On May 7, 2019 Allergan plc (NYSE: AGN) reported its first quarter 2019 financial results including GAAP net revenues of $3.60 billion, a 2.0 percent decrease from the prior year quarter (Press release, Allergan, MAY 7, 2019, View Source [SID1234535841]).
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Executive Commentary
"Our first quarter results reflected continued growth of our Core Business, which increased 4.4 percent year-over-year across our four key therapeutic areas. Growth of key products such as BOTOX Cosmetic, BOTOX Therapeutic, VRAYLAR, JUVÉDERM and Lo LOESTRIN offset declines in products that lost exclusivity and products which were divested in 2018," said Brent Saunders, Chairman and CEO of Allergan. "Many key R&D programs have made steady progress and we now anticipate five regulatory approvals over the next 18 months. I appreciate the talented Allergan colleagues around the world who are bringing our products to patients who need them and positioning Allergan for a successful 2019 and beyond."
First Quarter 2019 Results
GAAP operating loss in the first quarter of 2019 was $2.31 billion, including the impact of impairments. Non-GAAP operating income in the first quarter of 2019 was $1.63 billion, a decrease of 7.6 percent versus the prior year quarter, impacted by lower operating margin and revenues due to the impact of divestitures, products that lost exclusivity and declines in textured breast implants and RESTASIS. GAAP cash flow from operations for the first quarter of 2019 totaled $1.23 billion.
Operating Expenses
Total GAAP Selling, General and Administrative (SG&A) Expense was $1.11 billion for the first quarter 2019, an increase of 1.5 percent from the prior year quarter. Total non-GAAP SG&A expense was $1.10 billion for the first quarter 2019, an increase of 4.5 percent from the prior year quarter, primarily related to an increase in selling and marketing spending in Medical Aesthetics. GAAP R&D investment for the first quarter of 2019 was $435.0 million, compared to $474.7 million in the first quarter of 2018. Non-GAAP R&D investment for the first quarter 2019 was $397.9 million, an increase of 11.8 percent compared to the prior year quarter, due to increased direct project spend to support pipeline advancement.
Amortization, Tax and Capitalization
Amortization expense for the first quarter 2019 was $1.40 billion, compared to $1.70 billion in the first quarter of 2018. The Company’s GAAP tax rate was 2.8 percent in the first quarter 2019. The Company’s non-GAAP adjusted tax rate was 12.8 percent in the first quarter 2019. As of March 31, 2019, Allergan had cash and marketable securities of $1.78 billion and outstanding indebtedness of $23.53 billion.
Asset Sales & Impairments, Net and In-Process R&D Impairments
Allergan recorded a goodwill impairment of $2.47 billion in the three months ended March 31, 2019, primarily related to the failure of rapastinel in clinical trials for major depressive disorder, which resulted in a lower fair value of the General Medicine reporting unit compared to the fair value as of December 31, 2018. The Company excludes asset sales and impairments, net and in-process research and development impairments from its Non-GAAP performance net income attributable to shareholders as well as Adjusted EBITDA and Non-GAAP Operating Income.
FIRST QUARTER 2019 BUSINESS SEGMENT RESULTS
U.S. Specialized Therapeutics
U.S. Specialized Therapeutics net revenues were $1.54 billion in the first quarter of 2019, a decrease of 2.3 percent versus the prior year quarter. Demand growth in BOTOX Therapeutic, BOTOX Cosmetic and JUVÉDERM Collection was partially offset by a decline in CoolSculpting sales compared to the prior year quarter, lower RESTASIS revenues due to lower net pricing, as well as the divestiture of the Company’s Medical Dermatology business on September 20, 2018. Segment gross margin for the first quarter of 2019 was 92.2 percent. Segment contribution for the first quarter 2019 was $1.01 billion.
Medical Aesthetics
Facial Aesthetics
BOTOX Cosmetic net revenues in the first quarter of 2019 were $229.5 million, an increase of 16.7 percent from the prior year quarter.
JUVÉDERM Collection (defined as JUVÉDERM, VOLUMA and other fillers) net revenues in the first quarter of 2019 were $129.7 million, an increase of 5.6 percent versus the prior year quarter.
Regenerative Medicine
ALLODERM net revenues in the first quarter of 2019 were $95.0 million, a decrease of 4.5 percent versus the prior year quarter.
Body Contouring
CoolSculpting net revenues (including both CoolSculpting Systems/Applicators and Consumables) in the first quarter of 2019 were $62.9 million, a decrease of 27.8 percent from the prior year quarter.
Neurosciences & Urology
BOTOX Therapeutic net revenues in the first quarter of 2019 were $397.6 million, an increase of 5.8 percent versus the prior year quarter.
Eye Care
RESTASIS net revenues in the first quarter of 2019 were $231.7 million, a decrease of 9.4 percent versus the prior year quarter.
ALPHAGAN/COMBIGAN net revenues in the first quarter of 2019 were $83.0 million, a decrease of 1.4 percent versus the prior year quarter.
OZURDEX net revenues in the first quarter of 2019 were $30.3 million, an increase of 18.8 percent versus the prior year quarter.
U.S. General Medicine
U.S. General Medicine net revenues in the first quarter of 2019 were $1.25 billion, an increase of 2.1 percent versus the prior year quarter, primarily due to growth in VRAYLAR and Lo LOESTRIN, partially offset by lower revenues from products that lost exclusivity. Segment gross margin for the first quarter of 2019 was 84.8 percent. Segment contribution for the first quarter 2019 was $805.1 million.
Central Nervous System
VRAYLAR net revenues were $143.7 million in the first quarter of 2019, an increase of 70.3 percent from the prior year quarter.
VIIBRYD/FETZIMA net revenues in the first quarter of 2019 were $85.0 million, an increase of 18.5 percent from the prior year quarter.
Gastrointestinal, Women’s Health & Diversified Brands
LINZESS net revenues in the first quarter of 2019 were $161.3 million, an increase of 1.3 percent versus the prior year quarter.
Lo LOESTRIN net revenues in the first quarter of 2019 were $125.8 million, an increase of 9.8 percent versus the prior year quarter.
BYSTOLIC/BYVALSON net revenues in the first quarter of 2019 were $128.3 million, a decrease of 3.4 percent from the prior year quarter.
International
International net revenues in the first quarter of 2019 were $801.5 million, an increase of 1.3 percent versus the prior year quarter excluding foreign exchange impact, driven by growth in Facial Aesthetics partially impacted by regulatory changes for textured breast implants in certain international markets as well as lower glaucoma and eye drop revenues due to trade buying patterns. Segment gross margin for the first quarter of 2019 was 86.3 percent. Segment contribution was $428.5 million.
Facial Aesthetics
BOTOX Cosmetic net revenues in the first quarter of 2019 were $147.4 million, an increase of 8.5 percent versus the prior year quarter excluding foreign exchange impact.
JUVÉDERM Collection net revenues in the first quarter of 2019 were $157.8 million, an increase of 18.3 percent versus the prior year quarter excluding foreign exchange impact.
Eye Care
LUMIGAN/GANFORT net revenues in the first quarter of 2019 were $85.1 million, a decrease of 7.8 percent versus the prior year quarter excluding foreign exchange impact.
OZURDEX net revenues in the first quarter of 2019 were $63.1 million, an increase of 6.7 percent versus the prior year quarter excluding foreign exchange impact.
Botox Therapeutic
BOTOX Therapeutic net revenues in the first quarter of 2019 were $93.9 million, an increase of 6.7 percent versus the prior year quarter excluding foreign exchange impact.
PIPELINE UPDATE
Allergan R&D continues to advance its pipeline. During the first quarter of 2019, the Company’s key late-stage clinical developments included (most recent listed first):
Allergan and Molecular Partners announced topline safety results from the MAPLE study of abicipar for the treatment of neovascular age-related macular degeneration. The study used a modified manufacturing process and demonstrated decreased intraocular inflammation of 8.9 percent compared to greater than 15 percent in previous Phase 3 clinical trials. Allergan expects to submit a Biologics License Application (BLA) for abicipar with the U.S. Food and Drug Administration (FDA) in the first half of 2019.
Allergan announced the FDA approved the company’s supplemental New Drug Application (sNDA) for AVYCAZ (ceftazidime and avibactam), expanding the label to include children and infants (patients three months and older) for the treatment of complicated intra-abdominal infections in combination with metronidazole and of complicated urinary tract infections.
The FDA accepted Allergan’s New Drug Application (NDA) for ubrogepant for the acute treatment of migraine. The NDA filing is based on positive results from two Phase 3 clinical trials demonstrating the efficacy, safety and tolerability of ubrogepant, an oral CGRP receptor antagonist, as well as two additional positive safety studies. A 10-month review period has been assigned with a Prescription Drug User Fee Act (PDUFA) date in the fourth quarter of 2019.
The FDA accepted Allergan’s supplemental biologics license applications (sBLAs) to expand the BOTOX (onabotulinumtoxinA) label for the treatment of pediatric patients ages two years and older with upper and lower limb spasticity. The pediatric upper limb spasticity indication has been designated a 6-month Priority Review with a PDUFA date expected in the second quarter of 2019. The pediatric lower limb spasticity indication will undergo a standard 10-month review with a PDUFA date expected in the fourth quarter of 2019.
Allergan announced topline results from three Phase 3 studies of rapastinel as an adjunctive treatment of Major Depressive Disorder. In all three pivotal acute studies, rapastinel did not meet primary and key secondary endpoints. Additionally, an interim analysis of a relapse prevention study of rapastinel suggested the primary and key secondary endpoints would not be met.
Allergan reported positive topline results from two Phase 3 clinical trials of Bimatoprost SR, a first-in-class sustained-release, biodegradable implant for the reduction of intraocular pressure in patients with open-angle glaucoma or ocular hypertension. Allergan anticipates submitting an NDA to the FDA in the first half of 2019.
In addition to first quarter 2019 pipeline developments, Allergan anticipates a regulatory decision from the FDA in May 2019 for the Company’s sNDA for VRAYLAR (cariprazine) seeking to expand the indication to include the treatment of depressive episodes associated with bipolar I disorder (bipolar depression) in adults.
1) GAAP represents EPS for ordinary shareholders. GAAP income per share includes the impact of amortization of approximately $5.6 billion. Non-GAAP represents performance net income per share.
(2) GAAP EPS shares do not include dilution of shares when earnings are a net loss. As such, the dilution impact of outstanding equity awards is not included in the forecasted shares.
FIRST QUARTER 2019 CONFERENCE CALL AND WEBCAST DETAILS
Allergan will host a conference call and webcast today, Tuesday, May 7, at 8:30 a.m. Eastern Time to discuss its first quarter 2019 results. The dial-in number to access the call is U.S./Canada (877) 251-7980, International (706) 643-1573, and the conference ID is 7466378. A replay of the conference call will also be available beginning approximately two hours after the call’s conclusion and will remain available through 11:30 p.m. Eastern Time on June 7, 2019. The replay may be accessed by dialing (855) 859-2056 or (404) 537-3406 and entering the conference ID 7466378.
To access the webcast, please visit Allergan’s Investor Relations website at View Source;. A replay of the webcast will also be available on Allergan’s Investor Relations website.
Allergan Contacts:
Investors:
Manisha Narasimhan, PhD
(862) 261-7162
Christine Chiou
(862) 261-7396
Media:
Amy Rose
(862) 289-3072
Lisa Brown
(862) 261-7320