Allergan: $2 Billion Share Buybacks Confirm Growth Is Dead

Sep. 25, 2017 10:45 AM ETAllergan plc (AGN)73 Comments
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Shock Exchange


  • AGN announced a $2B share buyback plan
  • Its CFO is in the process of being replaced
  • Buybacks confirm AGN's growth is dead
  • If AGN traded like other hedge fund hotels (7.4x EBITDA) its shares could crater
  • AGN remains a strong sell

Monday morning Allergan (NYSE:AGN) announced it had authorized a $2 billion share repurchase program and reaffirmed its Q3 2017 revenue projections:

Allergan plc (AGN) today announced that the Company's Board of Directors has authorized a new $2 billion share repurchase program, and has affirmed its commitment to increasing its regular quarterly cash dividend annually for shareholders as part of the Company's capital allocation strategy ... As part of its commitment to maintaining investment grade credit ratings, the Company also reaffirms its commitment to pay down $3.75 billion of debt in 2018.

Per Reuters the company's CFO, Tessa Hilado, is also retiring. The company has made major headlines over the past few weeks with the sale of its Restasis patents to St. Regis Mohawks. The narrative appears to be constantly changing. Below is my takeaway on the recent news.

Buybacks Confirm Growth Is Dead

Allergan is another healthcare company that grows via acquisition. It also earned a reputation as a growth company. Its Q2 revenue growth of 8% would appear to confirm that reputation.

Two of the company's business segments grew revenue by double-digits while the Generics segment fell 1%. After parsing through the company's revenue I determined that organic growth (similar to same store sales) was practically flat.

Acquisitions helped the company's top line, though offset by revenue declines in Restasis (9% of total revenue) and Generics (36% of total revenue). Competing drug makers have seen their generics segments hard-hit by a loss of pricing power with big customers, and an acceleration of new drug approvals by the FDA. Restasis dominates the $1.8 billion dry eye market, but is losing share to Shire's (SHPG) Xiidra which entered the market in the second half of 2016. It is also under siege by generic competitors Mylan (MYL), Teva (

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The Shock Exchange has a B.A. in economics and MBA from a top 10 business school. He has over 10 years of M&A / corporate finance experience. Currently head the New York Shock Exchange, financial literacy program based in Brooklyn, NY.His book, "Shock Exchange: How Inner-City Kids From Brooklyn Predicted the Great Recession and the Pain Ahead", predicted pain ahead for the U.S. economy and financial markets.In 2014 the law firm of Kirby, McInerney, LLP brought a class action lawsuit against Molycorp, Inc. for "materially misleading statements" in its financial statements. Kirby, McInerney used investigative journalism from the Shock Exchange to buttress its case. That's the discipline the Shock Exchange brings to every situation he covers for SA.

Analyst’s Disclosure: I am/we are short VRX, AGN, TEVA, ENDP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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