The Lesson of Allergan

NEW YORK (TheStreet) -Just over one year ago, when Allergan (AGN) stood at about $115, worries abounded, causing the stock to drop to the low $80s by the middle of 2013, as the overall equity market continued to roar. This underperformance spooked many investors, but that low was a huge opportunity, as the stock has posted a stellar run ever since, now at new highs at over $130.

I bring this up now because many are talking about a bubble in biotech, particularly given surges from recent IPOs.

According to IPO fund manager Renaissane Capital, so far in 2014, there have been 22 biotech IPOs raising $1.4 billion. Biotech IPOs have represented almost 50% of the 45 IPOs completed in 2014 and almost 20% of the $7.6 billion in proceed raised, making it one of the most prolific subsectors of the IPO market. In 2013, the average biotech jumped 22% on its first day of trading and based on Friday's close, the average total return YTD among the 2014 class of biotech IPOs is 54%.

Now, these have been money making machines with many continuing to rise, including names like Intercept (ICPT). However, when it comes to high quality companies and not one-hit wonders... and particularly in the case of Allergan which has developed a pipeline in a product strategy.

Some analysts were worried about Allergan's DARPin macular degeneration drug that competes with Regeneron's (REGN) EYLEA. However, the company is still making headway here and remains competitive. There were also worries about Latisse scalp timing being pushed out-- but again, this is still in progress and one of many pipeline products.  Lastly, worries about Restasis generic competition abounded. But this has been a concern for the stock over extended periods, for those of us that have looked at it regularly. The company keeps updating new versions of its product and is keeping competition at bay.

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