Allergan: A new position for Glenview Capital Management



Glenview Capital and Allergan

During 4Q14, Glenview Capital Management started a new position in Allergan, Inc. (AGN). The fund holds 629,647 shares of AGN, which accounts for 0.67% of the fund’s total 4Q14 portfolio.

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About Allergan

Allergan is a multispecialty healthcare company that develops and commercializes the following innovative products:

  • pharmaceuticals
  • biologics
  • medical devices
  • over-the-counter (or OTC) products

Actavis to acquire Allergan

On November 17, Allergan accepted a takeover bid from Actavis plc (ACT), a manufacturer of generic drugs. It ended Valeant Pharmaceuticals International, Inc.’s (VRX) hostile pursuit to acquire Allergan.

Actavis agreed to buy AGN for $66 billion, or $219 per share in cash and stock transactions. The acquisition price is 10% above AGN’s closing price on November 14. It will generate at least $1.8 billion in annual synergies beginning in 2016.

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The acquisition is expected to create one of the top ten global pharmaceutical companies by sales revenue, with more than $23 billion in revenues for 2015. According to Statista, Abbott Laboratories (ABT) ranks tenth on the basis of 2014 revenue of $21.8 billion. For 2014, AGN and ACT reported revenues of $7.2 billion and $13.1 billion, respectively.

On February 19, Actavis announced the sale of $8.4 billion in shares in connection with the pending acquisition of Allergan. After the deal is complete, Actavis will adopt Allergan’s name, with shareholder approval. On March 10, both companies are expected to meet their respective shareholders about the acquisition. The deal is expected to close by 2Q15.

Allergan’s 4Q14 double-digit sales growth

For 4Q14, Allergan’s revenue grew 13.8%, or 17.2% on a constant currency basis, to $1.9 billion. Specialty sales increased 12.4%, or 15.3% on a constant currency basis. Core medical device sales grew 20.7%, or 26.9% on a constant currency basis. Diluted earnings per share (or EPS) were $1.77 compared to $1.04 in 4Q13.

Full-year 2014 results

For the year ended 2014, Allergan’s total revenue grew 14.3% to $7.2 billion. Specialty pharmaceuticals sales increased 12.6% to $6 billion. Sales were driven by ~12% growth in all eye care pharmaceuticals, Botox, skin care, and other product lines.

Medical device sales grew 29.8% to $1.1 billion, driven mainly by facial aesthetics products. The United States accounted for 63.4% of Allergan’s total sales. Diluted EPS was $5.01 compared to $3.26 in 2013.

You can gain exposure to Allergan by investing in the Health Care Select Sector SPDR ETF (XLV). AGN accounts for 2.58% of XLV.

In the next part of this series, we’ll look at Glenview Capital Management’s position change in Citigroup Inc. (C).


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