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Allergan (AGN) Beats on Q3 Earnings, Raises 2018 Guidance
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Allergan plc’s third-quarter 2018 earnings came in at $4.25 per share, which comprehensively beat the Zacks Consensus Estimate of $4.01 and also came ahead of the guided range of $3.80-$4.10. Earnings rose 2.4% year over year primarily attributable to lower operating costs.
Revenues came in at $3.91 billion, which exceeded the Zacks Consensus Estimate of $3.84 billion as well as the guided range of $3.75 billion to $3.90 billion. Revenues fell 3% from the year-ago period primarily due to loss of exclusivity on some brands.
Key products like Botox, Juvéderm collection of fillers, Vraylar and Lo Loestrin pulled up the top line in the quarter. Third-quarter revenues also benefited from higher revenues from Alloderm, Linzess and Lumigan.
However, lower sales of Namenda XR and Estrace cream due to generic competition hurt third-quarter sales. Sales of Allergan’s blockbuster eye drug, Restasis also declined in the quarter.
Segment Discussion
Allergan reports revenues under three segments – U.S. General Medicine, U.S. Specialized Therapeutics and International.
U.S. Specialized Therapeutics’ net revenues remained almost flat at $1.71 billion. Strong sales growth of its medical aesthetics products, Botox and Alloderm were offset by decline in sales of Restasis.
In Facial Aesthetics, Botox (cosmetic) raked in sales of $216 million, up 13.9% year over year. Juvéderm collection of fillers rose 10% to $127.2 million.
Alloderm sales grew 25.1% to $105.8 million while CoolSculpting sales added $84.9 million to sales.
In Eye Care, while Ozurdex and Alphagan sales rose 16.3% and 2.9% to $28.6 million and $95.4 million, respectively, Restasis sales decreased 18.8% to $298 million due to lower selling price and demand. Botox Therapeutic revenues were $407.4 million, up 10.4% year over year, driven by demand growth.
U.S. General Medicine net revenues were down 7.8% year over year to $1.38 billion in the reported quarter hurt by lower sales of Namenda XR and Estrace, which were partially offset by strong growth from Vraylar, Linzess and Lo Loestrin.
Linzess, which was co-commercialized with Ironwood Pharmaceuticals (IRWD - Free Report) , sales rose 7.3% to $204.8 million. Lo Loestrin sales grew 17.9% to $141.5 million while Bystolic sales fell 7.9% to $151.2 million. Vraylar sales were $138 million in the third quarter, 72.1% higher than the year-ago quarter figure, while Viibryd sales were $88.5 million compared with $86.5 million in year ago quarter.
Namenda XR sales slumped from $114.3 million to $16.2 million in the reported quarter due to generic competition following loss of exclusivity in February.
The International segment recorded net revenues of $821.6 million, up 7.8% from the year-ago period, excluding the impact of foreign exchange, driven by growth in Medical Aesthetics and Botox (therapeutic), partially offset by the unfavorable impact of Ozurdex recall.
Profits Rise
Adjusted operating income decreased 3.2% to $1.91 billion in the third quarter.
Selling, general and administrative (SG&A) expenses declined 6.2% to $1.03 billion in the third quarter owing to lower promotional/advertising costs, impact of previous restructurings and reduction in foreign exchange losses.
Research and development (R&D) expenses declined 2.9% to $393.7 million due to pipeline re-prioritization.
2018 Outlook Raised
Allergan raised its earnings and sales guidance range for 2018. Allergan lifted its sales guidance to an approximate range of $15.575-$15.725 billion compared with the earlier forecast of $15.475-$15.625 billion. The increase in guidance is primarily due to delay in launch of restasis genrics.
The company also raised its adjusted earnings expectation to the band of $16.20-$16.60 per share from $16.00-$16.50 guided earlier.
The company maintained its guidance range for adjusted tax rate, SG&A and R&D costs.
Adjusted tax rate is expected to be approximately 14.5% in 2018. Adjusted R&D expenses are expected to be approximately $1.55 billion and SG&A spend is expected to be approximately $4.35 billion.
Adjusted gross margin is now expected to be approximately 85.5% compared with 85.5%-86% expected previously. Gross margin is expected to be hurt by loss of exclusivity of high-margin products — Restasis, Estrace and Delzicol — and unfavorable product mix.
Our Take
Allergan delivered solid performance in the third quarter, beating estimates for both earnings and sales while also raising its full-year expectations. However, revenues declined as some key drugs lost exclusivity.
Shares fell 1.9% in pre-market trading presumably on lower sales year-over-year. Allergan’s share price has risen 8.4% this year so far against the industry’s decline of 6.4%.
Allergan’s key products like Botox and Linzess and new products such as Viberzi and Vraylar will continue to support sales amid ongoing exclusivity challenges for older products. Patent litigations related to generic versions of Restasis remain an overhang. Allergan also continues to deliver on its R&D pipeline, with three new drug applications expected to be filed in 2019.
A couple of better-ranked drug/biotech stocks include Eli Lilly & Company (LLY - Free Report) and Merck & Co., Inc. (MRK - Free Report) . Both the stocks carry a Zacks Rank #2 (Buy).
Lilly’s earnings estimates for 2018 and 2019 have risen from $5.42 to $5.47 and from $5.69 to $5.78, respectively over the past 60 days. The stock has gained 26% this year so far.
Merck’s shares have risen 25.1% this year so far while earnings estimates have risen from $4.26 to $4.31 for 2018 and from $4.58 to $4.68 for 2019 over the past 60 days.
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Allergan (AGN) Beats on Q3 Earnings, Raises 2018 Guidance
Allergan plc’s third-quarter 2018 earnings came in at $4.25 per share, which comprehensively beat the Zacks Consensus Estimate of $4.01 and also came ahead of the guided range of $3.80-$4.10. Earnings rose 2.4% year over year primarily attributable to lower operating costs.
Revenues came in at $3.91 billion, which exceeded the Zacks Consensus Estimate of $3.84 billion as well as the guided range of $3.75 billion to $3.90 billion. Revenues fell 3% from the year-ago period primarily due to loss of exclusivity on some brands.
Key products like Botox, Juvéderm collection of fillers, Vraylar and Lo Loestrin pulled up the top line in the quarter. Third-quarter revenues also benefited from higher revenues from Alloderm, Linzess and Lumigan.
However, lower sales of Namenda XR and Estrace cream due to generic competition hurt third-quarter sales. Sales of Allergan’s blockbuster eye drug, Restasis also declined in the quarter.
Segment Discussion
Allergan reports revenues under three segments – U.S. General Medicine, U.S. Specialized Therapeutics and International.
U.S. Specialized Therapeutics’ net revenues remained almost flat at $1.71 billion. Strong sales growth of its medical aesthetics products, Botox and Alloderm were offset by decline in sales of Restasis.
In Facial Aesthetics, Botox (cosmetic) raked in sales of $216 million, up 13.9% year over year. Juvéderm collection of fillers rose 10% to $127.2 million.
Alloderm sales grew 25.1% to $105.8 million while CoolSculpting sales added $84.9 million to sales.
In Eye Care, while Ozurdex and Alphagan sales rose 16.3% and 2.9% to $28.6 million and $95.4 million, respectively, Restasis sales decreased 18.8% to $298 million due to lower selling price and demand. Botox Therapeutic revenues were $407.4 million, up 10.4% year over year, driven by demand growth.
U.S. General Medicine net revenues were down 7.8% year over year to $1.38 billion in the reported quarter hurt by lower sales of Namenda XR and Estrace, which were partially offset by strong growth from Vraylar, Linzess and Lo Loestrin.
Linzess, which was co-commercialized with Ironwood Pharmaceuticals (IRWD - Free Report) , sales rose 7.3% to $204.8 million. Lo Loestrin sales grew 17.9% to $141.5 million while Bystolic sales fell 7.9% to $151.2 million. Vraylar sales were $138 million in the third quarter, 72.1% higher than the year-ago quarter figure, while Viibryd sales were $88.5 million compared with $86.5 million in year ago quarter.
Namenda XR sales slumped from $114.3 million to $16.2 million in the reported quarter due to generic competition following loss of exclusivity in February.
The International segment recorded net revenues of $821.6 million, up 7.8% from the year-ago period, excluding the impact of foreign exchange, driven by growth in Medical Aesthetics and Botox (therapeutic), partially offset by the unfavorable impact of Ozurdex recall.
Profits Rise
Adjusted operating income decreased 3.2% to $1.91 billion in the third quarter.
Selling, general and administrative (SG&A) expenses declined 6.2% to $1.03 billion in the third quarter owing to lower promotional/advertising costs, impact of previous restructurings and reduction in foreign exchange losses.
Research and development (R&D) expenses declined 2.9% to $393.7 million due to pipeline re-prioritization.
2018 Outlook Raised
Allergan raised its earnings and sales guidance range for 2018. Allergan lifted its sales guidance to an approximate range of $15.575-$15.725 billion compared with the earlier forecast of $15.475-$15.625 billion. The increase in guidance is primarily due to delay in launch of restasis genrics.
The company also raised its adjusted earnings expectation to the band of $16.20-$16.60 per share from $16.00-$16.50 guided earlier.
The company maintained its guidance range for adjusted tax rate, SG&A and R&D costs.
Adjusted tax rate is expected to be approximately 14.5% in 2018. Adjusted R&D expenses are expected to be approximately $1.55 billion and SG&A spend is expected to be approximately $4.35 billion.
Adjusted gross margin is now expected to be approximately 85.5% compared with 85.5%-86% expected previously. Gross margin is expected to be hurt by loss of exclusivity of high-margin products — Restasis, Estrace and Delzicol — and unfavorable product mix.
Our Take
Allergan delivered solid performance in the third quarter, beating estimates for both earnings and sales while also raising its full-year expectations. However, revenues declined as some key drugs lost exclusivity.
Shares fell 1.9% in pre-market trading presumably on lower sales year-over-year. Allergan’s share price has risen 8.4% this year so far against the industry’s decline of 6.4%.
Allergan’s key products like Botox and Linzess and new products such as Viberzi and Vraylar will continue to support sales amid ongoing exclusivity challenges for older products. Patent litigations related to generic versions of Restasis remain an overhang. Allergan also continues to deliver on its R&D pipeline, with three new drug applications expected to be filed in 2019.
Allergan plc Price, Consensus and EPS Surprise
Allergan plc Price, Consensus and EPS Surprise | Allergan plc Quote
Zacks Rank & Stocks to Consider
Allergan currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A couple of better-ranked drug/biotech stocks include Eli Lilly & Company (LLY - Free Report) and Merck & Co., Inc. (MRK - Free Report) . Both the stocks carry a Zacks Rank #2 (Buy).
Lilly’s earnings estimates for 2018 and 2019 have risen from $5.42 to $5.47 and from $5.69 to $5.78, respectively over the past 60 days. The stock has gained 26% this year so far.
Merck’s shares have risen 25.1% this year so far while earnings estimates have risen from $4.26 to $4.31 for 2018 and from $4.58 to $4.68 for 2019 over the past 60 days.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>