Allergan PLC  (AGN) needs to tighten up its Botox business if it wants to thwart competitive threats, RBC Capital Markets analysts wrote in a note.

Allergan faces the most competitive Botox aesthetic threat from Revance Therapeutics Inc. (RVNC) following the company's positive Phase 3 data in December around longer duration botulinum toxin for glabellar lines.

Allergan's total U.S. Botox aesthetic revenue is $800 million, representing 26% of the overall Botox market and 5% of Allergan's total revenue and growing at about a 10% rate.

"But this is a 2020E questions that will not go away," analysts wrote. "There will clearly be some competitive erosion upon launch but how much will remain a source of debate."

RBC noted that acquiring Revance, with a $1 billion market cap, "could solve that."

Botox migraine rakes in about $600 million in revenue at 10% to 20% growth, representing 19% of total Botox revenue, 40% of U.S. therapeutic revenue and 4% total revenue for Allergan, RBC found. Allergan said there could be a bit of shorter-term impact with the entry of CGRP (calcitonin gene-related peptide) migraine drugs into the arena but doesn't expect any longer-term impact. According to RBC, category pricing will ultimately drive market dynamics.

RBC found that there appears to be consensus that a breakup, spinoff or sale of Allergan's Women's Health business is unlikely. But analysts did find some support following a report on selling the anti-infectives business as a smart strategic move that would send a message that Allergan is focused on unlocking value.

Allergan's pipeline reflects 10% to 15% of expected revenue for year-end 2022. "The bull case is that pipeline is under-appreciated/valued," RBC wrote. "That means focus on upcoming oral CGRP reads (ubrogepant Phase 3, atogenpant Phase 2b) will be most important as well as Esmya (including label) closer to mid-year. The question of what is priced in is difficult but disappointing."

RBC analysts placed an outperform rating on Allergan shares with a $218 price target, implying a 16.8% upside for the stock from its Wednesday closing price of $186.72.

Allergan is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio . Want to be alerted before Cramer buys or sells ANG? Learn more now.

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