- Allergan shares increased more than 4% Thursday, after an Evercore ISI analyst interpreted remarks from an executive as indicative that the company may be headed toward a split.
- "There is a continued sense of urgency both from management and the board for ways which we think would unlock value," Manisha Narasimhan, Allergan's vice president of investor relations and strategic initiatives, told Raffat in response to a question about a potential split on an investor call. "In terms of timing, we're working as quickly as we can, and we hope to be in a position to make an announcement over the next couple of months. I would say in a month or two."
- Narasimhan told the analyst she could not comment beyond that. From the call, it is not clear if the announcement would be about a split, or more broadly on action from the board.
Narasimhan's commentary, which gave an initial timeline for some kind of action from the company, came as part of a half-hour call with Allergan's general counsel to discuss the pharma's level of liability in various opioid lawsuits.
While the Allergan exec's answer carried a level of vagueness, Raffat viewed the comments as a sign that a split is coming.
"I walked away with the sense that Allergan is heading towards a split and may likely lay out timelines," he wrote in a June 18 note to investors, adding that he thinks an announcement is coming along with its second quarter earnings call.
Last month, CEO and chairman Brent Saunders pledged "decisive action" from the board to address mounting investor frustration with the company's market performance. But those remarks on Allergan's first quarter earnings call lacked specifics, instead asking for investors to "stay tuned" and promising all options are on the table.
Shares have fallen more than 60% since a 2015 peak.
Saunders has faced rising investor discontent amid the decline. Earlier this year, the activist hedge fund Appaloosa led a shareholder proposal to immediately split up the roles of CEO and chair. The idea was struck down at the annual shareholder meeting, with 60% voting against the proposal.
Raffat is not the first analyst to push the idea of a split between the therapeutics and aesthetics businesses. Earlier this year, RBC Capital Markets' Randall Stanicky and Bernstein's Ronny Gal also backed the idea.
In April, Stanicky outlined how the Alcon spin-off from Novartis could serve as a blueprint for Allergan, citing data that showed recent pharma spin-offs had outperformed the broader stock market.
"The solid historical performance of spin-offs suggests that it could be a compelling alternative to a sale or divestiture should Allergan pursue a break-up," the analyst wrote.
While the timeline of action in the next month or two is new, the idea of everything being on the table for Allergan is not. Slightly more than a year ago, for instance, the company outlined plans to sell its women's health and infectious disease units. To date, neither unit has been sold.