Allergan (NYSE:AGN), a pharmaceutical company best known for developing Botox, fell 15.7% from $243.09 to $204.95, reducing the Fund’s return by 55 basis points. The stock dropped after the company announced a deal with the Saint Regis Mohawk Tribe, whereby Allergan transferred patents on its $1.5 billion dry eye drug, Restasis, to the tribe in exchange for an upfront payment and annual royalties. While this deal has the potential to delay generic competition due to the tribe’s sovereign immunity, it has also attracted political scrutiny, which weighed on the stock’s multiple. We trimmed our position to reflect our disappointment with this unusual deal. However, we continue to own the stock because we like the company’s aesthetics franchise and think the stock is significantly undervalued, trading at just 12 times expected 2018 earnings.
From Jerome Dodson (Trades, Portfolio)'s Parnassus Fund third quarter 2017 commentary.
