Allergan reloaded: Bypassing early-stage R&D in the hunt for new biotech deals

Allergan CEO Brent Saunders

The big question that analysts had for Allergan ($AGN) CEO and quick-draw dealmaking artist Brent Saunders on this morning's Q2 call centered squarely on his plans for new biotech deals now that he's inked a $40.5 billion generics sale with Teva ($TEVA).

The answer was unequivocal: Nothing on a "transformational" scale will likely happen before the Teva deal is complete and the money is in the bank. Analysis and talks may begin anytime, but don't look for a headline grabbing M&A pact to be completed before that. Allergan is also not going to dive into the discovery and early-stage research field on his watch. Unlike big pharma rivals like J&J ($JNJ), Allergan's deal-making impresario and the team around him clearly plan to stay focused on assets that are ready for late-stage development and a date with regulators.

"I think we love research and we have no issue with research," Saunders noted this morning. "We just don't like to do it ourselves." Allergan has a lot of work underway for aesthetics and eyecare, he added, but "what we won't do is waste our money on R&D that is widely available elsewhere."

If you want a guide for some of the company's future deals, look more toward the recent $560 million-plus acquisition of Naurex's Phase III-ready depression drug pipeline or the late-stage, $250 million CGRP migraine drug licensing pact with Merck.

Allergan's David Nicholson

Allergan R&D chief David Nicholson applauded biotech companies, praising all the "brilliant science" now in evidence as academic groups do more spinouts. "That's where research should be performed," he noted. They are excellent at "generating early-stage molecules that we can pick up and develop through to the market. And there are plenty of opportunities out there."

There are other big pharmas that also don't budget for discovery research, Saunders said. And a smart business development strategy works best for Allergan.

On the transformational, blockbuster deal side of things, Saunders says he's willing to be flexible. Their Furiex deal, keeping a late-stage drug while immediately selling off a royalty stream to help pay for the pact, shows they're ready to get creative as they execute new acquisitions.

Allergan's executive team seems to be living and breathing M&A deals at the moment. And they don't appear to be ready to slow up the pace anytime soon, pausing just long enough to reload with cash from Teva.

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