Pharmaceutical giant Allergan (AGN) said Tuesday its board had authorized a new share buyback program of up to $10 billion.
The buyback follows the company’s agreement to sell its generic drug business to Teva Pharmaceutical for $40.5 billion. That deal is expected to close in June.
CEO of Allergan Brent Saunders said the close of the Teva deal would allow his company to pay down debt, helping it maintain its investment rating, while preserving “significant firepower” to invest for growth. As of Dec. 31, Allergan had long-term debt of about $40 billion.
Allergan, whose $160 billion merger with Pfizer (PFE) fell apart last month, also reported a better-than-expected quarterly profit on Tuesday, led by strong sales of wrinkle treatment Botox and eye drug Restasis.
Shares of Allergan were up 6% in morning trading. Up to Monday’s close of $213.71, the company’s stock had fallen about 23% since Pfizer scrapped the merger, which would have been the biggest-ever in the pharmaceutical industry.
The deal collapsed after the U.S. Treasury issued new rules curbing tax inversions, under which American companies move their domicile overseas to cut taxes.
“With this highly controversial quarter now in the rearview mirror, we see an attractive setup inAllergan shares going forward based on a combination of attractive valuation, ongoing healthy organic growth and significant capital deployment optionality,” JP Morgan analyst Chris Schott wrote in a note.
Ireland-based Allegan said revenue in its U.S. brands business, which includes Botox and Restasis, rose 27.3% to $2.30 billion in the first quarter ended March 31. The unit accounts for about 60% of the company’s total revenue.
The company reported net income attributable to ordinary shareholders of $186.1 million, or 47 cents per share, compared with a loss of $535.2 million, or $1.85 per share, a year earlier.
Excluding items, the company earned $3.04 per share, slightly above the average analysts’ estimate of $3.01, according to Thomson Reuters I/B/E/S.
Total revenue rose 48% to $3.80 billion, but this was short of the average estimate of $3.95 billion.
Revenue fell in the company’s generic distribution unit, which lost business from Target’s (TGT) in-store pharmacies after they were acquired by CVS Health (CVS).