As followers of Allergan (AGN) on Monday inquired about the possibility of a transformative deal coming down the pike, the botox maker's CEO Brent Saunders reiterated that the company isn't looking for a large acquisition and instead remains focused on its so-called "stepping stone" strategy.
"Allergan doesn't need to do any big M&A," Saunders told investors Monday morning when asked whether the drugmaker would be interested in acquiring a company such as biotech giant Biogen (BIIB) , which has been a rumored acquisition target of Allergan in recent weeks.
Instead, the chief executive emphasized that Allergan would concentrate on a so-called stepping stone strategy, which focuses on smaller "tuck-in" or "bolt-on" deals, reiterating his confidence in the company's growth prospects and durability of its existing commercial business and pipeline.
"We are not going to rush to do a deal for the sake of doing a deal," Saunders said. "We're going to stay disciplined. We're going to stay focused. We have no shortage of opportunities to evaluate. We'll do the right deals at the right time..."
It was just last week that Dublin-headquartered Allergan disclosed the completion of the sale of its generic drug business to Teva Pharmaceutical Industries Ltd. (TEVA) following a lengthy regulatory review process, through which the former ultimately received $33.4 billion in cash and $5.4 billion in Teva stock.
The deal initially valued at $40.5 billion was announced in July 2015 and finally gained Federal Trade Commission clearance last week after coming to terms on what is the largest drug divestiture order ever in pharmaceutical merger history.
A day after closing the generics deal, Israel's Teva on Aug. 3 agreed to purchase Allergan's generics distribution business Anda Inc. for $500 million.
"AGN exits the quarter with a strong balance sheet and recent divestitures of generic and distribution business has brought increased focus to the business," Leerink Partners LLC analysts wrote in an Aug. 8 research note.
With some $27.6 billion of cash now on its balance sheet, Allergan plans to return a significant portion to shareholders. As previously stated, the company said Monday it will execute $5 billion worth of share buybacks throughout the remainder of 2016. The remaining $5 billion of share repurchases under its current buyback program may be made should favorable market conditions persist, executives said.
"To the extent that we looked at the large cap universe, we ran that analysis vis-à-vis doing our stuck buyback," Saunders said on the call, describing the odds of a sizable compelling deal presenting itself as being "exceptionally low, but not zero."
Allergan on Monday posted about $3.69 billion in net revenue for its second quarter ended June 30, up 1% from $3.64 billion a year earlier. It posted non-GAAP diluted earnings per share of $3.35, up 9% from $3.06 a year ago.
Shares of Allergan retreated 2.8% to $245.86 Monday morning.