Botox maker Allergan PLC is getting closer to a potential split between its aesthetics and therapeutics divisions with an announcement of the shakeup possibly coming soon, according to Evercore analyst Umer Raffat.

Raffat spoke with Allergan Vice President of Investor Relations and Strategic Initiatives Manisha Narasimhan, according to a June 18 note. Narasimhan told the analyst that Allergan is "evaluating all options."

"There is a continued sense of urgency both from management and the board for ways that we think will unlock value," Narasimhan said in response to Raffat's inquiry about a possible split. "In terms of timing, we're working as quickly as we can and we hope to be in a position to make an announcement in the next couple of months."

The urgency reflects falling revenues and eroding share prices that have stoked investors' desire to see a change in trajectory.

"I walked away with the sense that Allergan is heading towards a split and may likely lay out timelines," Raffat said.

Narasimhan noted that her statements have been echoed to some extent by CEO Brent Saunders and other Allergan executives at recent investor events. Saunders said on the company's first-quarter earnings call in May that the board would be looking to restore value for investors "with a sense of urgency" and that "everything is on the table."

Executive Vice President and CFO Matthew Walsh reiterated the position at the Bank of America Merrill Lynch 2019 Healthcare Conference in May.

"When the board went through its full strategic review a year ago, [a split] was one of the options on the table," Walsh said. "I think given that a year has passed and our valuation is where it is, it does cause us to have to re-look at the spin option as well as others with the sense of urgency that Brent alluded to."

One consideration for Allergan is that Botox, its top-selling product, straddles the divide of therapeutic and cosmetic but is much more profitable in the latter.

"We clearly need to protect Botox as a brand, which is both an aesthetic and therapeutic product and one of the most important brands in the Allergan family," Saunders said on the recent earnings call. "So that's something that we would have to be thoughtful and meticulous in terms of how we thought about that."

Opioid litigation 'manageable'

Part of the conversation around a therapeutics spinoff is that Allergan is wrapped up in litigation regarding its alleged contribution to the opioid crisis, a wave of painkiller addictions across the country that has been blamed on the promotion of the drugs by companies like Johnson & Johnson, Purdue Pharma LP and others. An estimated 100 Americans die every day from the epidemic.

But Allergan executives believe the company is better shielded from the litigation compared to some of its peers that are on the hook for major payouts and settlements in the millions of dollars.

Allergan divested much of its opioid cache when the Actavis generics arm was sold to Teva Pharmaceutical Industries Ltd. in 2016, and a few branded products were left in its portfolio.

The combined market share for Allergan's branded opioid products, Cadian and Norco, at its highest in 2009 was 6.1% of the branded market and only 0.38% of the total opioid market, Executive Vice President and Chief Legal Officer Robert Bailey told Evercore's Raffat. The drugs represent 0.05% of the overall market.

Allergan's opioids booked sales of less than $30 million in 2018, Bailey said.

The litigation against Allergan for promoting the drugs during those times is "manageable," Bailey told Raffat.

Investor confidence, however, is another issue.

Some investors responding to the opioid litigation have "acted out of fear of an unrealistic and ungrounded worst-case scenario."

Since Teva settled with the state of Oklahoma for $85 million at the end of May, Allergan's shares fell 17%. Bailey said the company's stake in the litigation is misperceived.

"We believe the main plaintiff theory against manufacturers in the opioid litigation is built around product promotion," Bailey said. "And against that the legacy Actavis and Watson companies' limited time of promotion and limited sales force for promotion paint a picture of limited exposure."

As for liability that Allergan might face from the business that was eventually sold to Teva, CEO Saunders has brushed off concerns.

"This is Teva's liability to manage — they have indemnified us twice, both when we sold the business to them and again when we settled out working capital adjustment to them," Saunders said at Bernstein's Strategic Decisions Conference in May. "It is ironclad."