) reported third quarter 2012 earnings of $1.06 per share,
slightly above the Zacks Consensus Estimate of $1.04 and the
company's guidance range of $1.02 - $1.04 per share.
While earnings increased 15.2% from the year-ago quarter, product
net sales increased 6.4% to $1,413.9 million. Revenues, however,
missed the Zacks Consensus Estimate of $1,427 million. Negative
currency movement impacted product net sales by 3.3% in the third
quarter of 2012.
The Quarter in Detail
Specialty pharmaceuticals sales increased 8.1% to $1,178.5
million, with eye care pharmaceutical sales increasing 8.4%.
Products like Restasis (up 19.4%), Alphagan franchise (up 10.8%),
Latisse (up 7.2%) and the Lumigan franchise (up 3.4%) contributed
to eye-care sales.
However, the company cut its Lumigan franchise guidance for 2012
by $20 million to $600 million - $620 million. Alphagan sales
guidance was increased to $440 - $450 million from $420 - $440
million. Restasis guidance was also increased to $780 million -
$800 million from $750 million - $780 million. Allergan
continues to expect Latisse sales of $100 million in 2012.
We note that the ophthalmology market includes players such as
Merck & Co. Inc.
Regeneron Pharmaceuticals Inc.
) among others.
Botox sales increased 8.8% year over year to $431.6 million.
Recent approvals for indications like chronic migraine and
urinary continence in adults with neurological conditions most
likely helped sales.
The company continues to expect 2012 Botox sales in the range of
$1,760 million - $1,800 million.
Meanwhile, Allergan's medical devices segment posted sales of
$212.6 million, down 4.0%. While breast aesthetics sales
increased 3.4% to $86.1 million, facial aesthetics sales
increased 0.8% to $89.1 million. The obesity intervention segment
continued to disappoint, with sales declining 24.7% to $37.4
The company is considering a potential sale of the obesity
intervention segment as an option in its efforts to maximize the
returns from this business.
Selling, general and administrative (SG&A) expenses increased
3.9% during the quarter to $537.2 million. Research and
development (R&D) expenses amounted to $230.8 million, up
2012 Guidance Narrowed
Allergan narrowed its 2012 earnings guidance to $4.17 - $4.19 per
share (old guidance: $4.15 - $4.19 per share). The company
expects product net sales to range from $5,695 - $5,770 million
(old guidance: $5,650 - $5,800 million). The Zacks Consensus
Estimate currently stands at $4.16 per share on total revenues of
For 2012, Allergan expects total specialty pharmaceuticals net
sales of $4,775 million - $4,830 million (old guidance: $4,740
million - $4,850 million).
The company narrowed its medical devices net sales guidance to
$920 million - $940 million from the earlier range of $910
million - $950 million. Here, performance will be driven mainly
by breast aesthetics. Breast aesthetics sales are expected in the
range of $380 million - $390 million (old guidance: $360 million
- $380 million).
Obesity intervention sales are expected to decline to
approximately $160 million (old guidance: $170 million). Facial
aesthetics sales are expected in the range of $380 million - $390
million (old guidance: $380 million - $400 million).
ALLERGAN INC (AGN): Free Stock Analysis
MERCK & CO INC (MRK): Free Stock Analysis
REGENERON PHARM (REGN): Free Stock Analysis
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For 2012, the company continues to expect cost of sales to
product net sales ratio of about 14%, SG&A expenses to
product net sales ratio of about 39% and R&D expenses to
product net sales ratio of 16%.
The company expects fourth quarter earnings in the range of $1.18
- $1.20 per share on product net sales of $1,470 million - $1,545
million. The Zacks Consensus Estimate for the fourth quarter of
2012 is pegged at $1.20 per share.
Allergan declared a third quarter 2012 dividend of $0.05 per
Neutral on Allergan
We currently have a Neutral recommendation on Allergan, which
carries a Zacks #3 Rank (short-term Hold rating). While the
company is facing headwinds in the form of negative currency
movement and pricing pressure, we believe Allergan's presence
across different segments will help maintain growth going