Jim Cramer is watching Allergan (AGN) as the company is set to report earnings on Thursday, August 6th before the market opens. Allergan is one of the stocks in Cramer’s charitable trust portfolio, Action Alerts PLUS. ‘Here’s the key thing about Allergan: they need to do an acquisition,’ Cramer said. He says that Allergan’s deal with Teva Pharmaceutical (TEVA) was a ‘brilliant idea.’ In the deal, Allergan sold its generics business to Israel’s Teva Pharmaceutical for $40.5 billion in cash and stock, making Teva the largest producer of generics in the world while also allowing Allergan to pay down its debt. Cramer does not think that generics are a good business because of the low margins and says to look at Mallinckrodt’s (MNK) ‘terrible’ generics division to see how bad the business is. Cramer says that after the deal, Allergan was able to get out of the low margin generics division, ‘get a huge war chest,’ and the Allergan CEO, Brenton Saunders, ‘is ready to do his next big deal.’ Although there is no statement as to what acquisitions Allergan could be looking to make, Cramer guesses that ‘it might be Amgen (AMGN).’
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