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Allergan Lower on Unfavorable FDA Guidance

Shares of biotech company, Allergan (NASDAQ: AGN) were down nearly 12 percent after the FDA issued a draft of guidance that indicated that the generic form of Allergan’s blockbuster drug, Restasis, may have a generic equivalent sooner than thought.

The FDA stated in a draft of its guidance that generic forms of the drug may be permitted without human trials providing they are highly similar to the make-up of Restasis. Of course, Allergan plans to object to the FDA’s guidance. It will say that running generic trials assures that the drug equally effective and safe. Branded drug manufacturers often state that there is a larger degree of variability in generic drugs as opposed to the branded product.

Also weighing on the stock was the downgrade from Deutsche Bank. It lowered the stock from “Buy” to “Hold” and lowered its price target to $98 from $113 on the news.

The drug is expected to contribute $850 to $890 million to Allergan’s revenue. Shareholders know that every day the generics are kept out of the market, it represents a big win-fall for Allergan. The FDA’a guidance, if accepted, would move the launch of the generics up drastically.

This isn’t the news that Allergan needed after a year of manufacturing issues and drugs that didn’t live up to the hype.

Disclosure: At the time of this writing, the author had no position in the companies mentioned.

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