While the offer of $25.00 per share represents a 60% premium to Tuesday night’s closing price, Allergan has made an astute business move as MAPP has about $100M in cash, and Allergan would have to pay MAP $77M in milestone payments on Levadex approval. Furthermore, for the reasons outlined in the previous article, AGN is not taking on undue risk given the high probability of approval. We are of the view that Levadex will add significantly to AGN revenues and profits, as Allergan already plays a role in the migraine treatment space with Botox; cost synergies should be considerable. Although follow-on indications in adolescents and cluster headaches can be quickly achieved at low cost, the real immediate value driver is the 25% of the 4 million U.S. adult acute migraine population that does not respond to triptans. Capturing just 15% of this population could lead to revenue of $600m and a conservative total of $1.2B including the E.U. and rest of the world. Uptake of Levadex will be fast due to the high dissatisfaction with the current treatment paradigm, leading to a steep initial sales curve. Levadex future revenues could comfortably add $1 in EPS for Allergan based on the company’s current ~20% profit margin (Levadex should improve on this significantly), making the billion dollar acquisition a bargain.
Allergan will host a conference call at 11:00 AM EST. And read PropThink's original MAPP report, which was published in early January and has returned 60% following Tuesday's announcement.