Allergan maps out a path to growth
The acquisitive company has added an inhalable migraine treatment to its product line-up.
One of my favorite quotes from the late, brilliant Nobel Prize-winning physicist Dr. Albert Einstein is, "No problem can be solved from the same level of consciousness that created it."
Some of the medical problems and health care treatment challenges facing millions of Americans are being addressed from new perspectives that offer both hope and immediate relief.
Close to 10% of the population in the U.S. suffers from migraine headaches. What migraine sufferers want is faster, more effective pain relief.
Map's blockbuster product, Levadex, will most likely be granted Food and Drug Administration approval in April, according to a "Mad Money" interview conducted by Jim Cramer with AGN Chairman and CEO Dr. David Pyott earlier this week. Levadex is an inhaled, faster-acting treatment for migraine sufferers. Dr. Pyott is very optimistic about future sales that will directly benefit AGN once the acquisition of MAPP is completed this year.
Another "problem" AGN is solving with a new "level of consciousness" is what to do with the lagging sales of its obesity division, which is mainly tied to the Lap-Band surgical device. The solution, according to Dr. Pyott, is to sell that part of AGN's business by the middle of 2013.
Allergan reported mixed earnings results on Tuesday, with revenue rising over 7% over the year ago quarter to $1.49 billion. Unfortunately, that missed the analyst consensus estimate of $1.51 billion by a frog's hair. No problems, however, for the stock price -- it leap-frogged forward and hit a new 52-week high on Wednesday of $108.73.
When it comes to earnings per share, AGN also disappointed by 3 cents, yet it still rose 15% higher than the same quarter last year. What analysts and the market look at when it comes to AGN is how the MAPP acquisition and last December's $350 million purchase of SkinMedica will impact upon both sales and earnings in the quarter just ahead. It's a very optimistic outlook tempered by modest guidance.
Allergan still can make money on its Botox cosmetic and therapeutic products, which the company states will see a sales increase of nearly 10% in 2013. You can read all about AGN's fourth-quarter 2012 operating results by visiting the company's consciously creative website. (Also see TheStreet's: EnteroMedics weight-loss device is a pulsing placebo.)
Looking at the company's five-year chart is an exercise in illustrating the success of this Irvine, Calif. health care colossus founded back in 1948. It also shows the growth of its trailing-12-month free cash flow that allowed it to make the two accretive acquisitions totaling over $1.3 billion.
The stock appears to be consolidating after its amazing recent peak. On Thursday AGN shares pulled back by more than 2% on higher than normal volume. Again, no problem, because analysts from Citigroup raised the price target for Allergan up to $124 citing strong growth in the company's core franchises, and kept a Buy rating on the stock.
Earlier, Argus Research lifted its target on Allergan to $118 on the premise that the company reported solid sales and earnings growth and has a strong pipeline. The firm expects the company to generate double-digit earnings growth during the next three to five years, driven by a number of important factors. It maintains a "buy" rating on the shares.
Do your own due diligence before investing in AGN. From a technical basis it wouldn't surprise this analyst to see the stock head closer to $100 before heading higher, as charts suggest based on the Bollinger Bands, the 200-day moving average line and the Relative Strength Indicator. The RSI may be in the process of going a bit lower.
AGN is a company that is solving problems with a prescient, new level of consciousness and the leadership acumen that will "ring the register" time and time again in the months ahead.
At the time of publication the author had no position in any of the stocks mentioned.
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John Stumpf acknowledges that growth has been slow, but he says he's still optimistic.
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