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A Look at Allergan’s Growth Pharma Model

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Aug. 29 2016, Updated 11:05 a.m. ET

The growth pharma model

Allergan’s (AGN) industry model, the “growth pharma,” is based on five characteristics that make the company grow at a faster rate and differentiate it from its peers, the big pharma companies growing at a slower pace.

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Strong top-line growth

Allergan reported revenues of $3.7 billion in 2Q16, which is a 1.5% increase. The company has leading global brands in its product portfolio, including Botox, Namenda, Restasis, and others. The company has acquired and divested many businesses, and now has a sustainable revenue model with top-line revenue growth each quarter. These acquisitions and divestitures have helped the company increase its product portfolio as well as its geographical reach.

Category leadership

The company is focused on developing innovative products for unmet medical needs as well as achieving and maintaining the top position through existing and new products in the selected therapeutic areas.

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Operational excellence

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

Open science research and development

Allergan has a strong pipeline of products under development, and the research and development team is focused on developing innovative products that can provide growth to the company as well as provide a leadership position for that drug.

Customer intimacy

As per Allergan, the company has a clear understanding of the diseases in the therapeutic areas the company is in, which makes the company highly service-oriented to its customers.

Investors can consider ETFs like the Health Care Select Sector SPDR ETF (XLV), which holds ~3.6% of its total assets in Allergan, in order to divest the risk. Apart from Allergan, XLV also holds 4.4% of its total assets in Amgen (AMGN), 7.8% in Pfizer (PFE), and 3.6% in AbbVie (ABBV).

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