Another Acquisition for Allergan Makes Six Since August

On October 3, 2016, Allergan Pharmaceuticals (NYSE:AGN) announced plans to acquire global rights to AstraZeneca’s (NYSE:AZN) MEDI2070 Inflammatory Disorder Development Program. It’s one of six major acquisitions the company has made since August, indicating Allergan’s refined strategic focus, as well as CEO Brent Saunders’ continued commitment to a “growth pharma” business model.
Early August saw Allergan divesting itself of assets: the company sold its global generics and Anda distribution business to Teva Pharmaceuticals. The goal? To tighten Allergan’s strategic focus and hone in on what Saunders called “seven key therapeutic areas”: gastroenterology, eye care, the central nervous system, medical aesthetics and dermatology, women’s health, urology and anti-infective therapeutics.
Shortly after, Allergan announced a series of strategic acquisitions in line with three of those focus areas.

Eye care

On August 11, the company said it would purchase ForSight VISIONS, a private eye care company. In so doing, they acquired peri-ocular ring technology that facilitates drug delivery for glaucoma and ocular hypertensive patients.
Allergan’s next announcement? They’d acquired all assets from biotech RetroSense Therapeutics. Again, this significantly expanded Allergan’s eye care portfolio with a gene therapy program for blindness caused by Retinitis Pigmentosa.

Dermatology

Then, on September 14, Allergan declared plans to buy Vitae Pharmaceuticals (NASDAQ:VTAE) for $639 million. With the addition of a novel drug design platform and several promising therapies for psoriasis, atopic dermatitis and other conditions, the acquisition made Allergan’s pipeline even more robust. Said Saunders, it “adds strength and depth to our innovative medical dermatology franchise.”

Gastroenterology

Just six days later, more news came from Allergan: they had completed an agreement with Tobira Therapeutics (NASDAQ:TBRA). This time, the assets included several development programs to treat non-alcoholic steatohepatitis and other liver diseases.
The same day, Allergan announced their acquisition of Akarna Therapeutics, another biotech focused on liver disease, as well as inflammatory and fibrotic conditions.
Then, on October 3, Allergan informed investors of its most recent acquisition: the rights to AstraZeneca’s MEDI2070 Development Program, which will treat Crohn’s disease and ulcerative colitis.

Saunders and “growth pharma”

Saunders has made a name for himself with these kinds of deals: he was CEO of Bausch + Lomb when it was acquired by Valeant Pharmaceuticals (NYSE:VRX,TSX:VRX), for example. He went to Forest Laboratories and oversaw its sale to Actavis—the company that then bought Allergan and took on its name.
It’s a business model he terms “growth pharma,” which some say privilege acquisition-based growth over a company’s own research pipeline. But Saunders is quick to defend Allergan’s approach. Deal-making is a large part of their growth strategy, he told The Financial Times, but noted that many huge biotech companies found success the same way.
“The idea that to play in the big leagues you have to do drug discovery is really a fallacy,” he explained in a Forbes profile last year. “You have to do research, you have to be committed to innovation. I strongly believe that, but discovery has not returned its cost of capital.”

What’s next?

The systematic way Allergan seems to be acquiring companies for each of its seven therapeutic focus areas, as well as Saunders’ reputation, makes us wonder: are more purchases on the horizon? Will the company move to expand its portfolio in therapies for the central nervous system, women’s health, urology and anti-infectives next?
Perhaps—but another major purchase may be completed first. Allergan is making moves to buy back up to $10 billion of its own common stock. The first phase of that repurchase should be completed by mid November.

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Securities Disclosure: I, Chelsea Pratt, hold no direct investment interest in any company mentioned in this article.