Cowen Defends Allergan

Following Allergan plc Ordinary Shares AGN 2 percent drop in reaction to its decision to buy unheralded clinical-stage biotech company Tobira Therapeutics Inc. TBRA, Cowen said the negative reaction is too harsh.

Allergan announced Tuesday it would buy Tobira for $28.35 per share in cash and up to $49.84 per share in contingent value rights, payable on successful completion of certain developments. The total potential value of the deal could be as much as $1.695 billion, giving a whopping premium of over 500 percent.

Tobira stock has soared 700 percent on the announcement.

Related Link: Tobira Therapeutics Up 760% Following Allergan Buyout, Liver Drug A Key Focus

Tobira's Warchest

The company develops medicines to treat liver disease, inflammation, fibrosis and HIV. Cenicriviroc is its lead candidate in development meant to treat non-alcoholic steatohepatitis, which is one of the major causes of liver cirrhosis in the U.S. after hepatitis C and alcoholic liver disease.

Allergan Privy to More Info?

Analyst Ken Cacciatore believes Allergan apparently is privy to more information about the specifics of the Phase II data due to be announced at an upcoming AASLD Meeting. Cowen noted that a substantial part of the CVR is based on events occurring that would de-risk the program.

Cowen Sees Logic

Cowen noted that currently $900 million is being paid for the asset, including the $600 million upfront payment and $300 million for the first CVR to determine if the company has a potential multi-billion dollar program. The firm also noted that the remaining components of the CVR would be released only when Phase III trial confirms this is a meaningful drug.