A Look at Allergan’s Growth Pharma Model



The growth pharma model

As discussed earlier, Allergan (AGN) has adopted its new industry model, “growth pharma,” based on identifying five characteristics that will make the company grow faster and differentiate it from its peers, the big pharma companies.

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Strong top line growth

Allergan reported revenue of $3.8 billion in 1Q16, a 48% rise over 1Q15. The company has leading global brands in its product portfolio, including Botox, Namenda, and Restasis.

The company has acquired and divested many businesses, and it now has a sustainable revenue model with top line revenue growth each quarter. These acquisitions and divestitures have helped the company to increase its product portfolio as well as its geographical reach.

Category leadership

Allergan is focused on developing innovative products for unmet medical needs. It wants to achieve and maintain the top position through new and existing products in selected therapeutic areas.

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Operational excellence

Allergan has a simplified manufacturing network, a well-established sales and marketing network, and products that yield high-profit margins.

Open science research and development

Allergan has a strong pipeline of products under development, and the company’s research and development team is focused on developing innovative products that can provide growth as well as leadership positions for its drugs.

Customer intimacy

Allergan contends that it has a clear understanding of the diseases in the therapeutic areas it deals with, making it highly service-oriented to its customers.

Investors can consider ETFs such as the VanEck Vectors Healthcare ETF (PPH), which holds ~5.1% of its total assets in Allergan, or the Health Care Select Sector SPDR ETF (XLV), which holds ~3.4% of its total assets in Allergan, in order to divest their risk.

Apart from Allergan, XLV also holds 11.7% of its total assets in Johnson & Johnson (JNJ), 7.5% in Pfizer (PFE), and 3.7% in AbbVie (ABBV).


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