Biotech Values

[DewDiligence]

AGN rejects VRX/Pershing buyout offer, justifying the decision by giving new 5-year sales and EPS guidance:

http://finance.yahoo.com/news/allergan-board-unanimously-rejects-unsolicited-110000605.html

Allergan, Inc. today announced that its Board of Directors has unanimously rejected the unsolicited proposal announced by Valeant Pharmaceuticals International, Inc. on April 22, 2014. After a comprehensive review, conducted in consultation with its financial and legal advisors, the Allergan Board concluded that the Proposal substantially undervalues Allergan, creates significant risks and uncertainties for the stockholders of Allergan, and is not in the best interests of the Company and its stockholders.

The Company also announced that, given the strength in its business, Allergan expects to increase earnings per share by 20 to 25 percent and continue to generate double digit revenue growth in 2015. Additionally, the Company expects to produce double digit sales growth and produce earnings per share compounded annual growth of 20 percent over the next five years.

AGN’s argument in rejecting VRX sounds a bit like AZN’s argument in rejecting PFE (#msg-101616919) with the notable difference that AGN’s growth targets are probably achievable rather than pie in the sky.

AGN recently implemented a poison pill triggered by any “unapproved” investor accumulating a 10%+ stake (#msg-100963775); Pershing currently has a 9.7% stake.

Meanwhile, AGN’s share price, which soared to $170 last week, has backtracked to $159.72 (-1% today). At the current price of VRX, the nominal value of the buyout offer ($48.30 cash + 0.83 shares of VRX) is $156.33, so AGN’s share price still has considerable buyout vig baked in.