Allergan (AGN) Q1 Earnings Beat Estimates, Sales Up Y/Y

Allergan plc’s (NYSE:AGN) first-quarter 2018 earnings came in at $3.74 per share, beating the Zacks Consensus Estimate of $3.36 by 11.3%. The bottom line also rose 11.6% year over year, driven by higher revenues and lower operating costs. Earnings also surpassed the previously expected range of $3.20-$3.40.

Revenues generated $3.67 billion, which marginally exceeded the Zacks Consensus Estimate of $3.59 billion by 2.2%. The top line also rose 2.8% from the year-ago period. Revenues also surpassed the past projection between $3.5 billion and $3.6 billion.

Key products like Botox and Juvéderm collection of fillers and new products like Vraylar, Viberzi and Namzaric did well in the quarter under review. However, sales erosion of Namenda XR and Aczone and loss of exclusivity, mainly from Asacol HD and Minastrin, hurt the top line.

First-quarter revenues also benefited from the addition of Alloderm from LifeCell (January 2017) and CoolSculpting body contouring system from ZELTIQ (April 2017) acquisitions.

Shares of Allergan increased almost 4% on Apr 30 in pre-market trading. The stock has lost 3.1% so far this year, outperforming the industry’s decline of 6.1%.

Segment Discussion

The company reports revenues under three segments, namely U.S. General Medicine, U.S. Specialized Therapeutics and International.

U.S. Specialized Therapeutics’ net revenues increased 6.5% to $1.58 billion, driven by a consistently strong performance of its facial aesthetics products, Botox and Juvéderm Collection of fillers.

Botox (cosmetic) raked in sales of $196.7 million (up 7% year over year). Botox Therapeutic revenues were $358.5 million, up 16.1%. In addition, Juvéderm Collection of fillers rose 2.5% to $122.8 million. In Eye Care, though Ozurdex sales increased 13.3% to $25.5, blockbuster dry-eye drug, Restasis’ sales decreased 17.2% to $255.8 million. In Plastic Surgery, breast implants sales increased 11.8%, which contributed to the upside. In Medical Dermatology, Aczone sales plunged 60.6% in the reported quarter to $16 million.

LifeCell’s Alloderm added $99.5 million while ZELTIQ’s CoolSculpting business added $87.1 million to sales in the first quarter.

U.S. General Medicine net revenues were down 9.1% year over year to $1.22 billion in the reported quarter with sales declining in the Diversified Brands, Central Nervous System (CNS) and Women's Health franchises. Anti-Infectives sales rose 28.5% to $71.6 million and Gastrointestinal inched up 0.3% to $388.7 million.

Established products like Linzess and Lo Loestrin as well as new products like Namzaric, Viberzi and Vraylar did well in the first quarter. Linzess’ sales rose 7.9% to $159.3 million, driven by strong demand. Lo Loestrin sales rose 14.8% to $114.6 million, backed by strong demand trends.

Among the newer products, Namzaric, a once-daily, fixed-dose combination of Namenda XR and Aricept, recorded sales of $33.4 million, up 41.5% compared with the year-ago figure. Viberzi recorded sales of $35.9 million, up 14% year over year.

Namenda XR sales slumped 66.8% to $40.5 million in the reported quarter due to loss of patent exclusivity for Namenda XR this February.

Asacol/Delzicol sales declined 33.7% to $38.2 million due to a reduction in demand for Ascaol HD, following the launch of an authorized generic in August 2016.

In the Women’s Health segment, Minastrin 24 revenues plummeted 87.3% to $5.2 million in the quarter due to loss of exclusivity last March.

The International segment logged net revenues of $864 million, up 17.2% from the year-ago period, driven by growth in Facial Aesthetics, Botox (therapeutic), Eye Care and the addition of CoolSculpting.

Selling, general and administrative (SG&A) expenses decreased 5.2% to $1.05 billion in the first quarter owing to a substantial reduction in selling and marketing spending including the impact of previous restructurings.

Research and development (R&D) expenses also declined 9.7% to $355.8 million due to reprioritization of R&D programs.

2018 Outlook Raised

Allergan lifted its sales guidance in the approximate range of $15.15-$15.35 billion compared with the former forecast of $15.0-$15.3 billion. The Zacks Consensus Estimate for the metric in the current year is pegged at $15.22 billion.

Meanwhile, the company also raised its adjusted earnings expectation in the band of $15.65-$16.25 per share from $15.25-$16, guided earlier. The consensus mark for the metric in the current year was pegged at $15.22 per share.

The company however, continues to estimate adjusted tax rate at approximately 14% in 2018.

Q218 View

In second-quarter 2018, revenues are anticipated between $3.85 billion and $4 billion while earnings per share are likely to be between $4 and $4.20. While the Zacks Consensus Estimate for revenue in the second-quarter is pegged at $3.59 billion, the consensus mark for earnings was pegged at $3.36 per share during the same period.

Migraine Candidate Succeeds in Second Phase III Study

Allergan also announced results from the second of two pivotal phase III studies, evaluating its migraine candidate, ubrogepant. The ACHIEVE II trial evaluated the efficacy, safety and tolerability of orally administered ubrogepant across two doses (25 mg and 50 mg) compared with placebo in a single migraine attack in adults.

Data from the study demonstrated that a “significant greater percentage of patients” treated with ubrogepant under both dosages (25 mg and 50 mg) was free from pain at 2 hours after the initial dose as compared to those treated with placebo. Also, the 50 mg dose showed a statistically significant greater percentage of ubrogepant patients achieving absence of the “most bothersome migraine-associated symptom” at 2 hours after the initial dose in comparison to patients treated with placebo. The company expects to submit a regulatory application for ubrogepant to the FDA in 2019.

Zacks Rank & Key Picks

Allergan carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector are Ligand Pharmaceuticals Incorporated (NASDAQ:LGND) , Infinity Pharmaceuticals, Inc. (NASDAQ:INFI) and OncoMed Pharmaceuticals, Inc. (NASDAQ:OMED) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ligand’s earnings per share estimates have moved north from $3.92 to $4.40 for 2018 and from $4.75 to $5.32 for 2019 in the last 60 days. The company delivered a positive surprise in three of the trailing four quarters with an average beat of 24.88%. Share price of the company has surged 42.6% over a year.

Infinity’s loss per share estimates have narrowed from $1.69 to 74 cents for 2018 and from 94 cents to 66 cents for 2019 in the last 60 days. The company pulled off a positive surprise in three of the last four quarters with an average beat of 7.87%.

OncoMed’s loss per share estimates have narrowed from $1.29 to 96 cents for 2018 and from $1.31 to $1.13 for 2019 in the last 60 days. The company came up with a positive surprise in three of the trailing four quarters with an average beat of 57.23%.

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