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Allergan's on the M&A hunt, but don't confuse it with Valeant:

Posted on over 1 year ago by Gerry Kennedy

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Allergan may have recorded most of its recent growth through dealmaking rather than good, old-fashioned R&D. But that doesn’t mean it deserves comparisons to embattled drugmaker Valeant, its CEO insists.

As chief exec Brent Saunders told the Financial Times, his company has been “historically disciplined” when it comes to taking big price increases--the kind that got Valeant in trouble with lawmakers. Plus, the Dublin drugmaker’s products are newer than the Canadian pharma’s, and Allergan banks on higher sales volumes to feed its expansion.

But that doesn’t mean that Allergan’s stock price hasn’t taken a hit on the political pressure that’s put Valeant in the doghouse. After canceling its $160 billion Pfizer megamerger, Allergan began to feel the squeeze its specialty peers had been dealing with for months. And a post-Pfizer selloff by hedge fund investors didn’t help.

Despite the drag, don’t expect Allergan’s dealmaking to slow down anytime soon, Saunders told the newspaper. For one, it’s about to come into $36 billion in cash from Teva, which is working hard to close a deal for Allergan's generics business. The Israeli company is reportedly looking to sell off another $2 billion in assets to get the transaction approved by regulators, and it’s aiming for June clearance. While some of the proceeds will go toward paying down debt, Allergan will likely spend a large portion on acquisitions, Saunders said.

Just what Allergan will buy, though, remains unclear--and some investors think the answer to that question could go a long way toward separating Allergan from the specialty pack. While some shareholders are pushing for a series of smaller deals--like the company’s recent buyout of chin-fat drugmaker Kythera--others don’t want to wait around for returns as Allergan integrates a string of buys.

And if the past is any indication, they’ll likely get their wish. Since taking the helm at then-Actavis in 2014, Saunders has already orchestrated a $66 billion buyout of Allergan, the Teva generics divestment and the mammoth, now-cancelled Pfizer tie-up.

“Brent is a bold guy,” one investor told the FT. “He has a lot of cash and he is not shy about spending it.”