Stifel Says Allergan Could Use A Face-Lift, Initiates Coverage With Hold

The Street is largely bullish on Allergan plc AGN, but the firm caught an ambivalent critic Tuesday. 

The Rating

Stifel Nicolaus analysts Annabel Samimy initiated coverage with a Hold rating and $192 price target.

The Thesis

By Stifel’s assessment, Allergan rests on the success of its growth-driving aesthetics franchise even as rivals rise and threaten market share. 

At the same time, it is advancing specialized therapeutics and general medicine without strategic direction, Samimy said in a Tuesday note. These franchises will suffer $3-billion loss-of-exclusivity headwinds this year — a 20-percent revenue hit representing one of the greatest such blows in the pharma space, the analyst said. (See Samimy's track record here.)

“While the current share price reflects these challenges and Allergan's valuation is attractive, we believe the pipeline holds tangible clinical/commercial risk, and we are not convinced there is a go-forward strategy to unlock the value of its performing franchises,” Samimy said. “This leaves us awaiting rational strategic alternatives.”

Stifel considers drastic alternatives possible, particularly as Allergan re-evaluates its $33.8-billion capital allocation related to the sale of generics that has failed to generate desired returns.

“While Allergan has invested meaningfully in its pipeline, divestment of franchises that may be detracting from that value may be the cards,” Samimy said. 

Price Action

Shares were volatile Tuesday and were up 0.33 percent at $167 at the time of publication. 

Related Links:

Cantor Fitzgerald Names 8 Upcoming Biotech Catalysts

Biotech Stock Roundup: Spectrum Up, Incyte Down, AveXis To Merge With Novartis And More

Photo courtesy of Allergan.