Irvine-based Allergan Inc.’s ongoing attempt to beat back Valeant Pharmaceuticals International Inc.’s hostile takeover bid has provided plenty of grist for the analyst mill in recent weeks.
Analysts are tackling a variety of subjects related to the situation, including what a potential deal would look like, as well as a survey showing doctors are wary of a combined company.
Shibani Malhotra of Birmingham, Ala.-based Sterne Agee & Co. dished on how Allergan might make a deal that could stop Valeant in its tracks. She said in a recent phone interview that she believed the current thinking was “they want to do a cash transaction” because it does not require shareholder signoff.
Allergan had $3.2 billion in cash and equivalents on its books as of June 30. The company has said it’s looking at various scenarios, although it hadn’t named a particular target.
If Allergan does a cash transaction, “that means that it’s unlikely to be a [tax] inversion. Because to do an inversion, you have to use your shares, exchange your ownership,” Malhotra said.
Tax-inversion deals take place when an American company buys a foreign one in order to lower its corporate tax rates.
Inversions are coming under fire. President Obama and politicians from both sides of the aisle in Congress have blasted such transactions in recent weeks, saying they erode the domestic tax base. Inversion deals have been particularly popular in the medical sector.
Allergan Chief Executive David Pyott said in news reports prior to the emergence of the Valeant bid that the Botox maker wasn’t likely to buy an Ireland-based drug company in order to lower its corporate tax rate.
As for the doctors, New York-based Bernstein Research senior analyst Ronny Gal published a report last month covering a survey of 100 “high-volume U.S. aesthetic physicians” who provide botulinum toxin, skin filler and breast implant services.
Gal’s survey found that as many as 44% of the surveyed doctors said they would consider shifting business away from Allergan if the Valeant merger and cost-cutting plans went through.
“While one could argue that the survey overstates the problem … we would argue there is material risk for business loss which will grow over time,” Gal wrote.
Bernstein’s report showed doctors’ responses “here are sharper than they have been in the past.” That was a reference to earlier surveys done after Valeant bought Long Beach-based Obagi Medical Products Inc. and Scottsdale, Ariz.-based Medicis Pharmaceutical Corp. in 2013 and 2012, respectively.
“In that case, 75%-87% of physicians stated the merger would have no influence on their product preference. Further, at the time of past surveys, Valeant was less known in the aesthetic marketplace.
“Valeant is now a known entity and the concerns are heightened, not lessened,” Gal wrote, adding that the data deserve “close examination and, perhaps, confirmation by other independent surveys because it does suggest a potential threat to aesthetic revenue if doctors acted as they said they would.”
Octane Summit
Executives from Orange County’s established and new companies will gather next month in Costa Mesa to talk about trends and technologies in the aesthetic medicine and dermatology fields at a summit presented by Aliso Viejo-based booster group Octane.
Speakers include Lynn Salo, vice president of sales and marketing, facial aesthetics, for Allergan; Bob Rhatigan and Tony Sine, chief operating officer and executive vice president, respectively, of Newport Beach-based aesthetic medicine company Alphaeon Corp.; and Dr. Chris Zachary, professor and chair of the dermatology department at the University of California-Irvine.
Bits & Pieces
Hoag Memorial Hospital Presbyterian hired Dr. David Millett as director of its epilepsy program. The neurologist previously directed epilepsy programs at LAC-USC Medical Center and Rancho Los Amigos Rehabilitation Center. … Linda Fenton, who spent more than 10 years as a senior manager at TriZetto Corp., a healthcare information technology company previously located in Newport Beach, is the new chief financial officer at Denver-based Welltok Inc. She will work out of an office in Newport Beach. Jeffrey Margolis, TriZetto’s founding chief executive and chairman emeritus, is Welltok’s chief executive.
