Analysts Pile On Allergan Stock After Weak Drug Data

Six brokerages have issued price-target cuts to AGN today

Managing Editor
Mar 7, 2019 at 10:15 AM
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Allergan plc (NYSE:AGN) is up 4.2% to trade at $143.31, shaking off some subpar drug data. Specifically, Rapastinel, the company's depression treatment, failed three late-stage studies. However, AGN shareholders may be celebrating separate news, after the Food and Drug Administration (FDA) accepted the company's application to extend the use of Botox in pediatric patients with upper and lower limb spasticity.

Still, no fewer than six price-target cuts followed the depression drug setback, including to $155 from $161 at Credit Suisse, which believes this pipeline failure could lead to increased activist pressure for a sale. J.P. Morgan Securities analysts called the results disappointing because Rapastinel was the company's most "important and visible pipeline asset."

Thanks to some early January bullish analyst attention, AGN roared out of the gate in 2019, but was quickly rejected by its 80-day trendline. Since gapping lower in late-January following a subpar quarterly report, the shares have churned below the $144 level, but today are set to top their 50-day moving average for the first time since that bear gap. 

Prior to today, analysts were running hot on Allergan. At last night's close, nine of the 16 brokerages covering AGN rated it a "buy" or better, with zero "sells" on the books. What's more, the security's consensus 12-month price target of $186.76 is a 36% premium to last night's close at $137.51.

On the other hand, recent AGN options traders have grown skeptical. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.77 is in the 81st percentile of its annual range. While the ratio tells us that long calls have outnumbered puts on an absolute basis, the high percentile indicates a much healthier-than-usual appetite for bearish bets of late.

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