Analysts Still Like Allergan

Following Allergan plc Ordinary Shares AGN second-quarter results, UBS still likes the company.

Analyst Marc Goodman said, despite the beat-and-raise quarter, investors are skeptical concerning the quality of the results. The analyst noted sales don't assume Namenda generics this year, with the company refraining from raising the top-line guidance due to concerns for Viberzi, Kybella and Aczone.

UBS noted the numbers got a boost from forex. Additionally, the increase in gross margin guidance is attributable to a one-time benefit arising from a tax refund, the firm added.

Notwithstanding, the firm said the numbers are still moving in the right direction. The aesthetics business remains strong globally and commentary concerning the oral CGRP safety was encouraging.

"And as we move into the 2018-2019 period, we believe investors will want to own the name AGN for the multiple pipeline read-outs where the risk/reward on those events remains very favorable for the stock," UBS said.

UBS also gave its key takeaways from the call:

• Removal of overhang over a probable settlement with respect to the Restasis patent trial and settlements with other generic companies
• Demand pick up expected for Viberzi in the second half of 2017
• Liver safety review board's comfort with the minimal elevated liver enzyme levels in patients using both molecules of oral CGRPs

Listing the other takeaways, UBS said:

• Second quarter operating cash included a tax refund of $535 million related to the gain on the sale of the generics business to Teva Pharmaceutical Industries Ltd (ADR) TEVA
• No tax payment required this quarter
• Cash flow to improve in the second half
• Intention to sell Teva shares, since the lock-up period has expired

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Strong Aesthetic Performance

Credit Suisse analysts Vamil Divan, Michael Morabito, Barbara Kotei and Duaa Mohamed attributed the top line and bottom line beat to strong performance by its aesthetic franchise.

The firm noted that the company raised its 2017 guidance, citing the quarterly performance and the benefit of some other items such as a lower expected currency headwind for the full year.

Credit Suisse feels the investors would now focus on important pipeline catalysts in the coming months.

"Most importantly, we will see topline Phase 3 data for ubrogepant (oral CGRP for acute migraines) and topline Phase 2b data for atogepant (oral CGRP for migraine prophylaxis) in 1H 2018," the firm added.

Adjusting Estimates

Credit Suisse raised its 2017 earnings per share estimate from $16.08 to $16.39, but lowered its 2018 estimate from $7.37 to $17.28 and 2019 estimate from $19.73 to $19.52.

UBS has a Buy rating and a $275 price target on shares. Credit Suisse maintained its Outperform rating and lifted its price target from $286 to $288.

"Our blue sky/grey sky scenario analysis suggests a blue sky valuation of $395 and a grey sky valuation of $188, suggesting the risk/reward remains attractive at current levels," the firm said.