Allergan will sell off two non-core businesses following a strategic review of the company’s assets, according to multiple reports.
Allergan will sell off two non-core businesses following a strategic review of the company’s assets, according to multiple reports.
The move will likely quell misgivings some shareholders have had about the state of the pharma giant. In April a group of shareholders banded together to push for change at the company. That move came days before Chief Executive Officer Brent Saunders said he was committed to the company’s business strategy during a rosy review of the first quarter for 2018. However, during that call with investors and analysts, Saunders noted that the company’s strategic review could bring about some changes, including the buyback of shares, divesting assets, splitting the company, M&A activity to spur revenue or continuing as is.
Selling off assets appears to be part of the plan. Today multiple outlets are reporting that Allergan has made a decision to sell its women’s health business and infectious disease business. Business Insider reported that Saunders himself confirmed the sale of the two assets. This morning Saunders spoke to the Bernstein Annual Strategic Decisions conference and said Allergan’s board of directors wants to focus on the company’s four core businesses -- eye care, aesthetics, central nervous system diseases and gastrointestinal conditions. Combined the company’s aesthetics business and sales of its dry eye drug Restasis generate about 40 percent of Allergan’s annual income. The decision by the board to sell those two non-core assets was unanimous, reports said.
“We have a very strong pipeline in all those areas. Having a focus on those four areas will make Allergan a more exciting company,” Saunders said, according to Reuters.
Saunders noted that the sale of the women’s business could be delayed due to an expected safety ruling on the company’s uterine fibroids treatment Esmya, Reuters said. That ruling is expected in August. In his interview, Saunders said it’s likely that potential buyers for the women’s health business would want to “wait out” that decision.
No formal deal or timeline for a sale has yet been announced, but the sale of the two businesses could fetch Allergan between $4 and $6 billion, Seeking Alpha noted, citing analysts at Cowen. The women’s health business is valued at about $4 billion and the infectious disease business has a value of about $2 billion.
Despite the potential boon in revenue from the sale of the businesses, shares of Allergan are down this morning. Shares fell to $147.56 earlier today, but have climbed a bit to $150.39 as of 10:39 a.m. Allergan’s stock has fallen about 33 percent since this time last year when it was trading at $243.05 per share.
The sale of the two businesses may not be enough to satisfy the shareholders who have been pushing for change. RBC analyst Randall Stanicky wrote in a note earlier this month that the sale of those two non-core businesses “would not bring in sufficient proceeds for meaningful redeployment of capital and would fail to change how investors value the company,” Reuters reported.
