This could be another big drug for Allergan as uterine fibroids are an extremely common disease suffered by women.
Aesthetics: Allergan has commonly been affiliated with its botox medicine. Botox, a nerve paralyzer, is used frequently for personal aesthetics and cosmetics. Cosmetics and personal beauty has been on the rise, evident by the ULTA’s tremendous growth. Due to the rise of social media platforms like Snapchat and facebook, there is a need for people to constantly be “picture ready” and the need for permanent beauty solutions like Botox has been on the rise. Botox can permanently change many aspect of one's body and this treatment is becoming significantly more popular.
Allergan has many more drugs coming in the Aesthetics pipeline such as Rhofade drug approved Jan 2017 to treat persistent facial erythema (facial redness), Sarechycline (with Paratec, to treat acne) and RORyt agonist (to treat psoriasis). Sarecycline is estimated to reach sales of $250-$300 million as per Allergan’s estimates.
Allergan is posed to continue growing in aesthetics, both from its pipeline and from the increasing demand in the sector. Currently 20% of Allergan’s revenue comes from aesthetics. As patients are rotating more towards their looks, Allergan greatly positioned to help patients these patients while growing its revenue.
Eye Care: This field brings Allergan over $3.6B in yearly revenue accounting for nearly 25% of their revenue. Currently Allergan's Ozurdex is a revolutionary implant used to treat inflammation of the eye such as from macular edema. It is an especially new treatment option and won't see its patents run out till 2020. There have been major upticks in patients using this implant resulting in a 25% rise in revenue over the year. Restasis is another massive drug for Allergan in the eye care industry. It is used to treat chronic dry eye and has grown 13% year over year. In addition Allergan is conducting a heavy push to raise awareness in this disease and will bring in more patients suffering from dry eyes to further increase their revenue. This could bring in many patients since the condition is experienced by many people and the treatment is very simple. Allergan’s anti-VEGF DARP treatment is still in clinical trials to help treat wet AMD. If successful this could be a prefered treatment option to Lucentis by Genentech because it requires fewer injections. So far there have been positive results in the trials and further favorable results here could help assert Allergan’s dominance in this sector well into the near future.
Disclosure: I/we are long AGN.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
*Disclaimer: Always invest with caution, any misstep in biotech companies such as AGN have huge downside effects to their stock price. We try to provide you with companies with extremely favorable upside and minimal downside risk.