Allergan Smoothing Out Wrinkles
Allergan, Inc. (AGN) has been expanding into new therapeutic areas through acquisitions over the past few quarters. We believe these acquisitions will provide the company with the opportunity to drive growth in its existing business and to expand into new areas of business even in the face of slowing U.S. consumer spend. The Inamed acquisition, in particular, should help strengthen Allergan's position as a specialty pharmaceutical company.
From a fundamental standpoint, we are enthusiastic about the future of Allergan. The company possesses a strong blockbuster product in Botox wrinkle treatment and a slew of innovative new products in the eye and skin care markets. We were pleased to see Allergan receive the Food and Drug Administration approval for Juvederm dermal fillers several months ahead of expectations. Both Botox and Juvederm should help the company strengthen its position in the dermatology and plastic surgery market. We were also pleased to hear about the U.S. approval of silicone breast implants.
We expect 2008 to be a strong year for Allergan and the company's impressive pipeline should help drive growth in the next decade. The stock currently trades at 19.8x our 2008 estimate of $2.59. Several issues are likely to keep a lid on the share price in the near-term. Allergan shares have been under pressure lately due to safety concerns surrounding the use of Botox. Allergan also received a subpoena from the Department of Justice, U.S. Attorney's Office for the Northern District of Georgia, related to promotional, educational and other activities for Botox. We maintain a Hold rating on the stock with a price target of $56.
Hitachi Debt-High, Cash-Strapped
Hitachi, Ltd. (HIT) continues to make progress in implementing its management plan by cutting operating and fixed costs, and developing new cutting-edge products. On a Yen basis, we are expecting flat revenue for HIT.
With strong growth in the Information & Telecommunication Systems, Power & Industrial Systems, and High Functional materials & Components especially in China, Hitachi recorded 14.2% year-over-year growth in its overseas sales for fiscal 2007, ended March 2008. Hitachi's goal is to increase overseas sales to 45.0% of total revenue by increasing its overseas investment ratio to 50% during 2009.
However, growing price competition in emerging technologies, increasing cost of raw materials and significant yen appreciation have hurt Hitachi, Ltd. Moreover, Hitachi has a large amount of debt and low amount of cash on its balance sheet, a situation that has been deteriorating over the past few years. During the first quarter of fiscal year ending March 31, 2009, Hitachi's net cash position (cash less debt) was negative $7,832.9 million.
