Allergan plans $10 billion stock buyback as it waits for Teva cash
- Irish drugmaker Allergan on Tuesday outlined plans for a $10 billion share buyback, pending the completion of the $41 billion sale of its generics business to Teva Pharmaceuticals. Both companies expect the deal to close in June.
- First-quarter revenues jumped by 48% to $3.8 billion from $2.6 billion a year prior, reflecting in part the full inclusion of Allergan's product revenues following Actavis' acquisition of the company (Actavis kept Allergan's name).
- After the $160 billion merger with Pfizer fell apart last month, many had expected Allergan to hunt for a transformative deal, especially with the pending influx of cash from Teva. While that may still be on the table, Allergan CEO Brent Saunders indicated a preference for "stepping-stone" deals, reports Reuters.
Allergan will begin buying back between $4 billion and $5 billion worth of shares through open-market repurchases over the next four to six months. If conditions remain favorable after that time, the company said it would continue the buyback program up to the $10 billion upper limit.
"As we think about our capital deployment options post the close of the Teva transaction, in addition to the stock repurchase program, we will have the ability to pay down debt to maintain our investment grade credit ratings and preserve significant firepower to invest for growth," Saunders said in a statement on the move.
Almost immediately after Pfizer and Allergan announced the dissolution of their merger in early April, Allergan signed a potentially $3.3 billion collaboration agreement with Heptares Therapeutics for rights to group of developmental treatments for Alzheimer's and other neurological disorders.
Two weeks following the deal with Heptares, Allergan acquired Topokine Therapeutics and its undereye bag treatment for $85 million up front.
These two deals could be indicative of the type of smaller "stepping-stone" deals Saunders may pursue, as they add on complementary later-stage products.
The company's first-quarter revenue was driven by strong sales of Botox and the dry-eye drug Restasis. Newer drugs like the extended release version of the Alzheimer's drug Namenda and the irritable-bowel treatment Linzess saw significant growth as well.
Operating expenses increased, however, due in part to higher amortization expenses related to Actavis' acquisition of Allergan.
Profits for the quarter hit $256 billion, up from a $512 million loss in the same period a year prior. Allergan stock closed the day's trading up a little over 5%.
- Wall Street Journal Allergan Realigns Executive Team, Outlines $10 Billion Stock Buyback
- Bloomberg Allergan to Buy Back Up to $10 Billion in Shares
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