On November 5, 2019 Allergan plc (NYSE: AGN) reported its third quarter 2019 financial results including GAAP net revenues of $4.05 billion, a 3.6 percent increase from the prior year quarter (Press release, Allergan, NOV 5, 2019, View Source [SID1234550382]).
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Executive Commentary
"The third quarter 2019 results demonstrate our commitment to continued strong operational performance. The core business has grown and has been bolstered by significant pipeline progress, with three new molecular entities currently under regulatory review," said Brent Saunders, Chairman and CEO of Allergan. "VRAYLAR, BOTOX Cosmetic, JUVÉDERM, BOTOX Therapeutic, OZURDEX and Lo LOESTRIN continue to lead the way, with VRAYLAR growing 70 percent and U.S. BOTOX Cosmetic growing 10 percent in the third quarter from the prior year."
Third Quarter 2019 Results
GAAP operating loss in the third quarter of 2019 was $596.6 million compared to GAAP operating income of $257.5 million in the prior year quarter. Non-GAAP operating income in the third quarter of 2019 was $1.76 billion, a decrease of 7.7 percent versus the prior year quarter, partially impacted by divestitures, products that lost or are at risk of losing exclusivity and an increase in operating expenses. GAAP cash flow from operations for the third quarter of 2019 totaled $2.92 billion. Cash flow from operations in the third quarter includes a one-time tax refund of $1.6 billion of capital gains taxes previously paid and attributable to tax losses recorded in prior periods.
Operating Expenses
Total GAAP Selling, General and Administrative (SG&A) Expense was $1.99 billion for the third quarter of 2019, compared to $1.04 billion in the prior year quarter. Total non-GAAP SG&A expense was $1.18 billion for the third quarter of 2019, an increase of 14.3 percent from the prior year quarter, primarily related to an increase in spending to support key products and new product launches. GAAP R&D investment for the third quarter of 2019 was $474.5 million, compared to $424.2 million in the third quarter of 2018. Non-GAAP R&D investment for the third quarter of 2019 was $448.9 million, an increase of 14.0 percent compared to the prior year quarter, due to increased direct project spend to support pipeline advancement and new product launches.
Amortization, Tax and Capitalization
Amortization expense for the third quarter of 2019 was $1.54 billion, compared to $1.59 billion in the third quarter of 2018. The Company’s GAAP tax rate was -2.4 percent in the third quarter of 2019. The Company’s non-GAAP adjusted tax rate was 11.2 percent in the third quarter of 2019. As of September 30, 2019, Allergan had cash and marketable securities of $4.56 billion and outstanding indebtedness of $22.5 billion.
Operating Charges and Impairments
Allergan recorded a pre-tax charge of $750 million in the three months ended September 30, 2019 related to a settlement reached in principle by subsidiaries Forest Laboratories, LLC, Forest Laboratories, Inc. and Forest Laboratories Holdings Ltd. with direct purchasers of Namenda, resolving the class action litigation filed by that class of purchasers in the U.S. District Court for the Southern District of New York. The Company excludes operating charges, 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.
THIRD QUARTER 2019 BUSINESS SEGMENT RESULTS
U.S. Specialized Therapeutics
U.S. Specialized Therapeutics net revenues were $1.67 billion in the third quarter of 2019, a decrease of 2.1 percent versus the prior year quarter. Demand growth in BOTOX and JUVÉDERM Collection was offset by a decline in sales of CoolSculpting compared to the prior year quarter and the divestiture of the Company’s Medical Dermatology business on September 20, 2018. Segment gross margin for the third quarter of 2019 was 91.0 percent. Segment contribution for the third quarter of 2019 was $1.08 billion.
Medical Aesthetics
Facial Aesthetics
BOTOX Cosmetic net revenues in the third quarter of 2019 were $237.6 million, an increase of 10.0 percent from the prior year quarter.
JUVÉDERM Collection (defined as JUVÉDERM, VOLUMA and other fillers) net revenues in the third quarter of 2019 were $134.8 million, an increase of 6.0 percent versus the prior year quarter.
Regenerative Medicine
ALLODERM net revenues in the third quarter of 2019 were $95.0 million, a decrease of 10.2 percent versus the prior year quarter.
Body Contouring
CoolSculpting net revenues (including both CoolSculpting Systems/Applicators and Consumables) in the third quarter of 2019 were $53.0 million, a decrease of 37.6 percent from the prior year quarter.
Neurosciences & Urology
BOTOX Therapeutic net revenues in the third quarter of 2019 were $431.6 million, an increase of 5.9 percent versus the prior year quarter.
Eye Care
RESTASIS net revenues in the third quarter of 2019 were $286.8 million, a decrease of 3.8 percent versus the prior year quarter.
ALPHAGAN/COMBIGAN net revenues in the third quarter of 2019 were $90.9 million, a decrease of 4.7 percent versus the prior year quarter.
OZURDEX net revenues in the third quarter of 2019 were $33.7 million, an increase of 17.8 percent versus the prior year quarter.
U.S. General Medicine
U.S. General Medicine net revenues in the third quarter of 2019 were $1.52 billion, an increase of 9.9 percent versus the prior year quarter. Demand growth in VRAYLAR, VIIBRYD and Lo LOESTRIN was partially offset by lower revenues from products that lost exclusivity. Segment gross margin for the third quarter of 2019 was 83.9 percent. Segment contribution for the third quarter of 2019 was $967.2 million.
Central Nervous System
VRAYLAR net revenues were $234.6 million in the third quarter of 2019, an increase of 70.0 percent from the prior year quarter.
VIIBRYD/FETZIMA net revenues in the third quarter of 2019 were $105.1 million, an increase of 18.8 percent from the prior year quarter.
Gastrointestinal, Women’s Health & Diversified Brands
LINZESS net revenues in the third quarter of 2019 were $214.7 million, an increase of 4.8 percent versus the prior year quarter.
Lo LOESTRIN net revenues in the third quarter of 2019 were $161.4 million, an increase of 14.1 percent versus the prior year quarter.
BYSTOLIC/BYVALSON net revenues in the third quarter of 2019 were $152.2 million, an increase of 0.7 percent from the prior year quarter.
International
International net revenues in the third quarter of 2019 were $835.1 million, an increase of 5.0 percent versus the prior year quarter excluding foreign exchange impact. Growth in Facial Aesthetics and BOTOX Therapeutic was partially offset by declines in textured breast implants. OZURDEX growth was primarily related to a 2018 recall of OZURDEX in certain international markets. Segment gross margin for the third quarter of 2019 was 82.7 percent. Segment contribution was $437.6 million.
Facial Aesthetics
BOTOX Cosmetic net revenues in the third quarter of 2019 were $165.6 million, an increase of 5.8 percent versus the prior year quarter excluding foreign exchange impact.
JUVÉDERM Collection net revenues in the third quarter of 2019 were $144.7 million, an increase of 7.3 percent versus the prior year quarter excluding foreign exchange impact.
Eye Care
LUMIGAN/GANFORT net revenues in the third quarter of 2019 were $89.7 million, a decrease of 1.4 percent versus the prior year quarter excluding foreign exchange impact.
OZURDEX net revenues in the third quarter of 2019 were $63.8 million, an increase of 159.3 percent versus the prior year quarter excluding foreign exchange impact.
Botox Therapeutic
BOTOX Therapeutic net revenues in the third quarter of 2019 were $93.9 million, an increase of 5.3 percent versus the prior year quarter excluding foreign exchange impact.
PIPELINE UPDATE
Allergan R&D continues to advance its pipeline. During the third quarter of 2019, the Company’s key clinical developments included:
The U.S. Food and Drug Administration (FDA) approved Allergan’s supplemental Biologics License Application (sBLA) to expand the BOTOX (onabotulinumtoxinA) label for the treatment of pediatric patients ages two years and older with lower limb spasticity, excluding spasticity caused by cerebral palsy. This marks the 14th approved indication for BOTOX and BOTOX Cosmetic combined in the U.S., and the 11th BOTOX therapeutic indication. The FDA approved BOTOX (onabotulinumtoxinA) for pediatric upper limb spasticity in the second quarter of 2019.
The FDA accepted a Biologics License Application (BLA) for Abicipar pegol, a novel, investigational DARPin therapy, in patients with neovascular (wet) age-related macular degeneration (nAMD). The FDA is expected to take action on the BLA mid-2020, with launch expected to follow. The European Medicines Agency (EMA) is also reviewing a Marketing Authorisation Application (MAA) for Abicipar in patients with nAMD. A decision from the European Commission is expected in the second half of 2020.
Allergan received FDA approval for the use of Juvéderm VOLUMA XC, a hyaluronic acid gel dermal filler, with a TSK STERiGLIDE cannula for cheek augmentation to correct age-related volume deficit in the mid-face in adults over 21.
Allergan dosed the first patient in a Phase 2b clinical trial of botulinum neurotoxin serotype E (BoNT/E) EB-001 for the treatment of glabellar frown lines.
Allergan completed enrollment of Part 1 of the Phase 3 AURORA NASH study in adults with stages 2/3 liver fibrosis.
In addition to third quarter 2019 pipeline developments and the anticipated launch of abicipar listed above, Allergan expects three additional significant launches in the next twelve months:
Allergan anticipates a regulatory decision from the FDA in December 2019 for the Company’s New Drug Application (NDA) for ubrogepant, an oral CGRP receptor antagonist for the acute treatment of migraine. Launch is expected to follow in the first half of 2020.
Allergan expects to launch CoolTone, a body contouring device that uses magnetic muscle stimulation, or MMS technology, to strengthen, tone and firm the muscles of the abdomen, buttocks and thighs, in the fourth quarter of 2019, following FDA clearance in the second quarter of 2019.
FDA action is expected in the first half of 2020 on Allergan’s NDA for Bimatoprost Sustained-Release, a biodegradable implant for the reduction of intraocular pressure in patients with open-angle glaucoma or ocular hypertension. Launch is expected to follow in the first half of 2020.
UPDATE ON PROPOSED ABBVIE TRANSACTION
On October 14, 2019, Allergan shareholders voted to approve the proposed acquisition of Allergan by AbbVie. Additionally, both companies received a Request for Additional Information and Documentary Material (Second Request) from the U.S. Federal Trade Commission. Allergan and AbbVie continue to expect to close the transaction in early 2020, subject to customary closing conditions and regulatory approvals.
FULL YEAR 2019 GUIDANCE
(1) GAAP represents EPS for ordinary shareholders. GAAP income per share includes the impact of amortization of approximately $5.9 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.
(3) The non-GAAP performance net income per share guidance for the twelve months ending December 31, 2019 of >$16.55 represents a "profit forecast" for the purposes of the Irish Takeover Rules. Please see page 7 of this press release for further information in relation to the basis of preparation of, assumptions behind and reports prepared in relation to that profit forecast.
ADDITIONAL THIRD QUARTER DETAILS
Due to the proposed acquisition of Allergan by AbbVie, Allergan is not hosting a conference call to discuss its third quarter results. For additional materials related to Allergan’s third quarter results, please visit Allergan’s Investor Relations website at View Source