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Allergan Q1 Mixed, But Stock Rises On Share Buyback, Teva Deal

Specialty-drug giant Allergan ( AGN ) reported a mixed first quarter, affirmed guidance and announced a massive share buyback Tuesday, lifting its battered stock. Allergan stock was already boosted 6% Monday after Teva Pharmaceutical Industries ( TEVA ) said in its Q1 report that its buyout of Allergan’s generics unit, Actavis, is on track to close next month after having been delayed by various regulatory issues. This would render moot the worries over generic-drug pricing that drove the stock to a two-year low on Friday, after it had already been hammered by the break-up of its merger with Pfizer ( PFE ). The stock was up another 5.5% in early trading on the stock market today as Allergan reported operating earnings of $3.04 a share, up 15% from the year-earlier quarter and beating analysts’ consensus by 4 cents, according to Thomson Reuters. Sales climbed 48% to $3.8 billion, about $150 million below Wall Street’s average estimate. Allergan affirmed full-year revenue guidance of $17 billion vs. $15.1 billion last year. All the above numbers exclude Actavis. The company said it will use part of the roughly $40 billion in proceeds from the Teva deal to buy back stock. It plans to buy $4 billion to $5 billion over the next four to six months, and said if conditions allow it will consider extending the program up to as much as $10 billion. Allergan stock, once a resident of the IBD 50, still holds an excellent EPS Rank of 97 and actually declined less than the group as a whole during the drug-stock sell-off between August and February. But the high-profile dissolution of the Pfizer deal in early April pushed the stock down to single-digit Relative Strength Ratings, leading to a mediocre Composite Rating of 40.

Medivation Reportedly Yielding To Buyer Interest; Stock Surges

Shares of rising biopharma player Medivation ( MDVN ) jumped to an 11-month high Monday on reports the company now is willing to sell itself. Citing an anonymous source, Reuters reported that Medivation had signed non-disclosure agreements with Pfizer ( PFE ) and Amgen ( AMGN ), both of which were previously rumored to be interested in buying the company, while Sanofi ( SNY ) went public with its uninvited $9.3 billion bid last month. It still isn’t certain that those companies will actually bid, Reuters said. Medivation stock was up modestly in morning trading on the stock market today , but shares surged after the report came out in the early afternoon, eventually closing up 4.3% at 62.59. Medivation had initially resisted being bought by anyone, and in late March it reportedly hired advisers to help it fend off such attempts. The reason was implied by CEO David Hung in his refusal of Sanofi’s offer , when he accused the French pharma major of taking advantage of “market dislocation” that he believed led the market to undervalue Medivation’s stock. Medivation’s value has continued to go up since then, taking the stock to within 5% of its 52-week high last May. With an IBD Composite Rating of 97, putting it among the top 3% of all stocks in key metrics such as sales and earnings growth, it sits at No. 49 on the IBD 50 list of top-performing stocks.

Generic Drug Stocks Crash, As Endo Warns Of Price Erosion

Drugmaker Endo International ( ENDP ) plunged 39% Friday after it delivered a hefty guidance cut driven by weakness in its generics business, dragging nearly every other generic-drug stock down with it. Endo actually beat analysts’ consensus in Q1, but it cut its full-year earnings guidance by 23% — now $4.50 to $4.80 a share — and trimmed the revenue outlook by 11% to a range of $3.87 billion to $4.03 billion. In the company’s earnings release, CEO Rajiv De Silva blamed “new competitive entrants, including for Voltaren Gel; greater-than-expected price erosion across the Generics sector; and delays on regulatory actions related to certain Endo products.” IBD’s Take: How healthy are shares of Endo and Teva and how do they stack up vs. rivals? Find out at IBD Stock Checkup It was the second factor that rattled the rest of the generics industry. Teva Pharmaceutical Industries ( TEVA ) stock fell 6.8% to 50.22, and hit a 19-month low of 50.01. Allergan ( AGN ), already staggering from the cancellation of its buyout by Pfizer ( PFE ), hit a two-year low of 195.50 and ended the day at 201.63, down 4.1%, even though it’s selling its generics business to Teva. Perrigo ( PRGO ), which cut its own guidance last month, fell 4.8%, to 92.42. Smaller drugmaker Akorn ( AKRX ), down as much as 20%, ended the day off 7.9%, at 22. Akorn, which has fallen way behind on its accounting due to internal issues, late Friday finally set dates for its Q4 and Q1 earnings releases, for May 9 and May 17, respectively. Leerink analyst Joseph Schwartz wrote in a research note that Endo’s problems read through most directly to Teva, Akorn and Perrigo, and more moderately to Allergan. Essentially, whoever’s done the most price-hiking on products representing more than 5% of generic sales lately is in the most trouble. Referring to industrywide data from IMS, Schwartz wrote: “Based on our analysis, Akorn has taken 13 price increases matching the above criteria (44% of IMS generic sales), Perrigo eight (18% of generic IMS sales) and Endo took 17 (17% of generic IMS sales).” Teva, meanwhile, is due to report its own Q1 earnings and guidance on Monday morning, and Allergan is due before the open the following day. Endo itself got at least four downgrades from Wall Street analysts Friday, mostly to neutral but one to underweight. It ended the day at 16.17, a seven-year closing low.