Allergan Beats As Valeant Offers $200 Per Share

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Allergan, Inc. (NYSE:AGN) released earnings results from its third quarter this morning before opening bell, posting non-GAAP earnings of $1.78 per share on $1.79 billion in revenue. Analysts had been expecting earnings of $1.64 per share on $1.78 billion in revenue. In the same quarter a year ago, Allergan’s non-GAAP earnings were $1.23 per share.

Key metrics from Allergan’s earnings report

Reported earnings per share were $1.03. That’s compared to $1.10 per share in earnings in the same quarter of last year. Allergan’s total net sales rose 17.2% year over year. The company reported a 14.3% increase in total specialty pharmaceuticals and a 30.4% increase in core medical devices net sales.

“With continuing strong momentum across a broad range of products, Allergan again recorded the strongest increase in absolute dollar sales in any quarter in our history, and again delivered sales and earnings per share growth above the high end of our expectations,” Allergan Chairman and CEO David E.I. Pyott said in a statement this morning.

Allergan provides guidance

For the full year, Allergan projects net sales of between $7.08 billion and $7.155 billion. That excludes revenue from agreements related to the sale of the obesity business. The Botox maker expects specialty pharmaceuticals sales to be between $5.99 billion and $6.045 billion and core medical devices sales to be between $1.05 billion and $1.07 billion. Allergan projects other revenue to be about $110 million for the full year and non-GAAP earnings to be between $6.27 and $6.30 per share.

For the current quarter, Allergan expects total net sales to be between $1.845 billion and $1.92 billion. The Botox maker expects non-GAAP earnings per share to be between $1.80 and $1.83 for the fourth quarter.

Valeant to raise Allergan bid

Also this morning, Valeant Pharmaceuticals, Inc. (NYSE:VRX) published another letter it sent to Allergan’s board of directors regarding its unsolicited buyout proposal. Valeant said it will increase its offer for Allergan to at least $200 per share. A shareholder vote on the proposal is scheduled for Dec.18. Shareholders of record as of Oct. 30 will be able to vote.

The letter from VRX, which is worth a read can be found below.

October 27, 2014

Board of Directors Allergan, Inc. 2525 Dupont Drive Irvine, California 92612

Dear Board of Directors,

One month ago I extended an olive branch, which was summarily rejected the same day. You have refused all of our offers to meet and answer any questions you may have about Valeant or about our offer. Instead, you have allowed management to continue making baseless attacks. Our third quarter earnings have clearly refuted those attacks and fully validated our business model.

Allergan would not be trading anywhere near where it is absent our offer, and our offer, even at Valeant’s current stock price, represents a very substantial premium. Allergan’s shares were trading at $110 at the beginning of the year, and $117 before we made our offer. The market and peer group are flat this year. Given this, it is unimaginable that Allergan would be trading anywhere near where it is now without our offer, even with the cost cuts you belatedly put in place in direct response to us.

We believe our stock is trading at artificially low levels – our shareholders are telling us that our shares should be trading at more than $150 per share. Your own banker had Valeant on its “Conviction Buy List” with a target price of $164 before we made our offer and before we provided our 2015 outlook – and that didn’t take account of the upside and synergies that would result from a merger. A trading price of $150 is only 15 times analyst consensus for 2015 Cash EPS.

To be clear, Valeant is prepared to improve its offer and provide value to your shareholders of at least $200 a share. We are confident that an increase in our stock price, and in consideration, will provide that value. No other potential acquirer of Allergan has the operational and tax synergies that we have, and no other potential acquirer of Allergan can provide the value that we can.

Since we made our offer many of your long only shareholders, including your largest shareholder other than Pershing Square, have sold down or out. A number of your remaining large long only shareholders publicly expressed their concerns regarding actions you had been contemplating, and we understand that a number have privately expressed those concerns as well. Both ISS and Glass Lewis have been highly critical of the Board.

Management has shown its true colors through “horse-choking” bylaws, baseless attacks and frivolous litigation. It is past time for the board to take control of this process, do what is right for the Allergan shareholders and come to the table. December 18 is not far away.


J. Michael PearsonChairman & Chief Executive Officer

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