Allergan Inc.AGN

Morningstar Rating

Stock Research and Analysis

by Brian Laegeler, CPA

Allergan's entrenched leadership positions in eye-care and cosmetic drugs and devices earn the company a wide economic moat. However, that moat has narrowed in recent years. Despite massive investments in research and development, a mediocre drug pipeline Read more

Bulls Say

Through its acquisition of Inamed, Allergan has become the "one-stop shop" for cosmetic surgeons. Allergan should realize substantial operating leverage in sales and marketing because many of these products are sold through existing Botox sales channels.

New uses for Botox will further growth during the next five years. For instance, the product is currently in Phase III trials for use in migraine headaches and overactive bladder, potentially large market opportunities.

Retinal diseases, such as macular degeneration and macular edema, are undertreated. Allergan has a significant opportunity in this market, most immediately with Posurdex--an innovative implant system that enables drugs to be delivered continuously to the eye.

Absent any recessionary conditions, Allergan's silicone breast implants should experience strong growth in the United States. Silicone implants offer an improved look and feel over saline and sell for a substantial premium. Read more

Bears Say

Botox will encounter its first real U.S. competition in 2009 with recently approved Dysport.

Roughly 70% of Allergan's products are dependent on reimbursement from governments and third-party payers. Reimbursement rates have fallen recently, especially outside the U.S., a trend we expect to continue.

Allergan's major pharmaceutical products, besides Botox, face generic or other branded competition in the next five years. Read more

Strategy

Allergan brings size and scale to otherwise fragmented niche markets. This enables the firm to assume leadership positions with a diverse base of specialty pharmaceutical products. The company supports Read more

Management

David E. I. Pyott became CEO of Allergan in 1998. Previously, Pyott served as head of the nutritional division at Novartis NVS. We believe he deserves a good deal of credit for Allergan's recent successes. The company's sales have climbed from $1.2 Read more

Profile

Allergan is one of the largest specialty pharmaceutical firms in the world and the maker of Botox, which constituted 30% of sales in 2008. Through its acquisition of Inamed Read more

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