Gary Mishuris of Silver Ring Value Partners presented his in-depth investment thesis on Allergan (NYSE: AGN) at Wide-Moat Investing Summit 2018.

Thesis summary:

Allergan is a pharmaceutical company with three components of value: (1) Botox and medical aesthetics medications – the economics are more similar to luxury goods than to typical drugs; (2) other medications – a mix of stable niche specialty drugs and regular drugs with a steep patent cliff; and (3) future pipeline sales derived from substantial R&D investment. Gary’s estimate of the intrinsic value puts the stock at less than 65% of his base-case value (50%+ expected return) with a downside to the worst-case value of less than 25%. As a sanity check, the stock recently traded at less than 10x normalized EPS. The market is overly concerned with near-term patent losses while underestimating the inelastic demand and growth characteristics of the Botox and medical aesthetics franchises. The pipeline, which has meaningful value on an expected-value basis, is also overly discounted due to few readily identifiable blockbusters close to launch.

Listen to this session:

slide presentation audio recording

The following resources have been shared by an MOI Global member:

Bloomberg article

Proxy fight-related Allergan presentation

About the instructor:

Gary Mishuris is the Managing Partner and Chief Investment Officer of Silver Ring Value Partners, an investment firm with a concentrated long-term intrinsic value strategy. Prior to founding the firm in 2016, Mr. Mishuris was a Managing Director at Manulife Asset Management since 2011, where he was the Lead Portfolio Manager of the US Focused Value strategy. From 2004 through 2010, Mr. Mishuris was a Vice President at Evergreen Investments (later part of Wells Capital Management) where he started as an Equity Analyst and assumed roles with increasing responsibilities, including serving as the co-PM of the Large Cap Value strategy between 2007 and 2010. He began his career in 2001 at Fidelity as an Equity Research Associate. Mr. Mishuris received a S.B. in Computer Science and a S.B. in Economics from the Massachusetts Institute of Technology (MIT).