Allergan's cash-use plan, pipeline could add to share run

Thu Aug 4, 2016 1:16pm EDT
 
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By Lewis Krauskopf

NEW YORK (Reuters) - Four months after the collapse of its deal to be bought by Pfizer (PFE.N: Quote), Allergan plc (AGN.N: Quote) has a $33 billion war chest, a pipeline of experimental drugs that some investors view as undervalued and optimistic shareholders scooping up its shares.

Whether the stock's recent rebound continues could rest on how wisely the drugmaker deploys that money. Wall Street could get a glimpse of Allergan's plans when it reports second-quarter results on Monday.

"A lot of the strategic focus is going to be on what they do with this cash infusion," said Kevin Kedra, an analyst with Gabelli & Co.

One possibility is Allergan strikes a major purchase of its own. It was reported this week to be interested in buying Biogen (BIIB.O: Quote), which has a market value around $70 billion.

While some analysts say the company does not need to strike such a sizable deal, they are bracing for some level of deal-making, along with share buybacks and the paydown of debt.

Allergan's newfound cash bounty stems from the sale of its generic drugs business to Teva Pharmaceutical Industries (TEVA.TA: Quote).

Helped in part by the sale, which closed on Tuesday after some doubts it would win U.S. antitrust approval, Allergan shares have climbed 10 percent since the end of June, topping a 3.5 percent rise for the NYSE Arca Pharmaceutical index of large and specialty drugmakers. They have rebounded about 30 percent since sinking to a two-year low at the start of May and traded at midday on Thursday at $255.02, up $2.49, or 0.99 percent, on the New York Stock Exchange.

Even after bouncing back, the shares remain down almost 20 percent for 2016, hurt after the Pfizer deal fell apart in April over new U.S. tax rules.   Continued...

 
Allergan ticker info and symbol are displayed on a screen on the floor of the New York Stock Exchange (NYSE) April 6, 2016. REUTERS/Brendan McDermid