) hit a 52-week high of $109.74 almost at the end of the trading
session on Mar 4, 2013. The stock was buoyed by the announcement
that it was a step closer to acquiring
MAP Pharmaceuticals, Inc.
) following the expiration of the tender offer to purchase the
shares of the latter and withdrawal rights.
With more than 22% year-to-date return, a long-term expected
earnings growth rate of approximately 13.3%, this specialty
pharmaceutical company seems to be an attractive pick for
long-term investors. Average volume of shares traded over
the last three months stands at approximately 1,539K. The company
has a market capitalization of $32.7 billion as of Mar 4.
On Jan 22, 2013, Allergan announced its intention to acquire MAP
Pharma. The offer price represented a premium of 60% over MAP
Pharmaceuticals' closing price on that date. The deal is expected
to be worth approximately $958 million.
The acquisition will give Allergan the exclusive rights to
migraine candidate, Levadex, in the US. Levadex is currently
under regulatory review for the treatment of adults suffering
from acute migraine. A response from the US Food and Drug
Administration (FDA) should be out by Apr 15, 2013.
We are positive on Allergan's decision to buy MAP
Pharmaceuticals. Levadex' approval would be a major boost for
Allergan and will complement the company's portfolio, which
includes Botox (onabotulinumtoxinA). Botox is indicated for
several indications including the treatment of chronic migraine
We remind investors that in Jan 2013, the FDA approved Botox for
the treatment of patients suffering from overactive bladder (OAB)
with symptoms of urge urinary incontinence, urgency and
frequency, which was a major boost for the company.
Allergan is looking to sell the obesity intervention segment,
which has performed disappointingly for some quarters now and
expects to do the same in the first half of 2013.
Premium Valuation Justified
Allergan currently trades at a forward price-to-equity (P/E) of
23.0x, reflecting a huge premium of 47.9% compared with the
peer group average of 15.55x. On a price-to-sales and
price-to-book basis, the stock is trading at a premium to the
peer group average. The company has a trailing 12-month return on
equity (ROE) of 22.7%, which is below its peer group average of
Given the company's strong fundamentals, the premium valuation is
justified and well supported by its long-term estimated earnings
growth rate of 13.3% compared to the peer group average of 6.2%.
Allergan carries a Zacks Rank #3 (Hold). Right now,
Eli Lilly and Company
) look more attractive in the pharma space with a Zacks Rank #2
ALLERGAN INC (AGN): Free Stock Analysis
LILLY ELI & CO (LLY): Free Stock Analysis
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