Dive Brief:

  • Allergan plc predicts 2018 net income per share will range from $15 to more than $16 depending on when its blockbuster drug Restasis loses patent exclusivity, an update that reaffirmed confidence among analysts who believe the company’s stock is undervalued.
  • The guidance came during a Wednesday presentation of the Ireland-based pharma’s third quarter performance. Net revenues for the period were up 11.4% year over year to $4.03 billion, boosted by powerhouse drugs like Botox and Linzess as well as the recently acquired regenerative medicines Alloderm and Strattice and body contouring technology platform Coolsculpting.
  • Restasis had $382 million in net revenue during the period, up 3% year over year. Generic versions of the eye drug, along with several other Allergan products, are poised hit the market over the next couple of years. On an earnings call, CEO Brent Saunders said his company has been preparing for those threats and will likely hold off on business development moves until the Restasis situation becomes clearer.

Dive Insight:

Allergan has zealously defended its second biggest franchise, going so far as to transfer all Orange Book-listed patents for Restasis (cyclosporine ophthalmic emulsion) to a Native American tribe, which in turned motioned to dismiss Mylan N.V.’s inter partes review (IPR) on the drug’s patentability.

Native American tribes, it turns out, have sovereign immunity from these types of challenges, shielding Restasis’ patents from IPR review.

That strategic play was crimped in October, however, after a federal judge invalidated four Restasis patents in court. Now, Allergan has drawn up several scenarios for how copycat versions of the drug could affect bottom lines. If a generic Restasis comes in January, the pharma expects 2018 net income per share of at least $15 dollars; if it comes by July, the number is more likely to be at least $16.

“We are pleased or comfortable with the strategic makeup and direction of the company,” Saunders said. “Yes, we’re facing some LOEs, but we’re not the first nor will we be the last biopharmaceutical company to have to deal with loss of exclusivities on products. That in and of itself is not a reason to change course.”

To that point, Saunders shot down an analyst inquiry on whether the company would consider, at least in the near-term, splitting to maximize value. Dealmaking, however, may get dialed down.

“Over the next several months, until we have a better handle on Restasis, we will take a pause from stepping stone deals,” Saunders said on the Nov. 1 earnings call. “That doesn’t mean that if we saw something strategically compelling and relatively manageable we wouldn’t evaluate it and look at it, but we’re going to add an extra layer of discipline and focus to preserve cash to return to shareholders, and that could include future buybacks as a good example.”

Executives also plan to strengthen the company’s balance sheet through cost-cutting measures, though its unclear exactly how those initiatives will pan out. “I hate to say that we know how to take costs out of the business, but we do. And we know how to do that in a way that protects long-term growth drivers,” Sanders said.

Allergan shares opened at $176.59 apiece on Wednesday, barely off from the prior day’s close of market. They slipped in early morning trading, at one point going as low as $169.64 apiece before rallying back up to $178.87 apiece later on.

Some analysts believe Allergan’s stock isn’t reflecting the company’s value. Data compiled by Nasdaq, for instance, notes that seven investment firms have a “strong buy” rating on Allergan and another two have a “buy” rating. Cowen & Co. analyst Ken Cacciatore issued an “outperform” rating on the company in a Nov. 1 note.

“Although the transition from the legacy franchises to the new product cycle has been more protracted than we originally anticipated, we do believe it is nearing its end. And as the new product cycle gains traction — complemented by the still growing Botox, fillers, breast and aesthetics divisions — we continue to believe that the trapped value will be unlocked,” he wrote.

Article courtesy of BioPharmDive, For more information

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