Allergan plc (AGN, Financial) is a global, integrated specialty pharmaceutical company focused on developing, manufacturing and distributing brand, generic and biosimilar products. Probably best known for its Botox, Allergan has undergone a massive, M&A driven transformation after combinations with Forest Labs ($25 billion) and Actavis ($66 billion) have created a $120 billion behemoth. In the process, the company has upgraded its quality of earnings and diversified away from legacy dermatology and ophthalmology businesses. Our analysis suggested that Allergan’s earnings could rise from about $15/share this year, to about $25/share in five years making it attractive enough to initiate a small position. Late in the fourth quarter, Pfizer made a long speculated cash and stock bid to acquire Allergan at about a 20% premium to its price. So-called “tax inversion” is one of the goals analysts believe Pfizer was after in attempting to acquire Allergan, and various U.S. politicians have spoken out about the need to try and prevent these kinds of transactions. We believe Allergan should do well regardless of whether this deal will go through or not (although, we think that it will) as the stock did not move and continues to trade at about 20% discount to Pfizer’s offer price.
From the Baron Fifth Avenue Growth Fund Fourth Quarter 2015 Letter.
