It has been about a month since the last earnings report for Allergan PLC. . Shares have lost about 2.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Allergan Tops Fourth Quarter Earnings; 2017 Sales View Upbeat
After weak revenues in the third quarter, Allergan bounced back with strong fourth-quarter results, wherein both earnings and sales beat estimates. Meanwhile, the company’s 2017 sales outlook was above expectations.
Allergan’s fourth-quarter 2016 earnings came in at $3.90 per share, beating the Zacks Consensus Estimate of $3.79 by 2.9%. Earnings also rose 16.1% year over year and 17.5% sequentially on the back of strong revenues and lower share count
Revenues came in at $3.86 billion, up 7.1% from the year-ago period, and beat the Zacks Consensus Estimate of $3.771 billion by 2.5%. Strong performance of key products like Botox and Linzess, and new product launches partially offset the lower sales of established products like Namenda IR/XR and Asacol HD sales due to loss of exclusivity.
Quarterly Details
Allergan reports revenues under three segments – U.S. General Medicine, U.S. Specialized Therapeutics and International.
U.S. Specialized Therapeutics’ net revenue increased 11% to $1.57 billion driven by strong growth in Eye Care, Facial Aesthetics, and Neuroscience & Urology. Products like Botox (cosmetic) and Restasis raked in sales of $199.4 million (up 18%) and $393.1 million (up 13%), respectively. While Botox sales were driven by continued strong demand for the product, Restasis benefited from higher pricing and demand growth. Botox Therapeutic revenues were $313.5 million, up 14%. In addition, dermal fillers revenues rose 25% and Ozurdex sales increased 18%, which contributed to the upside.
U.S. General Medicine net revenues were flat at $1.53 billion in the reported quarter as a decline in Central Nervous System and Diversified Brands sales was partially offset by strong growth in Women's Health. Sales at the Gastrointestinal franchise remained flat in the quarter.
Established products like Linzess, Lo Loestrin, Estrace Cream, as well as new products like Viberzi, and Vraylar put up a robust performance. Linzess’s sales rose 34% in the quarter to $173.6 million driven by strong demand and continued OTC conversion. However, lower Namenda IR and XR sales hurt the performance of the CNS franchise. Namenda IR sales plunged 90.2% to $2.3 billion. On the other hand, Namenda XR sales declined 26% to $141.1 million in the quarter due to lower demand and shift of promotional efforts to Namzaric. Namzaric, a once-daily, fixed-dose combination of Namenda XR and Aricept, recorded sales of $19.5 million compared with $14.9 million in the previous quarter. Asacol/Delzicol sales declined 57% due to a reduction in demand for Ascaol HD following the launch of an authorized generic in Aug 2016.
The International segment recorded net revenues of $753.2 million, up 11% from the year-ago period. Growth was driven by Eye Care, Facial Aesthetics and Botox revenues.
Selling, general and administrative (SG&A) expenses rose 7% to $1.07 billion in the quarter primarily due to new product launches such as Vraylar, Viberzi, and Kybella and continued promotional investment. R&D expenses increased 26.0% to $425 million with many clinical programs advancing to phase III studies.
2016 Results
Full-year sales improved 14.8% to $14.57 billion, marginally beating the Zacks Consensus Estimate of $14.49 billion. Revenues were within management’s guided range $14.45 billion to $14.65 billion.
Adjusted earnings came in at $13.51 per share, up 2.3% year over year, and surpassed the Zacks Consensus Estimate of $13.39. Earnings were also slightly above the projected range of $13.30–$13.50.
2017 Outlook
Allergan expects total revenue in a range of $15.5 billion to $15.8 billion in 2017, which reflects mid-single-digit growth. The range was above the then Zacks Consensus Estimate of $15.33 billion. Currency headwinds are expected to hurt revenues by $100 million.
Adjusted earnings are expected in a range of $15.80–$16.30 per share, reflecting strong double-digit growth in a range of 17% to 21%.
The 2017 guidance includes contribution from LifeCell, which closed on Feb 1, 2017.
The company expects stable Restasis revenues, while Namenda franchise sales will continue to erode in 2017, especially with the expected entry of a generic version of Namenda XR in the fourth quarter of 2017.
Adjusted gross margins are expected between 86% and 87%. While R&D expenses are expected in a range of $1.45 billion to $1.55 billion, SG&A spend is expected between $4.3 billion and $4.4 billion.
First Quarter Outlook
For the first quarter, the company expects revenues of approximately $3.5 billion, which includes two months of LifeCell revenues. This will be the lowest revenue quarter for the year. Sales are expected to be hurt by an anticipated change in U.S. wholesale buying patterns and normal seasonality in the first quarter.
Drug Pricing Issues
Allergan discussed its Social Contract with Patients which it signed in Sep 2016. Per the contract, Allergan committed to limit price increases on its products to once per year, and to only increase the list price of a product by single-digits with the expectation that net price increases would be in the low to mid- single digit range after discounts and rebates.
For the full-year 2016, Allergan said net price increases on its U.S. products averaged 4.8% (list price increases averaged 8.1%).
Effective Jan 2017, Allergan increased the price of certain U.S. branded products but said it was consistent with its Social Contract.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.
VGM Scores
At this time, Allergan's stock has a poor Growth Score of 'F', however its momentum is doing a lot better with a 'B'. Charting a somewhat similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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Why Is Allergan (AGN) Down 2.2% Since the Last Earnings Report?
It has been about a month since the last earnings report for Allergan PLC. . Shares have lost about 2.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Allergan Tops Fourth Quarter Earnings; 2017 Sales View Upbeat
After weak revenues in the third quarter, Allergan bounced back with strong fourth-quarter results, wherein both earnings and sales beat estimates. Meanwhile, the company’s 2017 sales outlook was above expectations.
Allergan’s fourth-quarter 2016 earnings came in at $3.90 per share, beating the Zacks Consensus Estimate of $3.79 by 2.9%. Earnings also rose 16.1% year over year and 17.5% sequentially on the back of strong revenues and lower share count
Revenues came in at $3.86 billion, up 7.1% from the year-ago period, and beat the Zacks Consensus Estimate of $3.771 billion by 2.5%. Strong performance of key products like Botox and Linzess, and new product launches partially offset the lower sales of established products like Namenda IR/XR and Asacol HD sales due to loss of exclusivity.
Quarterly Details
Allergan reports revenues under three segments – U.S. General Medicine, U.S. Specialized Therapeutics and International.
U.S. Specialized Therapeutics’ net revenue increased 11% to $1.57 billion driven by strong growth in Eye Care, Facial Aesthetics, and Neuroscience & Urology. Products like Botox (cosmetic) and Restasis raked in sales of $199.4 million (up 18%) and $393.1 million (up 13%), respectively. While Botox sales were driven by continued strong demand for the product, Restasis benefited from higher pricing and demand growth. Botox Therapeutic revenues were $313.5 million, up 14%. In addition, dermal fillers revenues rose 25% and Ozurdex sales increased 18%, which contributed to the upside.
U.S. General Medicine net revenues were flat at $1.53 billion in the reported quarter as a decline in Central Nervous System and Diversified Brands sales was partially offset by strong growth in Women's Health. Sales at the Gastrointestinal franchise remained flat in the quarter.
Established products like Linzess, Lo Loestrin, Estrace Cream, as well as new products like Viberzi, and Vraylar put up a robust performance. Linzess’s sales rose 34% in the quarter to $173.6 million driven by strong demand and continued OTC conversion. However, lower Namenda IR and XR sales hurt the performance of the CNS franchise. Namenda IR sales plunged 90.2% to $2.3 billion. On the other hand, Namenda XR sales declined 26% to $141.1 million in the quarter due to lower demand and shift of promotional efforts to Namzaric. Namzaric, a once-daily, fixed-dose combination of Namenda XR and Aricept, recorded sales of $19.5 million compared with $14.9 million in the previous quarter. Asacol/Delzicol sales declined 57% due to a reduction in demand for Ascaol HD following the launch of an authorized generic in Aug 2016.
The International segment recorded net revenues of $753.2 million, up 11% from the year-ago period. Growth was driven by Eye Care, Facial Aesthetics and Botox revenues.
Selling, general and administrative (SG&A) expenses rose 7% to $1.07 billion in the quarter primarily due to new product launches such as Vraylar, Viberzi, and Kybella and continued promotional investment. R&D expenses increased 26.0% to $425 million with many clinical programs advancing to phase III studies.
2016 Results
Full-year sales improved 14.8% to $14.57 billion, marginally beating the Zacks Consensus Estimate of $14.49 billion. Revenues were within management’s guided range $14.45 billion to $14.65 billion.
Adjusted earnings came in at $13.51 per share, up 2.3% year over year, and surpassed the Zacks Consensus Estimate of $13.39. Earnings were also slightly above the projected range of $13.30–$13.50.
2017 Outlook
Allergan expects total revenue in a range of $15.5 billion to $15.8 billion in 2017, which reflects mid-single-digit growth. The range was above the then Zacks Consensus Estimate of $15.33 billion. Currency headwinds are expected to hurt revenues by $100 million.
Adjusted earnings are expected in a range of $15.80–$16.30 per share, reflecting strong double-digit growth in a range of 17% to 21%.
The 2017 guidance includes contribution from LifeCell, which closed on Feb 1, 2017.
The company expects stable Restasis revenues, while Namenda franchise sales will continue to erode in 2017, especially with the expected entry of a generic version of Namenda XR in the fourth quarter of 2017.
Adjusted gross margins are expected between 86% and 87%. While R&D expenses are expected in a range of $1.45 billion to $1.55 billion, SG&A spend is expected between $4.3 billion and $4.4 billion.
First Quarter Outlook
For the first quarter, the company expects revenues of approximately $3.5 billion, which includes two months of LifeCell revenues. This will be the lowest revenue quarter for the year. Sales are expected to be hurt by an anticipated change in U.S. wholesale buying patterns and normal seasonality in the first quarter.
Drug Pricing Issues
Allergan discussed its Social Contract with Patients which it signed in Sep 2016. Per the contract, Allergan committed to limit price increases on its products to once per year, and to only increase the list price of a product by single-digits with the expectation that net price increases would be in the low to mid- single digit range after discounts and rebates.
For the full-year 2016, Allergan said net price increases on its U.S. products averaged 4.8% (list price increases averaged 8.1%).
Effective Jan 2017, Allergan increased the price of certain U.S. branded products but said it was consistent with its Social Contract.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.
Allergan PLC. Price and Consensus
Allergan PLC. Price and Consensus | Allergan PLC. Quote
VGM Scores
At this time, Allergan's stock has a poor Growth Score of 'F', however its momentum is doing a lot better with a 'B'. Charting a somewhat similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.