Replies to post #177137 on Biotech Values

[DewDiligence]

AGN, which closed 2% above the nominal value* of VRX’s offer, has implemented a poison pill:

http://online.wsj.com/news/articles/SB10001424052702304734304579518423370599030

Allergan Inc. has adopted a poison-pill defense in the wake of an unfriendly advance from larger rival Valeant Pharmaceuticals International Inc., which has teamed with activist investor William Ackman to make a $46 billion bid for the company.

If any unapproved investor acquires 10% or more of Allergan's stock, other stockholders will have the right to buy discounted shares, Allergan said late Tuesday. The defense mechanism, officially known as a shareholder rights plan, effectively prevents Mr. Ackman, who disclosed a 9.7% stake in the company on Monday, from significantly growing his position. It also prevents Valeant from taking its hostile offer straight to shareholders in a direct offer to purchase stock, known as a tender offer.

*VRX’s offer consists of $48.30 cash + 0.83 VRX shares for each AGN share.

[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.