Sunday, 11 August 2013


As a company Allergan (AGN) is best known for its Botox product. As a cure for wrinkles AGN has become a celebrities best friend but in fact ophthalmology (eye care) is the largest division of the business. AGN is classified as a pharmaceutical company but consumer beauty is the major driver for the company. Botox is growing much like the magic pudding it is delivering new solutions for different problems with a current focus on reducing migraines.

AGN is positioned in three attractive sectors ophthalmology (eye care), obesity and cosmetics. All three sectors target the aging and increasing weight of populations around the world. As an investor a company that benefits from the ageing of the population and obesity are two attractive investment areas.

No patent cliff for Botox
Apparently Botox is a naturally occurring substance so AGN cannot patent it. But what they do have a patent on is the process of making and harvesting the Botox itself. Some have described it as valuable as the Coca-Cola recipe.

AGN targets EPS growth in the mid-teens and management do have a good track record. The stock has sold off recently because of reduced expectations regarding its future drug pipeline. There are concerns that competition in eye care will increase with the US Food and Drug Administration seeming to pave the way for competitors to start making generic forms of Restasis (chronic dry solution their second best selling product around 14% sales) much earlier than investors expected. The stock now trades at the closest premium to its peers in years. Even with a reduced pipeline exposure just to Botox suggests it is still a stock to watch.


Disclosure: Decisive has no position in Allergan (AGN) stock
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