Allergan, Inc. (AGN) reported first quarter earnings of 77 cents per share, 3 cents ahead of the Zacks Consensus Estimate but towards the lower end of its guidance range. While earnings increased 18.5% from the year-ago quarter, revenues increased 13.6% to $1,271.2 million.
Revenues easily surpassed the Zacks Consensus Estimate of $1,251 million. Allergan also declared a quarterly dividend of 5 cents per share.
Quarterly Details
Specialty pharmaceuticals sales increased 13.3% to $1,028.4 million with eye care pharmaceutical sales increasing 15.6%. Strong performance of products like Lumigan and Restasis helped drive eye-care sales.
Alphagan and Combigan franchise sales went up 6.5% to $100.2 million in the reported quarter. New product Latisse contributed $25.3 million to first quarter sales. We note that Latisse sales increased both on a sequential and year-over-year basis.
Botox sales, which came in at $364.5 million, recorded an increase of 10.1% from the year-ago period. Going forward, Allergan is looking to grow Botox sales by gaining approval for additional indications.
Last year, the company received approval for two additional indications. While the first label expansion allows the use of Botox for the treatment of increased muscle stiffness in the elbow, wrist and fingers in adults with upper limb spasticity, the second label expansion is for the treatment of chronic migraine.
Both label expansions should contribute nicely to revenues. Allergan is also seeking approval for the use of Botox for the treatment of urinary continence, which represents significant incremental opportunity.
For 2011, Allergan expects total specialty pharmaceuticals net sales in the range of $4,170 million – $4,310 million (old guidance: $4,160 million – $4,300 million). Sales should be driven by Botox (guidance: $1,500 million – $1,550 million; revised from $1,490 million – $1,540 million).
Meanwhile, Allergan’s medical devices segment also delivered growth with sales increasing 13.0% to $224.4 million. While breast aesthetics sales increased 8.0% to $84.1 million, facial filler sales increased a whopping 48.5% to $88.2 million.
However, obesity intervention sales continued to disappoint with sales declining 14.9% to $52.1 million. The medical devices segment faces competition primarily from companies like Johnson & Johnson (JNJ) and Medicis Pharmaceutical Corp. (MRX).
Medical devices net sales are expected in the range of $880 million – $940 million (old guidance: $860 million – $920 million) in 2011. Here, performance will be driven mainly by facial aesthetics (guidance: $330 million – $350 million; revised from $310 million – $330 million). The US approval of Juvederm XC, Allergan’s latest facial filler product, should help drive facial aesthetics sales.
2011 Guidance Revised
Allergan increased it 2011 earnings guidance range by 2 cents and now expects earnings to range from $3.56 – $3.62 per share. The Zacks Consensus Estimate of $3.61 lies within the company’s guidance range. Allergan expects product net sales to range from $5,050 million – $5,250 million (old guidance: $5,020 – $5,220 million).
Allergan also provided guidance for the second quarter of 2011. The company expects to earn 93 – 95 cents on total product net sales of $1,310 million – $1,360 million. The Zacks Consensus Estimate currently stands below the guidance range at 92 cents.
Neutral on Allergan
We currently have a Neutral recommendation on Allergan, which is supported by a Zacks #3 Rank (short-term Hold rating). Although the company is facing significant challenges due to the global economic weakness, European pricing pressure, safety issues surrounding the use of Botox, and increased competition, we think Allergan will be able to face these challenges well and will be back on its historical mid-to-high teens earnings growth trajectory.
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