Allergan’s growth strategy
Actavis acquired Allergan in March 2015, and the company changed its name from Actavis to Allergan (AGN).
Allergan calls its new industry model the “growth pharma.” It is based on identifying five characteristics that make the company grow at a higher rate and differentiate it from its peers, the big pharma companies growing at a slower pace. We’ll discuss the growth pharma model in the next article.
The company plans to evolve as a focused brand growth pharma leader, and so it has made many acquisitions and divestitures as listed below.
Changes in 2Q16
Actavis, now Allergan, completed many small and large acquisitions and divestitures in the last quarter:
- It announced the acquisition of ForSight VISION5, a privately held biotechnology company focused on eye care products, on August 11, 2016. Forsight Vision5 has developed a peri-ocular ring that is designed for extended drug delivery in patients with glaucoma. The deal size includes $95 million in upfront payment with milestone payments attached to the launch of the peri-ocular ring.
- It announced the divestment of ANDA distribution business to Teva Pharmaceuticals (TEVA) for $500 million on August 2, 2016. ANDA distribution business includes over-the-counter products, generic products, brand products, and specialty products from over 300 manufacturers that are distributed to pharmacies, clinics, hospitals, and physicians in the United States.
- It completed the divestment of the global generics business to Teva Pharmaceuticals on August 2, 2016. The deal was valued at $33.4 billion in cash and $5.4 billion worth of Teva stocks. Allergan received 100.3 million shares at $53.39 per share, the opening price of Teva stock on August 2, 2016.
Apart from these acquisitions and divestments, Allergan announced board authorization for the share repurchase program in May 2016. The company’s board has authorized the repurchase of shares worth $10 billion, and the company is expected to repurchase shares worth $4 million to $5 million from open markets.
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 12.0% of its total assets in Johnson & Johnson (JNJ), 5.7% in Merck & Co. (MRK), and 4.1% in Gilead Sciences (GILD).