By Ben Levisohn
With the Allergan (AGN)-Pfizer (PFE) merger scuttled by those pesky new Treausry rules on tax inversions, Allergan will have a lot of cash on hand to go shopping. Who will it buy?Citigroup’s Liav Abraham and Yigal Nochomovitz have ideas:
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- Brendan McDermid /Reuters
Current market dynamics, particularly in the SMID biotech universe, provide a plethora of opportunities for the company to augment the breadth and depth its pipeline in its core therapeutic areas, including neurology, ophthalmology and dermatology, where innovation is rife and where consolidation of some of the smaller players in the space is likely, in our view. Stocks in our SMID coverage universe that could potentially constitute future acquisition targets for Allergan include Aclaris Therapeutics (ACRS) and Dermira (DERM) (both have mid- to late-stage dermatology assets in development). We note with interest the collaboration with Heptares announced yesterday evening for the development of several M1, M4 and dual M1/M4 agonists in development for a variety of neurological diseases, including Alzheimer’s disease. Notwithstanding this above, larger scale transactions of course cannot be ruled out, and we notetoday’s market commentary (Fox Business) regarding the potential sale ofValeant Pharmaceuticals International’s (VRX) Bausch & Lomb unit. It is reasonable to assume that Allergan could be a bidder for this asset, given the company’s presence in ophthalmology, as well as CEO Brent Saunders’ familiarity with the asset (he was the CEO prior to its sale to Valeant in 2013 for $8.7bn). At the time of its sale to Valeant, B&L was generating c.$3bn in revenues and growing at a double-digit rate. Current sales of the asset are unclear due to the reporting structure of Valeant, as well as concerns regarding the company’s operating/ pricing strategy.
Shares of Allergan have dropped 1.4% to $237.74 at 2:46 p.m. today, while Valeant Pharmaceuticals International has tumbled 5.2% to $33.68, Aclaris Therapeutics has fallen 2.6% to $20.15, and Dermira has gained 1.4% to $23.98. Pfizer has declined 0.9% to $32.47.