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Allergan to sell off women’s health, anti-infective businesses

  • Allergan plans to sell its women’s health and infectious disease units, aiming to shore up investor confidence and more narrowly focus the company amid a steady erosion of its share price over the past year.
  • The decision to divest the two modestly sized businesses is the result of a strategic review, now complete, that had explored more disruptive options including a split of the Ireland-headquartered drugmaker.
  • Company CEO Brent Saunders, speaking Wednesday at a conference hosted by Bernstein, said Allergan would use any cash raised by a sale to pay down debt and buy back shares. As of March 31, the company reported nearly $27 billion in outstanding debt.

Once a Wall Street favorite, Allergan has faced rising concerns in recent quarters over the company’s strategy, particularly as looming generic competitors to key eye drug Restasis (cyclosporine) threaten to erode revenues.

Shares in the drugmaker have lost roughly 40% of their value since cresting $250 apiece last July.

Saunders has staunchly stood by Allergan’s business plan, arguing the company remains competitive in its core therapeutic areas. Yet the outspoken CEO acquiesced to a strategic review, acknowledging the consistent drop in stock price required a response.

Divesting women’s health and infectious disease will keep Allergan’s focus on medical aesthetics, eye care and drugs for diseases of the central nervous and gastrointestinal (GI) systems — sidestepping broader overhauls of the company.

News of Allergan’s intent to sell the two units was first reported by CNBC.

Speaking at the Bernstein conference, Saunders said the company board of directors looked into splitting Allergan, but judged the effects would be too disruptive.

“When you look at medical aesthetics, CNS, GI and eyecare — strategically they are concentric circles. They share significant resources in the marketplace to be competitive.”

Last year, sales of Allergan’s women’s health products brought in just over $1 billion, while anti-infectives accounted for $257 million. Put together, the two units currently account for about 6% of Allergan sales.

Most of the drugs in each unit are older. One, the vaginal cream Estrace, recently lost exclusivity, leading to a sharp drop in sales. Allergan hopes to win approval this year, however, of its experimental uterine fibroids drug ulipristal acetate.

It’s not clear whether any potential buyers have engaged with Allergan, although a company spokesperson confirmed to BioPharma Dive that the sales process has been initiated both internally and externally.

Allergan may still opt to wait, however.

“There is no fire sale at Allergan,” Saunders said Wednesday morning at a conference hosted by Bernstein, an investment firm. “There is no undue pressure to sell them for a bargain-basement price.”

An analysis by Cowen analyst Ken Cacciatore in late April suggested the women’s health business could fetch as much as $4 billion, while anti-infectives could sell for about half as much.

Shares in Allergan were little moved in Wednesday trading.