From a fundamental standpoint, we are enthusiastic about the future of Allergan (AGN). Although the company is facing significant challenges in the form of slowing sales due to the global economic weakness, safety issues surrounding the use of Botox and foreign currency headwinds, we think Allergan will be able to face these challenges well and will be back on its historical mid-to-high teens earnings growth trajectory from 2011.

We consider Allergan to be one of the premier specialty pharmaceutical companies in the world. The company possesses a strong blockbuster product in Botox and a slew of innovative new products in the eye and skin care markets. Allergan has also been pretty active on the acquisition front 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 consumer spending, Allergan’s presence across different segments and geographies should help maintain decent growth going forward.

We have adjusted our model based on the first quarter results and 2009 guidance provided by the company. The company expects 2009 adjusted diluted EPS in the range of $2.69 – $2.75 on total product net sales of $4.1 – $4.3 billion. Although we have cut our forward estimates significantly, we still see the company delivering decent top-and bottom-line growth (EPS CAGR of 12% through 2012).

Based on our model, we see Allergan delivering EPS of $2.71 in 2009, up 5.5% y-o-y. Beyond that, the company’s impressive pipeline should help drive growth in the next decade. We maintain our Hold rating with a $48 price target, which is based on 17.7x our 2009 EPS estimate of $2.71.

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