Morgan Stanley Loses Confidence In Allergan's Pipeline Optionality

Allergan plc AGN needs new drivers for revenue growth, according to Morgan Stanley. Although the drugmaker's stock is inexpensive, pipeline and growth uncertainties will continue to exert pressure, the sell-side firm said in a downgrade note.

The Analyst

Morgan Stanley’s David Risinger downgraded Allergan from Overweight to Equal-Weight and reduced the price target from $183 to $156.

The Thesis

The most important pipeline candidates for Allergan are novel drugs for severe depression, Risinger said in a Wednesday note. Among these, rapastinel is scheduled for Phase III reporting in the first half of 2019.

Allergan seemed to play down this key candidate during a Jan. 29 call, the analyst said. 

There is uncertainty around the safety of ubrogepant for oral migraine, Risinger said. Although Allergan said it was pleased with the safety data, the vital details on liver toxicity are yet to be disclosed, he said. 

The company may also witness a deceleration in U.S. Botox growth, with new competition emerging, the analyst said. The implications of competitor initiatives for Botox volume and pricing are still unknown, he said. 

Morgan Stanley lowered its revenue and EPS estimates for 2019-2023 by 2-5 percent and 7-12 percent, respectively, to reflect lower pipeline projections.

Price Action

Allergan shares were down 0.84 percent at $143.90 at the time of publication Wednesday. 

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