On January 29, 2019 Allergan plc (NYSE: AGN) reported its full-year and fourth quarter 2018 financial results including full-year 2018 GAAP net revenues of $15.79 billion, a 1.0 percent decrease from 2017 (Press release, Allergan, JAN 29, 2019, View Source [SID1234532942]). Fourth quarter 2018 GAAP net revenues were $4.08 billion, a 5.7 percent decrease from the prior year quarter.

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Executive Commentary
"Allergan posted another quarter of strong results to close out 2018, underscoring our focus on execution, financial discipline and the strength of our core business which grew 8.3 percent. Our anchor brands BOTOX Cosmetic, BOTOX Therapeutic, VRAYLAR, JUVÉDERM, Lo LOESTRIN, CoolSculpting and LINZESS added nearly $1 billion in new revenue to our core business in 2018," said Brent Saunders, Chairman and CEO of Allergan. "I’m also proud of the significant advances we have made in our R&D pipeline with positive clinical results reported from six late-stage development programs. We look to build on that progress in 2019."

"Taken together, these accomplishments and our talented colleagues give me confidence in our ability to continue producing solid results in 2019 and beyond, while also delivering innovation that will have an enduring impact on patients, customers and shareholders."

Full-Year 2018 Performance
GAAP operating loss in 2018 was $6.25 billion compared with $5.92 billion in 2017. Non-GAAP operating income, which excludes the impact of impairments, amortization and other items, was $7.56 billion in 2018 compared to $7.65 billion in 2017, impacted by lower revenues as operating margin remained stable. GAAP cash flow from operations for the full year of 2018 totaled $5.64 billion.

Fourth Quarter 2018 Performance
GAAP operating loss in the fourth quarter 2018 was $5.38 billion, including the impact of impairments. Non-GAAP operating income in the fourth quarter of 2018 was $1.92 billion, a decrease of 11.8 percent versus the prior year quarter, impacted by lower operating margin and revenues due to the impact of divestitures, products that lost exclusivity and a decline in RESTASIS. GAAP cash flow from operations for the fourth quarter of 2018 totaled $1.50 billion.

Operating Expenses
Total GAAP Selling, General and Administrative (SG&A) Expense was $1.19 billion for the fourth quarter 2018, a decrease of 5.8 percent from the prior year quarter. Total non-GAAP SG&A expense was $1.14 billion for the fourth quarter 2018 compared with $1.13 billion in the prior year period, including an increase in selling and marketing spending in Medical Aesthetics offset by the impact of previous restructurings. GAAP R&D investment for the fourth quarter of 2018 was $678.1 million, compared to $408.2 million in the fourth quarter of 2017. Non-GAAP R&D investment for the fourth quarter 2018 was $436.1 million compared to $405.7 million in the prior year quarter, due to increased direct project spend to support pipeline advancement.

Amortization, Tax and Capitalization
Amortization expense for the fourth quarter 2018 was $1.57 billion, compared to $1.92 billion in the fourth quarter of 2017. The Company’s GAAP tax rate was 23.2 percent in the fourth quarter 2018. The Company’s non-GAAP adjusted tax rate was 14.3 percent in the fourth quarter 2018. As of December 31, 2018, Allergan had cash and marketable securities of $1.91 billion and outstanding indebtedness of $23.8 billion.

Impairments
In the fourth quarter of 2018, Allergan recorded total pre-tax impairment charges of $5.4 billion. This amount reflects $1.9 billion of other intangible asset impairments, including $1.6 billion for KYBELLA/BELKYRA as sales forecasts have declined. The Company’s intended sale of Anti-Infectives and its increased cost of capital based on market dynamics as well as other commercial factors prompted a review of its General Medicine Reporting Unit goodwill. As a result, the Company wrote off $3.5 billion of total goodwill, including $622 million allocated to Anti-Infectives.

FOURTH QUARTER 2018 BUSINESS SEGMENT RESULTS

U.S. Specialized Therapeutics
U.S. Specialized Therapeutics net revenues were $1.81 billion in the fourth quarter of 2018, a decrease of 3.9 percent versus the prior year quarter. Volume demand growth in BOTOX Therapeutic and Facial Aesthetics, including BOTOX Cosmetic and JUVÉDERM Collection, was offset in part by a decline in RESTASIS due to lower demand and net pricing, as well as the divestiture of the Company’s Medical Dermatology business on September 20, 2018. Segment gross margin for the fourth quarter of 2018 was 92.3 percent. Segment contribution for the fourth quarter 2018 was $1.23 billion.

Medical Aesthetics

Facial Aesthetics
BOTOX Cosmetic net revenues in the fourth quarter of 2018 were $258.1 million, an increase of 13.0 percent from the prior year quarter.
JUVÉDERM Collection (defined as JUVÉDERM, VOLUMA and other fillers) net revenues in the fourth quarter of 2018 were $158.4 million, an increase of 13.5 percent versus the prior year quarter.
Regenerative Medicine
ALLODERM net revenues in the fourth quarter of 2018 were $94.9 million, a decrease of 3.1 percent versus the prior year quarter.
Body Contouring
CoolSculpting net revenues (including both CoolSculpting Systems/Applicators and Consumables) in the fourth quarter of 2018 were $81.3 million, a decrease of 13.9 percent versus the prior year quarter.
Neurosciences & Urology

BOTOX Therapeutic net revenues in the fourth quarter of 2018 were $433.3 million, an increase of 12.8 percent versus the prior year quarter.
Eye Care

RESTASIS net revenues in the fourth quarter of 2018 were $325.0 million, a decrease of 18.8 percent versus the prior year quarter.
ALPHAGAN/COMBIGAN net revenues in the fourth quarter of 2018 were $97.7 million, a decrease of 4.0 percent versus the prior year quarter.
OZURDEX net revenues in the fourth quarter of 2018 were $29.3 million, an increase of 11.0 percent versus the prior year quarter.
U.S. General Medicine
U.S. General Medicine net revenues in the fourth quarter of 2018 were $1.40 billion, a decrease of 8.4 percent versus the prior year quarter, impacted by lower revenues from NAMENDA XR and ESTRACE due to generic competition, offset by growth from VRAYLAR and Lo LOESTRIN. Segment gross margin for the fourth quarter of 2018 was 86.0 percent. Segment contribution for the fourth quarter 2018 was $946.6 million.

Central Nervous System

VRAYLAR net revenues were $150.5 million in the fourth quarter of 2018, an increase of 71.6 percent from the prior year quarter.
VIIBRYD/FETZIMA net revenues in the fourth quarter of 2018 were $95.5 million, an increase of 7.3 percent from the prior year quarter.
NAMENDA net revenues in the fourth quarter of 2018 were $10.7 million compared to $97.8 million in the prior year quarter, impacted by loss of patent exclusivity for NAMENDA XR in February 2018.
Gastrointestinal, Women’s Health & Diversified Brands

LINZESS net revenues in the fourth quarter of 2018 were $205.2 million, an increase of 5.3 percent versus the prior year quarter.
Lo LOESTRIN net revenues in the fourth quarter of 2018 were $143.8 million, an increase of 13.7 percent versus the prior year quarter.
BYSTOLIC/BYVALSON net revenues in the fourth quarter of 2018 were $151.7 million, a decrease of 3.7 percent from the prior year quarter.
International
International net revenues in the fourth quarter of 2018 were $870.2 million, an increase of 1.0 percent versus the prior year quarter excluding foreign exchange impact, driven by growth in Facial Aesthetics and BOTOX Therapeutic. International net revenues were negatively impacted by a recall of textured breast implants in certain international markets as well as reduced OZURDEX sales following a third quarter product recall in certain markets. Segment gross margin for the fourth quarter of 2018 was 83.2 percent, also impacted by the textured breast implant recall. Segment contribution was $452.0 million.

Facial Aesthetics

BOTOX Cosmetic net revenues in the fourth quarter of 2018 were $157.8 million, an increase of 9.2 percent versus the prior year quarter excluding foreign exchange impact.
JUVÉDERM Collection net revenues in the fourth quarter of 2018 were $174.0 million, an increase of 20.4 percent versus the prior year quarter excluding foreign exchange impact.
Eye Care

LUMIGAN/GANFORT net revenues in the fourth quarter of 2018 were $96.9 million, an increase of 2.2 percent versus the prior year quarter excluding foreign exchange impact.
OZURDEX net revenues in the fourth quarter of 2018 were $29.6 million compared to $60.9 million in the prior year quarter.
Botox Therapeutic

BOTOX Therapeutic net revenues in the fourth quarter of 2018 were $96.7 million, an increase of 6.6 percent versus the prior year quarter excluding foreign exchange impact.
NEW SHARE REPURCHASE PROGRAM

Allergan’s Board of Directors has authorized a new $2.0 billion share repurchase program as part of the Company’s capital allocation strategy. Allergan expects to deploy the program over the next 12 months.

Allergan reaffirmed its commitment to maintaining investment grade credit ratings and achieving a net debt to adjusted EBITDA ratio of less than 2.5X by the end of 2020.

These actions reflect the Company’s conviction in its strategy and strong future cash flow position, allowing for periodic return of cash to shareholders through dividends and share buybacks while maintaining investment grade ratings and continuing its strategy to pay down debt.

PIPELINE UPDATE

Allergan R&D continues to advance its pipeline. Key 2018 late stage clinical achievements and anticipated milestones include:

Cariprazine: Allergan anticipates a regulatory decision from the U.S. Food and Drug Administration (FDA) in the first half of 2019 for the Company’s supplemental New Drug Application (sNDA) for VRAYLAR (cariprazine). The FDA accepted for review Allergan’s sNDA seeking to expand the indication to include the treatment of depressive episodes associated with bipolar I disorder (bipolar depression) in adults. In 2018, Allergan reported positive Phase 3 results in the third of three pivotal trials of cariprazine in bipolar depression.
Ubrogepant: Allergan anticipates filing a New Drug Application (NDA) with the FDA by the first quarter of 2019 for ubrogepant for the acute treatment of migraine. In 2018, Allergan reported positive results from two Phase 3 clinical trials studying the safety and efficacy of ubrogepant, an oral CGRP receptor antagonist, as well as two positive safety studies, including a long-term safety study of ubrogepant for acute migraine.
Atogepant: Allergan announced positive results from a Phase 2b/3 clinical trial evaluating the efficacy, safety, and tolerability of atogepant, an oral CGRP receptor antagonist in development for migraine prevention. A Phase 3 study has been initiated.
Bimatoprost SR: 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 second half of 2019.
Abicipar: Allergan and Molecular Partners announced two positive Phase 3 clinical trials on Abicipar for the treatment of neovascular age-related macular degeneration. The Biologics License Application (BLA) submission for Abicipar is planned for the first half of 2019. Allergan anticipates results from the MAPLE trial using its further optimized formulation in the first half of 2019.
Brimonidine DDS: Allergan reported positive results in Phase 2b clinical trials for Brimonidine DDS for geographic atrophy secondary to age-related macular degeneration. Allergan plans to initiate Phase 3 clinical trials in the second half of 2019.

(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.

FOURTH QUARTER AND FULL-YEAR 2018 CONFERENCE CALL AND WEBCAST DETAILS
Allergan will host a conference call and webcast today, Tuesday, January 29, at 8:30 a.m. Eastern Time to discuss its fourth quarter and full-year 2018 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 8599848. 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 February 28, 2019. The replay may be accessed by dialing (855) 859-2056 or (404) 537-3406 and entering the conference ID 8599848.

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