On October 3o, 2018 Allergan plc (NYSE: AGN) reported its third quarter 2018 performance (Press release, Allergan, OCT 30, 2018, View Source [SID1234530580]). Total third quarter 2018 GAAP net revenues were $3.91 billion, a 3.0 percent decrease from the prior year quarter.
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THIRD QUARTER 2018
Executive Commentary
"Allergan’s performance in the third quarter of 2018 highlights the momentum in our business and our focus on execution. We continued to deliver solid results in the third quarter, driven by double-digit growth from many of our key promoted brands, led by BOTOX Therapeutic and Cosmetic, JUVÉDERM, and VRAYLAR," said Brent Saunders, Chairman and CEO of Allergan. "We also maintained momentum in the R&D pipeline with achievements of significant milestones for key programs including cariprazine in bipolar depression, ubrogepant in acute migraine and abicipar in age-related macular degeneration."
"Despite the 3.0 percent decline in net revenue driven primarily by loss of exclusivity on some brands, our core business, representing nearly 90 percent of our total revenues, grew 5.9 percent versus prior year or 7.4 percent excluding foreign exchange. Allergan also maintained strong operating margins and grew non-GAAP performance net income per share. Our business continues to generate robust cash flows, and we are maintaining a disciplined approach to capital allocation – with a strong balance sheet, strategic growth investments and capital returns to our shareholders," added Saunders. "With this strong momentum in the business and based on our revised expectations for RESTASIS, we increased our full-year 2018 guidance for net revenue and non-GAAP performance net income per share."
"I am proud of what our team has accomplished this year and excited about our potential to create more value for patients, employees and shareholders for many years to come."
Third Quarter 2018 Performance
GAAP operating income in the third quarter 2018 was $257.5 million, including the impact of amortization. Non-GAAP operating income in the third quarter of 2018 was $1.91 billion, a decrease of 3.2 percent versus the prior year quarter, impacted by lower revenues as operating margin remained stable.
Operating Expenses
Total GAAP Selling, General and Administrative (SG&A) Expense was $1.04 billion for the third quarter 2018, a decrease of 10.7 percent from the prior year quarter. Total non-GAAP SG&A expense was $1.03 billion for the third quarter 2018, a decrease of 6.2 percent from the prior year period, driven primarily by a reduction in selling and marketing spending, including the impact of previous restructurings, as well as more favorable foreign exchange compared with the prior year quarter. GAAP R&D investment for the third quarter of 2018 was $424.2 million, compared to $442.6 million in the third quarter of 2017. Non-GAAP R&D investment for the third quarter 2018 was $393.7 million, compared to $405.3 million in the prior year quarter, in part due to reprioritization of R&D programs.
Amortization, Other Income (Expense) Net, Tax and Capitalization
Amortization expense for the third quarter 2018 was $1.59 billion, compared to $1.78 billion in the third quarter of 2017. GAAP other income (expense), net of $130.0 million in the three months ended September 30, 2018 was primarily attributed to a gain on the divestiture of the Company’s Medical Dermatology business sold to Almirall on September 20, 2018. The Company’s GAAP tax rate was 120.5 percent in the third quarter 2018. The Company’s non-GAAP adjusted tax rate was 14.2 percent in the third quarter 2018. As of September 30, 2018, Allergan had cash and marketable securities of $1.21 billion and outstanding indebtedness of $23.58 billion. The Company repurchased $1.76 billion aggregate principal amount of its debt in the third quarter of 2018. It expects to conduct one or more financing transactions in the fourth quarter, subject to market conditions, that are expected, together with any additional repurchases during the fourth quarter, to reduce its outstanding debt on a net basis by at least $750 million.
THIRD QUARTER 2018 BUSINESS SEGMENT RESULTS
U.S. Specialized Therapeutics
U.S. Specialized Therapeutics net revenues were $1.71 billion in the third quarter of 2018 compared to $1.72 billion in the prior year quarter. Growth in BOTOX Therapeutic and Medical Aesthetics, including BOTOX Cosmetic and ALLODERM, was offset in part by a decline in RESTASIS due to lower net pricing, demand and trade inventory levels, as well as decreased revenues in Medical Dermatology due to generic pressure prior to divestiture. Segment gross margin for the third quarter of 2018 was 91.6 percent, impacted by RESTASIS. Segment contribution for the third quarter 2018 was $1.20 billion.
Medical Aesthetics
Facial Aesthetics
BOTOX Cosmetic net revenues rose 13.9 percent in the third quarter of 2018 from the prior year quarter to $216.0 million.
JUVÉDERM Collection (defined as JUVÉDERM, VOLUMA and other fillers) net revenues in the third quarter of 2018 were $127.2 million, an increase of 10.0 percent versus the prior year quarter.
Regenerative Medicine
ALLODERM net revenues in the third quarter of 2018 grew 25.1 percent from the prior year quarter to $105.8 million.
Body Contouring
CoolSculpting net revenues (including both CoolSculpting Systems/Applicators and Consumables) in the third quarter of 2018 were $84.9 million, compared to $83.4 million in the prior year quarter.
Neurosciences & Urology
BOTOX Therapeutic net revenues in the third quarter of 2018 were $407.4 million, an increase of 10.4 percent versus the prior year quarter.
Eye Care
RESTASIS net revenues in the third quarter of 2018 were $298.0 million, a decrease of 18.8 percent versus the prior year quarter.
ALPHAGAN/COMBIGAN net revenues in the third quarter of 2018 were $95.4 million compared with $92.7 million in the prior year quarter.
OZURDEX net revenues in the third quarter of 2018 increased 16.3 percent from the prior year quarter to $28.6 million.
U.S. General Medicine
U.S. General Medicine net revenues in the third quarter of 2018 were $1.38 billion, a decrease of 7.8 percent versus the prior year quarter, impacted by lower revenues from NAMENDA XR and ESTRACE due to generic competition, offset by growth from VRAYLAR, Lo LOESTRIN and LINZESS. Segment gross margin for the third quarter of 2018 was 84.1 percent. Segment contribution for the third quarter 2018 was $890.8 million.
Central Nervous System
VRAYLAR net revenues rose 72.1 percent in the third quarter of 2018 from the prior year quarter to $138.0 million.
VIIBRYD/FETZIMA net revenues in the third quarter of 2018 were $88.5 million, compared to $86.5 million in the prior year quarter.
NAMENDA XR net revenues in the third quarter of 2018 were $16.2 million, versus $114.3 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 third quarter of 2018 were $204.8 million, an increase of 7.3 percent versus the prior year quarter.
Lo LOESTRIN net revenues in the third quarter of 2018 were $141.5 million, an increase of 17.9 percent versus the prior year quarter.
BYSTOLIC/BYVALSON net revenues in the third quarter of 2018 were $151.2 million, compared to $164.2 million in the prior year quarter.
International
International net revenues in the third quarter of 2018 were $821.6 million, an increase of 7.8 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 OZURDEX in certain international markets. Excluding this impact, International net revenues would have grown by 11.8% excluding foreign exchange impact. Segment gross margin for the third quarter of 2018 was 84.1 percent, also impacted by OZURDEX. Segment contribution was $449.8 million.
Facial Aesthetics
BOTOX Cosmetic net revenues in the third quarter of 2018 were $163.4 million, an increase of 32.5 percent versus the prior year quarter excluding foreign exchange impact.
JUVÉDERM Collection net revenues in the third quarter of 2018 were $138.6 million, an increase of 16.9 percent versus the prior year quarter excluding foreign exchange impact.
Eye Care
LUMIGAN/GANFORT net revenues in the third quarter of 2018 were $94.8 million, an increase of 7.4 percent versus the prior year quarter excluding foreign exchange impact.
OZURDEX net revenues in the third quarter of 2018 were $25.8 million compared to $50.2 million in the prior year quarter.
Botox Therapeutic
BOTOX Therapeutic net revenues in the third quarter of 2018 were $92.9 million, an increase of 16.5 percent versus the prior year quarter excluding foreign exchange impact.
PIPELINE UPDATE
Allergan R&D continues to deliver on its pipeline. Key development highlights in the third quarter of 2018 included:
Regulatory Milestones & Clinical Updates
Allergan announced the completion of two positive safety studies of ubrogepant for the acute treatment of migraine. The first study (UBR-MD-04) evaluated the long-term safety and tolerability of ubrogepant (50 mg and 100 mg) compared to usual care for the acute treatment of migraine in adults for one year. The second study (3110-105-002) evaluated the hepatic safety and tolerability of ubrogepant 100 mg compared to placebo in healthy study participants over eight weeks. Based on the completion of these safety studies for ubrogepant and previously reported efficacy and safety results from the ubrogepant ACHIEVE I (UBR-MD-01) and ACHIEVE II (UBR-MD-02). studies, Allergan will submit a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) by the first quarter of 2019.
Allergan announced the FDA has accepted for review the Company’s supplemental New Drug Application (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. The sNDA is supported by data from three pivotal trials, in each of which cariprazine demonstrated greater improvement than placebo for the change from baseline to week 6 on the Montgomery Asberg Depression Rating scale total score.
Allergan announced that the FDA has granted Fast Track designation for AGN-241751, an investigational new treatment for Major Depressive Disorder. AGN-241751 is a novel, oral NMDA modulator in Phase 2 development.
Allergan and Molecular Partners announced two positive Phase 3 clinical trials on Abicipar for the treatment of neovascular age-related macular degeneration. The two identical studies demonstrated that both the 8-week and 12-week treatment regimens met the pre-specified primary endpoint of non-inferiority to Ranibizumab. The Biologics License Application (BLA) filing for Abicipar is planned for the first half of 2019, pending a pre-BLA meeting. Allergan continues to expect results from MAPLE trial using its further optimized formulation in the first half of 2019.
Allergan announced positive results in Phase 2b clinical trials for Brimonidine DDS for geographic atrophy secondary to age-related macular degeneration. The BEACON study evaluated the safety and efficacy of the intravitreal implant and found that Brimonidine DDS significantly reduced mean geographic atrophy area growth at 24 and 30-months. Allergan plans to initiate Phase 3 in the second half of 2019.
Allergan received a Complete Response Letter from the FDA in response to the NDA for ulipristal acetate for the treatment of abnormal uterine bleeding in women with uterine fibroids. The agency cited safety concerns regarding ESMYA post-marketing reports outside the United States. Allergan plans to meet with the FDA by the end of 2018 to discuss their comments and next steps.
Allergan’s CoolSculpting treatment received FDA clearance to treat the submandibular area below the jawline. In addition, the FDA clearance was expanded to include patients with a BMI of up to 46.2 when treating the submental and submandibular areas. This clearance makes CoolSculpting the first and only nonsurgical fat reduction treatment to contour the area below the jawline and improve the appearance of lax tissue in conjunction with submental fat treatments.
THIRD QUARTER 2018 CONFERENCE CALL AND WEBCAST DETAILS
Allergan will host a conference call and webcast today, Tuesday, October 30, at 8:30 a.m. Eastern Time to discuss its third quarter 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 2759968. 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 November 30, 2018. The replay may be accessed by dialing (855) 859-2056 or (404) 537-3406 and entering the conference ID 2759968.
To access the live webcast, please visit Allergan’s Investor Relations website at View Source;. A replay of the webcast will also be available