Mizuho Securities Upgrades Allergen (AGN) to Buy; Sees Lowered Risk Moving Forward
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Mizuho upgrades Allergan (NYSE: AGN) from Hold to Buy and boosts its price target from $246 up to $318 on lower risk expectations.
The firm commented today,
We revisited our assumptions after Allergan lowered guidance on the 2Q:16 call, removing an overhang, in our view. We view the business as less risky since consensus estimates look more reasonable and we are more comfortable with revenue growth. We also see upside from higher gross margins and possible quarter beats.
Other details from the note:
As goes Botox, so goes AGN: The company broke out the details of its revenue base, allowing us to better view the ramp in Botox cosmetic and therapeutic indications. A strong fall push in Kybella DTC promotion should also drive increased utilization of Botox and fillers, in our view. Mgmt is still targeting 10% organic growth for the overall business in 2017, and we view this as doable. Additional granularity about other segments like GI, eye drops, Saphris, and anti-infectives made it easier to appropriately assign growth or stability to products, rather than wonder about declines within "other branded product sales".
Execution will be a focus and some risk remains: This is the hard part. Mgmt will need to contain costs while launching new products and advancing the pipeline. Highly visible products like Kybella will need to hit expectations (we aren't sure this one will attain $52M in 2016). In 2H:16, we expect several data readouts: (1) Ph III of tavilermide in dry eye, (which requires two additional Ph III trials). (2) Ph IIb data for relamorelin in gastroparesis (we have low expectations) and (3) Ph II data for atogepant in migraine prophylaxis. We also await approval of Restasis MDPF.
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