What's going on with Allergan (NYSE:AGN) these days?
Three of the drugmaker's executive team had the opportunity to address that question when they spoke at the Goldman Sachs healthcare conference on Wednesday. Allergan CEO Brent Saunders, CFO Tessa Hilado, and chief commercial officer Bill Meury were on the hot seat fielding questions. Here are five key things they said that investors will want to know.
1. Happy but not complacent
Brent Saunders likes the progress that Allergan has made over the past few years. He stated that Allergan is now a "top global pharma company" and is "arguably one of best and most dynamic businesses in pharma." Saunders noted that the company has undergone a huge transformation, but that it's been a positive experience. He said that he's happy with where the company is today (words he didn't utter in January after a dismal stock performance last year).
That happiness only goes so far, though. Saunders quickly added that complacency is never good for a company. He said that Allergan's team "continues to evolve" and could need additional skill sets in the future.
2. Ready for possible pricing changes
Saunders said that Allergan is the "best-positioned global pharma company to deal with what's coming" with respect to potential drug pricing changes. He mentioned the possibility that President Trump could issue an executive order related to drug pricing, stating that it could be "constructive." Although Allergan relied heavily on price increases to boost revenue last year, the company honored a commitment to cap price hikes at 10% in 2017 and going forward.
Allergan isn't worried about prospects for a shift to value-based pricing. Chief commercial officer Bill Meury said that Allergan's balance between cash payments and reimbursements, between primary care and specialty, and between U.S. and international sales should allow the company to manage pricing changes better than most drugmakers.
3. More dividend increases, stock buybacks, and acquisitions could be in store
CFO Tessa Hilado said that Allergan is "truly focused on cash flow." Brent Saunders provided some hints about how the company might use some of the cash that its operations generate.
Saunders suggested that "the past is instructive to the future" when it comes to Allergan's capital allocation strategy. He noted that since the company sold Actavis Generics to Teva last year, Allergan has initiated a dividend program, bought back shares, and paid down debt. Investors should expect similar actions in the future, with potential dividend hikes and stock buybacks on the way.
What about mergers and acquisitions? There could be more deals in store also. However, Saunders didn't think there would be any transformative acquisitions, adding that he would "never say never."
4. The best could still be yet to come for Botox
Allergan's Botox franchise has been around for a long time. How sustainable is this business? The company's executives think the best could be yet to come.
Saunders noted that Botox is a brand that "doesn't just trade on price." He's not awfully worried about competitors. Meury added that Allergan's market penetration is only 10% to 15%. Allergan thinks the market for Botox could double in size, thanks to trends such as body contouring and more males seeking reduction of wrinkles.
5. We expect great things from our "six stars"
Allergan refers to its late-stage programs as its "six stars." These are Esmya, Abicipar, Cenicriviroc (CVC), Ubrogepant Atogepant, Rapastinel, and Relamorelin. Saunders thinks these drugs, if approved, will be "easier to price" than previous drugs. Tessa Hilado stated that the "six stars" could help improve Allergan's already-strong margins.
While Saunders said that he's "never confident" in any of the pipeline candidates until the clinical results are known, there is "serious conviction around each of these programs." He admits that all six might not pan out exactly as hoped, but that he expects that at least four or five will.