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Brent Saunders has a message for Allergan investors today: He feels your pain

The past three years have been a bumpy downhill ride for shareholders at Allergan $AGN. And during his Q1 call today he wanted to underscore that he knows just how much that hurts. He and the board have been talking with dozens of significant investors, including Appaloosa’s activist chief David Tepper — who tried and failed to force Saunders to bring in an independent chairman. And he tried to assure everyone on the call that he’s on the job.

David Tepper

“Let me be clear. I share that frustration, I understand that frustration,” he said. “I am a very large shareholder relative to my own personal holdings in Allergan.” Same as the managers.

“The board is on it. The board is engaged. Stay tuned.”

Those remarks during the Q&A echoed his prepared comments, which also dealt with a $2.5 billion writedown primarily due to the late-stage failure of rapastinel. Said Saunders:

“The sense of urgency to create value is high and the board is actively and continuously reviewing alternative avenues that could unlock value in the near term.”

In the meantime, Saunders and the team tried to reassure analysts that there were some sure things within reach, topped by 4 promised — the word “expected” was used — approvals for:

— Cariprazine for bipolar depression.

— Ubrogepant for acute migraine.

— Abicipar for neovascular age-related macular degeneration.

— Bimatoprost for glaucoma.

You can wrap up the rest of the assurances in a series of phrases.

“Everything is on the table…Sense of urgency…Stay tuned.”

After a year of near silence on the deal front, we got another burst of assurances from Saunders  — free of any specifics.

R&D is the lifeblood of Allergan. There’s a commitment to continuous innovation to drive growth. Ten Phase III studies are underway with a variety of trials emerging from their partnerships. They are constantly looking for new science, new collaborations, recruiting the best scientists to upgrade the company’s skills.

And so on.

Marc Goodman at SVB Leerink summed it up like this:

A “glass is half empty” view of these thoughts would be that management keeps saying the same things over again regarding this topic. How many times have we heard the board has a sense of urgency? A “glass is half full” view would be that the CEO did say “stay tuned’ several times during the call when asked about potential change.

Vamil Divan at Credit Suisse doesn’t know how much water is in the glass, noting another dip in the stock price that greeted the Allergan team’s remarks.

Some of this was obviously due to the broader market weakness today but we think much of this was also due to investors being disappointed that there was not a more concrete near-term plan laid out for alternative ways the company may look to generate shareholder value. It appears the Board is considering some options following recent discussions with various shareholders, but until we get more clarity on what steps the company may pursue, we believe it will be difficult for shares to gain any significant momentum.

How exactly did the message play with investors? Allergan shares are down 5% Tuesday afternoon.


Image Source: Brent Saunders. AP


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