giofranchi Posted August 3, 2015 Share Posted August 3, 2015 Equity Position: Allergan From our perspective, an ideal management team is one with a clear strategic vision, a thoughtful and pro-active approach to capital allocation, and a strong alignment with shareholders. This rare trifecta of qualities exists today at Allergan, a pharmaceutical company led by Chairman Paul Bisaro and Chief Executive Officer Brent Saunders. We first became involved in what is now Allergan in 2013, when it was the much smaller company, Actavis. It had recently completed its acquisition of Warner Chilcott and we believed it was poised to leverage its new Irish domicile to conduct additional accretive transactions. Over the last 20 months, this management team has done just that, closing large transactions in Forest Laboratories ($21 billion) and Allergan ($65 billion), along with many smaller deals. While critics say they are acquisition-happy, Bisaro and Saunders have articulated a strong strategic vision for Allergan and a coherent framework for pursuing deals. Their mission is to create a growth-oriented pharmaceutical company with attractive long-duration assets while implementing strict expense controls and avoiding high-risk and undisciplined R&D spend. Over the past two years, Allergan has used its formidable cash flow to acquire derisked assets and build a broad based pipeline, in line with its stated goals. On July 27, 2015, the company announced its latest transaction: the sale of its generic drug business to Teva Pharmaceuticals for $40.5 billion in cash and Teva shares. Financially, the transaction is a home run for Allergan; they sold a structurally mature business for ~17x 2015 EBITDA while delevering the balance sheet from $40 billion in net debt to nearly zero. The strategic vision of the transaction is equally impressive. Despite the fact that generic drugs were Allergan’s original business, Bisaro and Saunders recognized that the legacy segment had become an anchor on valuation and that its divesture was the right course of action for Allergan shareholders. While shareholders applauded the decision, driving Allergan stock nearly 10% higher in the ensuing three days, we believe that there is still a meaningful valuation gap to close. Following the close of the TEVA transaction in Q1 2016, Allergan will be a pure-play growth pharmaceutical company with long duration branded assets in seven therapeutic areas, an underappreciated pipeline, an unlevered balance sheet and most importantly, a bold and forward thinking leadership team. Despite this successful track record, on July 31, 2015, Allergan stock traded at $329 per share or only ~16.5x estimated pro forma earnings of $20 per share, a valuation below comparable growth pharma companies like Celgene, Biogen, Bristol Myers, Shire, and Novo Nordisk who trade at an average 2017 earnings multiple of ~19x. Moreover, the 2017 earnings estimate assumes neither any accretive acquisitions nor the use of cash for any other purpose such as buybacks. However, on several occasions, Saunders has talked openly about the opportunity for a “transformational” transaction. Looking across the pharmaceutical industry, we see several companies who could benefit from Allergan’s operating discipline and focus and whose acquisition by Allergan would drive significant accretion and shareholder value. While many management teams would be patting themselves on the back for a job well done, Paul Bisaro and Brent Saunders have consistently demonstrated a drive to create shareholder value in Allergan with bold strategic action and focused operational execution. To align themselves with shareholders, they and the rest of the senior management have tied their long-term compensation to achieving an aspirational $25 per share earnings target in 2017. We believe that they are among the best leaders in business today and are glad to have put a significant portion of our investors’ capital in their hands. --Daniel Loeb, Q2 2015 Letter 1) $15.5 billion in revenues after the recent sale to TEVA, compared to $11 billion in revenues at VRX. 2) $130 billion in market cap, compared to $115 billion of VRX. 3) Very similar strategies. 4) A very reasonable P/E multiple. 5) The main worry was they had paid too much for Allergan, but the recent sale of a mature business for 17x 2015 EBITDA to TEVA should solve any problem. 6) A balance sheet that is not levered, and therefore could be levered back again quickly, should the right opportunity come. I think VRX’s performance will be better than AGN’s, but what about AGN as a way to diversify? Spreading the risk over two companies, instead of putting all the eggs just in VRX? Cheers, Gio Link to comment Share on other sites More sharing options...
Liberty Posted August 3, 2015 Share Posted August 3, 2015 You're comparing AGN's USD market cap with VRX's CAD. VRX in USD is 88bn. Link to comment Share on other sites More sharing options...
giofranchi Posted August 3, 2015 Author Share Posted August 3, 2015 You're comparing AGN's USD market cap with VRX's CAD. VRX in USD is 88bn. Sorry! My fault! I think revenues are much more indicative of the runway still left for both companies: VRX surely has more room for growth, but I would be very surprised if AGN wouldn’t double in the next 5 years! Then, of course, the recent sale to TEVA imo highlighted the fact that revenue growth is not the only way both companies have to create shareholders value: 1) aggressively deleveraging their balance sheets surely is another (which is what has happened thanks to the recent sale of AGN’s generic business); 2) buy backs might be a third way to create shareholders value; 3) and finally spin-offs or strategic sales (like the recent one to TEVA) might be a fourth way. Therefore, who knows? They both might be able to go on creating shareholders value, even after rapid revenues growth is finally over. What are your thoughts on AGN? Never taken into consideration as a diversifier? Gio Link to comment Share on other sites More sharing options...
Liberty Posted August 3, 2015 Share Posted August 3, 2015 What are your thoughts on AGN? I think they'll probably do fine over time. Link to comment Share on other sites More sharing options...
giofranchi Posted August 5, 2015 Author Share Posted August 5, 2015 Allergan and KYTHERA Announce that Pending Transaction will now be for All-Cash Consideration http://phx.corporate-ir.net/phoenix.zhtml?c=65778&p=irol-newsArticle&ID=2075975 Gio Link to comment Share on other sites More sharing options...
giofranchi Posted August 6, 2015 Author Share Posted August 6, 2015 FDA Approves 28 Additional Styles Of Allergan's Natrelle® 410 Highly Cohesive Anatomically Shaped Silicone-Filled Breast Implants http://phx.corporate-ir.net/phoenix.zhtml?c=65778&p=irol-newsArticle&ID=2076275 Gio Link to comment Share on other sites More sharing options...
giofranchi Posted August 6, 2015 Author Share Posted August 6, 2015 Allergan Reports Exceptional Second Quarter 2015 Performance with 116% Increase in Net Revenue to $5.76 Billion and 29% Growth in Non-GAAP EPS to $4.41 -- Adjusted EBITDA Increases 203% to $2.6 Billion in Second Quarter 2015 -- -- Strong Performance Across All Businesses -- -- Q2 2015 GAAP Loss Per Share of $0.80 - -- Integration of Actavis-Allergan On-Track -- DUBLIN, Aug. 5, 2015 /PRNewswire/ -- Allergan plc (NYSE: AGN) reported continued exceptional performance with net revenue increasing 116 percent to $5.76 billion for the quarter ended June 30, 2015, compared to $2.67 billion in the second quarter 2014. On a non-GAAP basis, diluted earnings per share increased 29 percent to $4.41 for the second quarter 2015, compared to $3.42 in the second quarter 2014. GAAP loss per share for the second quarter 2015 was $0.80, compared to GAAP income per diluted share of $0.28 in the prior year period. GAAP results were impacted by amortization, in-process research and development impairments, acquisition-related expenses, acquisition accounting valuation related expenses and severance and integration costs associated with acquired businesses, mainly the acquisitions of Allergan on March 17, 2015 and Forest Laboratories on July 1, 2014. http://phx.corporate-ir.net/phoenix.zhtml?c=65778&p=irol-newsArticle&ID=2076508 GioAGN_Q2_Earnings_Deck_8-6-15_FINAL.pdf Link to comment Share on other sites More sharing options...
giofranchi Posted August 31, 2015 Author Share Posted August 31, 2015 Allergan Successfully Completes Naurex Acquisition - Two Lead Development Products Rapastinel (GLYX-13) and NRX-1074 Demonstrated Rapid Onset of Action and Robust Efficacy in Phase 2 Studies in Major Depressive Disorder - - Adds Potential Breakthrough Treatments for Depression - - Enhances Allergan's World-Class Position in Mental Health - http://www.prnewswire.com/news-releases/allergan-successfully-completes-naurex-acquisition-300135009.html Cheers, Gio Link to comment Share on other sites More sharing options...
giofranchi Posted September 2, 2015 Author Share Posted September 2, 2015 Positive Phase III Results Demonstrate Efficacy Of Antibiotic Medicine AVYCAZTM (ceftazidime-avibactam) In Complicated Urinary Tract Infections http://www.prnewswire.com/news-releases/positive-phase-iii-results-demonstrate-efficacy-of-antibiotic-medicine-avycaz-ceftazidime-avibactam-in-complicated-urinary-tract-infections-300136763.html Gio Link to comment Share on other sites More sharing options...
giofranchi Posted September 2, 2015 Author Share Posted September 2, 2015 Allergan Announces FDA Approval of Updated Label for TEFLARO® (ceftaroline fosamil) http://www.prnewswire.com/news-releases/allergan-announces-fda-approval-of-updated-label-for-teflaro-ceftaroline-fosamil-300136587.html Gio Link to comment Share on other sites More sharing options...
giofranchi Posted September 11, 2015 Author Share Posted September 11, 2015 Allergan And Perrigo Receive FDA Approval Of Three Extended Release Products Equivalent To Mucinex® And Mucinex® DM http://www.prnewswire.com/news-releases/allergan-and-perrigo-receive-fda-approval-of-three-extended-release-products-equivalent-to-mucinex-and-mucinex-dm-300141198.html Cheers, Gio Link to comment Share on other sites More sharing options...
giofranchi Posted September 17, 2015 Author Share Posted September 17, 2015 7 Health Care Stocks John Paulson Is Betting On in 2015 http://www.thestreet.com/story/13285848/1/health-care-stocks-john-paulson-loves.html?utm_content=buffer01405&utm_medium=social&utm_source=twitter.com&utm_campaign=eb He holds large investments in both AGN and VRX. Cheers, Gio Link to comment Share on other sites More sharing options...
Picasso Posted September 17, 2015 Share Posted September 17, 2015 Paulson is the kiss of death. Almost anything he is heavily involved with just gets crushed. Link to comment Share on other sites More sharing options...
giofranchi Posted September 17, 2015 Author Share Posted September 17, 2015 Paulson is the kiss of death. Almost anything he is heavily involved with just gets crushed. It might be… I don’t know… But probably healthcare is another story: he seems to have a pretty good track-record in healthcare! Cheers, Gio Link to comment Share on other sites More sharing options...
Picasso Posted September 17, 2015 Share Posted September 17, 2015 http://www.insidermonkey.com/blog/john-paulson-lost-1-5-billion-as-abbvie-inc-abbv-shire-plc-shpg-deal-fell-apart-charlie-gasparino-332909/ Just one example. Link to comment Share on other sites More sharing options...
giofranchi Posted September 17, 2015 Author Share Posted September 17, 2015 http://www.insidermonkey.com/blog/john-paulson-lost-1-5-billion-as-abbvie-inc-abbv-shire-plc-shpg-deal-fell-apart-charlie-gasparino-332909/ Just one example. Yes, in fact the article I posted already mentioned that deal fell through… Do you have at least another example? Cheers, Gio Link to comment Share on other sites More sharing options...
giofranchi Posted September 18, 2015 Author Share Posted September 18, 2015 Allergan and Gedeon Richter Plc. Receive FDA Approval of VRAYLAR™ (cariprazine) for Treatment of Manic or Mixed Episodes of Bipolar I Disorder and Schizophrenia in Adults http://www.prnewswire.com/news-releases/allergan-and-gedeon-richter-plc-receive-fda-approval-of-vraylar-cariprazine-for-treatment-of-manic-or-mixed-episodes-of-bipolar-i-disorder-and-schizophrenia-in-adults-300145132.html Cheers, Gio Link to comment Share on other sites More sharing options...
giofranchi Posted September 18, 2015 Author Share Posted September 18, 2015 Why Allergan's Stock Price Could Double If The Real Adjusted Earnings And Growth Rates Are Sustained http://seekingalpha.com/article/3508316-why-allergans-stock-price-could-double-if-the-real-adjusted-earnings-and-growth-rates-are-sustained Cheers, Gio Link to comment Share on other sites More sharing options...
giofranchi Posted September 25, 2015 Author Share Posted September 25, 2015 Allergan Launches Generic Version of INVEGA® (paliperidone) http://www.prnewswire.com/news-releases/allergan-launches-generic-version-of-invega-paliperidone-300148943.html Cheers, Gio Link to comment Share on other sites More sharing options...
Picasso Posted September 29, 2015 Share Posted September 29, 2015 Paulson is the kiss of death. Almost anything he is heavily involved with just gets crushed. It might be… I don’t know… But probably healthcare is another story: he seems to have a pretty good track-record in healthcare! Cheers, Gio I guess AGN and VRX are the other examples now. I would not be surprised if he is one of the guys selling VRX/AGN right now. He did the same thing when BAC fell apart (sold at $5-6), HPQ (sold between $15-20), and the list goes on. Almost anything that is a large position for him gets mass liquidated at some point or the other. Healthcare has been a large position for him (Shire, Allergan, Valeant) and so it would not surprise me to see the next 13-F's come out and he's blown out of some of these names. Link to comment Share on other sites More sharing options...
giofranchi Posted October 1, 2015 Author Share Posted October 1, 2015 U.S. FDA Approves JUVEDERM® ULTRA XC for Use in Lips http://www.prnewswire.com/news-releases/us-fda-approves-juvederm-ultra-xc-for-use-in-lips-300152336.html Cheers, Gio Link to comment Share on other sites More sharing options...
giofranchi Posted October 1, 2015 Author Share Posted October 1, 2015 Allergan Successfully Completes Kythera Acquisition; Adds Game-Changing KYBELLA Treatment for Double-Chin http://www.prnewswire.com/news-releases/allergan-successfully-completes-kythera-acquisition-adds-game-changing-kybella-treatment-for-double-chin-300152533.html Cheers, Gio Link to comment Share on other sites More sharing options...
giofranchi Posted October 2, 2015 Author Share Posted October 2, 2015 KYBELLA® Injection Wins Allure Magazine "Best of Beauty" Award http://www.prnewswire.com/news-releases/kybella-injection-wins-allure-magazine-best-of-beauty-award-300153263.html Cheers, Gio Link to comment Share on other sites More sharing options...
giofranchi Posted October 2, 2015 Author Share Posted October 2, 2015 Allergan and Humana Announce Research Partnership to Improve Health Outcomes http://www.prnewswire.com/news-releases/allergan-and-humana-announce-research-partnership-to-improve-health-outcomes-300153282.html Imo this is something that also VRX should do... It would be viewed with much less criticism, and it costs practically nothing! ;) Cheers, Gio Link to comment Share on other sites More sharing options...
giofranchi Posted October 9, 2015 Author Share Posted October 9, 2015 FDA Accepts Supplemental New Drug Application (sNDA) for DALVANCE® (dalbavancin) http://www.prnewswire.com/news-releases/fda-accepts-supplemental-new-drug-application-snda-for-dalvance-dalbavancin-300157164.html Cheers, Gio Link to comment Share on other sites More sharing options...
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