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Analyzing Allergan’s Growth Pharma Plans

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Growth pharma model

As we discussed earlier, Allergan (AGN) adopted its new industry model “growth pharma.” It’s 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.

The five characteristics for the growth pharma model include the following.

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Strong topline growth

Allergan reported revenue of $3.62 billion in 3Q16—4.5% growth from its 3Q15 revenue. The company has leading global brands in its product portfolio including Botox, Namenda, Restasis, and others. The company acquired and divested many businesses. Now, it has a sustainable revenue model with topline revenue growth each quarter. These acquisitions and divestitures helped the company increase its product portfolio and geographical reach. We discussed a few of the acquisitions and divestitures earlier in this series.

Category leadership

The company is focused on developing innovative products for unmet medical needs and maintaining a leading position through existing and new products in select therapeutic areas.

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Operational excellence

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

Open science research and development

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

Customer intimacy

According to Allergan, the company has a clear understanding of the diseases in the key therapeutic areas. As a result, the company is very service oriented regarding 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 12.0% of its total assets in Johnson & Johnson (JNJ), 7.8% in Pfizer (PFE), and 3.6% in AbbVie (ABBV).

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