Botox Competition Spurs Argus To Downgrade Allergan

Shares of Allergan plc Ordinary Shares AGN continue trading near their multi year low of $160.07, with many investors concerned with a competitive environment that will intensify in the coming years.

The Analyst

Argus' David Toung downgraded Allergan's stock rating from Buy to Hold.

The Thesis

Allergan will see two of its major products, Botox and Restasis, face major competition, which justifies a reduction in the stock's rating, Toung said in the downgrade note. (See Toung's track record here.)

Botox will likely compete with what is considered to be a "better Botox" alternative by Revance Therapeutics Inc RVNC called RT002, Toung said. And the dry eye treatment Restasis will likely see generic competition by the middle of next year after a U.S. District Court invalidated the company's patents.

Botox accounted for $2.79 billion of Allergan's 2016 revenue and demonstrated a double-digit growth rate in the third quarter of 2017, the analyst said. Allergan took a $3.2-billion asset impairment charge in the third quarter to better reflect the write-down of the patent assets.

Allergan does have some late-stage data readouts due to be released next year which could improve investor sentiment, Toung said. The company could also offset Restaiss losses through new products and assets via acquisitions, the analyst said.

Price Action

Shares of Allergan were trading lower by more than 2 percent Thursday morning and are down nearly 22 percent since the start of 2017.

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