Allergan, Inc. (AGN): No Sign of a Slowdown at This Recession Resistant Company

Page 1 of 2

I must confess I am finding the current market to be one of the most frustrating periods of my investing life. I’ve always liked a defensive growth stock, but nowadays they seem to be so expensive that the only thing left to do is refrain from buying and sulk in the corner for a while. However, I can’t complain too much about Allergan, Inc. (NYSE:AGN), as it’s a stock I held during its sterling run lately. I like the stock, but it is fairly valued now and on a risk reward basis I won’t be buying back in just yet.

Allergan, Inc. (NYSE:AGN)Allergan, Inc. (NYSE:AGN) Delivers Growth

I initially covered the stock in an article linked here, which is useful as a primer for research. In order to assess current prospects I’ve tabulated what Allergan forecast for the full year in 2012 alongside what it achieved and then the guidance for 2013. The starred figures in the middle column are for those products that beat the mid-point of full year guidance from Q3.

Allergan is offering a mix of mid-single digit top line growth along with mid-teens EPS growth. All of this is fine but, in my opinion, it doesn’t justify a trailing PE ratio of 31 and a forward PE of 22. Moreover, the forecast figure of around $1 billion in free cash flow puts it on a free cash flow yield of around 3.2%. It’s hardly cheap.

Botox Driving Growth

With that said, investors need to appraise the long term prospects for the company, and they do look solid.  The biggest single product is the market leading neuromodulator Botox. AGN claims to have around 77% of the global market and is gaining share in therapeutic uses but losing it in aesthetics. The plan is to increase sales in new or expanding indications like migraine, spasticity and bladder treatments.

Obviously with such a dominant position the concern is that it could lose some share in future. Indeed, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is buying Medicis partly because it wants to expand its dermatology operations with Dysport (the key rival to Botox). Furthermore, Merz Pharma will be allowed to re-commercialize Xeomin for aesthetics in the current quarter. Listening to the commentary around the results, AGN seem to think it may gain some market share from Dysport as a result of the impending takeover but that it will lose some thanks to Xeomin’s re-introduction; this is baked into the guidance. Given that Botox has 84% of the US aesthetic market it’s not surprising to see some pressure. AGN also faces competition from Johnson & Johnson (NYSE:JNJ) , which has an anti-wrinkle product that it obtained from the acquisition of Metnor. However, JNJ hasn’t exactly set the world on fire with its skin care numbers lately.

Turning back to Botox, I’m a great believer in the idea that neuromodulators have a bright future for aesthetic purposes. More old people, more divorces, more wealthy women running around without kids, is there a more perfect climate for more plastic surgery? Indeed, AGN pointed out that Italy, Spain and France (challenged economies in Europe) reported strong numbers.

Looking at Botox longer term, the growth is expected to occur within therapeutic, and it has been obtaining approvals for its migraines and bladder treatments in various countries recently. However, the key news recently has been the FDA approval for use in overactive bladder treatment. Prospects look good for Botox, and investors can feel confident.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!