2 Huge Stories for Allergan and MannKind Investors

Allergan (NYSE: AGN  ) and MannKind  (NASDAQ: MNKD  ) both released pivotal news Friday that could have a major impact on their respective share prices in the coming week.

Allergan's hopes of remaining independent are fading
On Friday, Allergan said it had agreed with Bill Ackman's Pershing Square Capital Management that a special meeting of shareholders would not trigger a "poison pill" measure that would have allowed shareholders to buy company stock at a discount in order to drive the price of a takeover up markedly. This agreement settles a lawsuit launched by Pershing Square earlier this month. 

Pershing Square, and now Paulson, have purchased large interests in Allergan in hopes of forcing the company to accept a merger with Valeant Pharmaceuticals (NYSE: VRX  ) . 

Although Valeant has reportedly offered up to $53 billion for the Irvine, Calif.-based Botox maker, Allergan's management has stated that such an offer grossly undervalues the company.

Valeant's initial offer would have come at roughly a 50% premium to Allergan's share price before this news hit the Street, making it one of the richer tender offers seen so far this year. After failing to convince management that this deal was in its best interest, Pershing Square plans to take the issue directly to Allergan's shareholders. 

Allergan's chances of remaining independent appear to be fading. I think it's unlikely shareholders will vote down a merger given that Allergan's current share price has clearly cooked in this offer, as illustrated by the chart below.

AGN Chart

AGN data by YCharts.

A vote against the merger would likely result in a major downturn in Allergan's share price, akin to what happened to AstraZeneca after the British company last month rebuffed Pfizer's buyout attempt. 

MannKind's inhaled insulin product officially approved
MannKind's long regulatory path for its inhaled insulin product Afrezza and delivery apparatus Dreamboat has finally come to an end, with the FDA approving the product on Friday. That's the good news.

The bad news is that the product will carry a warning on the box regarding the risk of acute bronchospasm in patients with asthma and chronic obstructive pulmonary disease. MannKind -- or any potential marketing partner -- is also required to carry out four post-marketing studies: one to examine Afrezza's safety and efficacy in children, another on the potential risk for lung cancer and heart problems, and two of the drug's pharmacokinetics and dosing.

After the news of the approval hit the Street, MannKind shares first plunged and subsequently shot upward by 10% in after-hours trading. My take on this erratic trading is that some investors decided to sell the news, while the furious after-hours activity reflects the strong belief of some MannKind longs that the best is yet to come.

Keep in mind that MannKind hasn't inked a partnership yet, but its market cap is rapidly closing in on the $4 billion mark. Moreover, MannKind shares have skyrocketed by 92% this quarter, suggesting that at least some of this approval has been baked into the share price.

MNKD Chart

MNKD data by YCharts.

Although I don't want to sound like a broken record, I think the details of any partnership are going to be crucial to MannKind's valuation moving forward. As such, you may want to take a cautious approach with this volatile biopharma for the time being.

Leaked: This coming blockbuster will make every biotech jealous
The best biotech investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns you will need The Motley Fool's new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW.

 


Read/Post Comments (2) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 30, 2014, at 8:36 AM, surfish wrote:

    MNKD besmirched by Motley FUD again!

    Buy!

  • Report this Comment On June 30, 2014, at 12:36 PM, rb77 wrote:

    Look at Astrazeneca share price now..just ~10% off from high reached after Pfizer offer.

    Few analysts already mentioned AGN stock price will remain stable even if merger doesn't go through.

    Allergan in the medium term (<2 yrs) a $250 stock. Current target price $190. After Darpin's superb phase 2 data, that $250 can come even faster.

    On top of that Valeant's business model is questioned by Jim Chanos who is among very few who raised red flag on Enron among huge number of cheerleaders. Allergan and famous John hempton raised same questions. Valeant's accounting highly questionable as many people already know. After few more quarters the VRX bubble will burst if it fail to buy AGN. I want to see what this cheerleader (author of this article) who has no ability to look long term says if Valeant bubble end up busting.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3011875, ~/Articles/ArticleHandler.aspx, 12/22/2014 10:38:01 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement