Sector News

CEO’s latest forecast: A ‘vast value gap’ between Allergan and Valeant

October 9, 2014
Life sciences
Allergan has been insisting for months that Valeant’s buyout offer is “grossly inadequate” and “substantially undervalues” the company. Now that Valeant has upped its bid by $4.5 billion? Same deal, the Botox maker says, citing its own rosy earnings forecast.
 
As Allergan announced Thursday, its third-quarter earnings will reach the $1.76 to $1.78 per share range, topping its previous forecast of $1.44 to $1.47. And earnings this year, next year, and even the year after that will be higher than analysts are projecting, the company said.
 
The drivers? Market growth, market share increases and new regulatory approvals, to name a few. And that’s reason enough to knock Valeant’s proposal, CEO David Pyott figures.
 
“Today’s announced expectations for the third quarter and updated future outlook further demonstrate that there is a vast value gap between Valeant’s offer and the intrinsic value of Allergan,” he said in a statement.
 
Valeant announced its own update on its third-quarter expectations late last month, claiming its revenue results would beat consensus and its EPS would pass its original guidance. According to Reuters’ sources, unveiling “blow-out” earnings on Oct. 20 was all part of its buyout plan. The impressive results would have led to a share price jump, boosting the value of its bid for Allergan before Valeant sweetened the offer further.
 
But then Actavis got in the way. The company–which Allergan recently rebuffed to pursue its own acquisition target, Salix–is reportedly looking at coming back for a second try, and Valeant moved quickly to fend off the white knight, Reuters says.
 
Now, some analysts are predicting that NJ-based Actavis might have the edge if it puts up an offer north of $200 per share. “While we wouldn’t rule out a higher bid given the exceptional circumstances associated with this deal, we would view it as unusual for [Valeant] to get into a public bidding war,” Leerink Partners analysts Jason Gerberry and Seamus Fernandez wrote in a note to investors Wednesday.
 
By Carly Helfand
 

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