Allergan Is Primed For Growth, Goldman Sees 27% Upside Potential

The 1Q earnings call hosted by Allergan plc Ordinary Shares (NYSE: AGN) gave a lot of confidence in the company’s underlying business, Goldman Sachs’ Jami Rubin said in a report. The analyst maintained a Buy rating for Allergan, with a price target of $275. He added the stock to the Americas Conviction Buy List, saying that there were “key catalysts on the horizon.”

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The price target reflects 27 percent upside, versus the 14 percent average for the large cap pharma group. Analyst Jami Rubin mentioned that the increased confidence Allergan was based on:

1. A “sharpened” business model that was focused on branded growth pharma
2. A reloaded balance sheet that seemed poised to de-lever from 4X to 1.5X following the deal with Teva Pharmaceutical Industries Ltd (ADR) (NYSE: TEVA)
3. Clear signal of management confidence reflecting in the $10bn share repo authorization
4. Expectation of double-digit topline growth, based on volume-driven durable assets including differentiated new products
5. Rich pipeline with about 70 unique assets including a number of “first-in-class and/or best-in-class candidates

“We believe AGN is on track to deliver sustainable topline growth with operating margin expansion,” Rubin wrote.

Two Important Catalysts

Rubin mentioned two catalysts that would unlock significant shareholder value in the next few months:

• “First, we believe investor concern around closing the TEVA deal can be mitigated by progress being made with the FTC review, which is complete for marketed drugs and nearly complete for the pipelines including remedies,” the analyst stated.
• Management could close the $4-$5bn of share repos pending deal and execute another $4-$5bn based on the $10bn authorized.