Allergan PLC’s unusual patent agreement with a New York state American Indian tribe attracted criticism from observers earlier this month.
Now the drugmaker
is facing another round from an unexpected corner: Investors are concerned about what the agreement means for the company.
Some investors “are currently unable to invest in AGN as their firm reviews whether an investment in AGN would meet their standards for socially responsible investing,” Credit Suisse analyst Vamil Divan said.
Others “view the agreement as a sign that AGN is not confident in winning the ongoing District Court case around these patents,” Divan said, referring to patent litigation that is separate from the recent agreement.
Allergan’s agreement with the New York-based Saint Regis Mohawk Tribe aims to protect its dry eye medication Restasis from generic competition. State entities like an American Indian tribe are protected from civil litigation, which experts say could reasonably include patent challenges made through the U.S. Patent and Trade Office’s inter partes review process.
The recent investor feedback suggests a change in perception of the drugmaker, which led the way in self-imposed limits on drug price increases last fall.
Chief Executive Brent Saunders said then that the health-care industry has a “social contract” with patients — a phrase that was later criticized when the Saint Regis Mohawk Tribe agreement was announced.
See: Allergan offers a rare pharmaceutical company promise: limits on drug-price increases and Allergan took its pricing pledge last fall about as literally as it gets
Allergan stock rose on Sept. 8, the day its agreement with the Saint Regis Mohawk Tribe was announced.
But shares have stalled since then, slumping 0.11% in the past 2½ weeks. Just this week, the company announced a $2 billion share buyback program, calling its shares “substantially undervalued.”
noted the ‘innovative’ (and now infamous?) mohawk patent settlement, perhaps attach this chart as an addendum to the ‘social contract’? $AGN pic.twitter.com/5G2IWugmt7
— zach (@zbiotech) September 21, 2017
Related: Allergan sets $2 billion buyback
A decision in the ongoing District Court case, which is expected by the end of October, “will go a long way toward impacting sentiment around the story,” Divan said. “An AGN loss would raise more questions at to why they proceeded with the controversial Saint Regis Mohawk Tribe agreement, but an AGN win, combined with the agreement, will likely give investors more comfort around AGN’s outlook for the next several years.”
Generic competition for Restasis is a key uncertainty for Allergan. Restasis brought in $336 million in the latest quarter, second only to the company’s best-selling Botox, and patents are expected to expire at the end of August 2024.
Allergan declined to comment. Company shares have declined 15% over the last three months to $209.07, compared with a 3% rise in the S&P 500
.
