We recently reaffirmed our Neutral stance on Allergan Inc. (AGN) following the release of fourth quarter and fiscal year 2010 financial results. Quarterly earnings of 88 cents per share were a penny short of the Zacks Consensus Estimate, but towards the higher end of the guidance range.
While earnings increased 12.8% from the year-ago quarter, revenues increased 6.9% to $1,309.3 million. Revenues easily surpassed the Zacks Consensus Estimate of $1,256 million.
Full year 2010 earnings increased 13.7% from the year-ago period to $3.16 per share. However, annual earnings, which were towards the higher end of the company’s guidance, were a penny short of the Zacks Consensus Estimate. Revenues for the year increased 8.4% to $4,883.4 million, and beat the Zacks Consensus Estimate of $4,825 million.
We believe Allergan’s presence across different segments and geographies should help maintain decent growth going forward even in the face of global economic weakness and foreign currency headwinds. For 2011, the company expects product net sales in a range of $5,020 – $5,220 million.
Further, Allergan expects to deliver 2011 earnings in the range of $3.54 – $3.60 per share. The current Zacks Consensus Estimate for 2011 is $3.60.
The company has been expanding into new therapeutic areas through acquisitions and collaboration agreements over the past few years. Allergan has been working on expanding its portfolio and added breast implantation, dermal fillers (including Juvederm), and obesity treatment products to its portfolio. The company’s most recent acquisition was that of medical device company, Serica Technologies, Inc., in the first quarter of 2010.
Collaboration agreements include Allergan’s licensing agreement with Serenity Pharmaceuticals for the development and commercialization of Ser-120, for the treatment of nocturia. Allergan also has an agreement with Bristol-Myers Squibb Co. (BMY) for the development and commercialization of a drug for neuropathic pain.
Additionally, in January 2011, Allergan entered into a collaboration agreement with MAP Pharmaceuticals for the US promotion of Levadex, which recently completed late-stage trials for the treatment of acute migraine in adults.
MAP Pharmaceuticals plans to submit a new drug application for Levadex in the first half of 2011. We believe these acquisitions and agreements will provide the company with the opportunity to drive growth and expand into new areas.
Although Allergan faced a couple of challenging years due to economic softness, we believe the company will be back on its historical mid-to-high teen earnings growth trajectory. Allergan is working on expanding its pipeline and new product launches should help support growth in the coming years.
We are also pleased to see the company seek label expansions for existing products like Botox, Ozurdex and Lap-Band among others, which should help drive growth.
However, Botox, one of Allergan’s key growth drivers, is facing tough competition from Medicis Pharmaceutical Corp.’s (MRX) Dysport. Botox sales have already slowed down due to weak consumer spending and negative news surrounding the product’s safety record. Additional competition in the market could result in the company losing share to its competitors, thereby leading to a decline in Botox sales.
Meanwhile, the entry of generic competition for products like Alphagan 0.15% and Acular have had an adverse impact on eye care sales. Other products like Combigan, Lumigan, Zymaxid and Sanctura XR are also facing patent challenges.
Moreover, several products in Allergan’s portfolio like Botox cosmetic, facial aesthetics, obesity intervention and breast implants have limited reimbursement or are not covered by government or other health care plans.
Since these products are not life-saving in nature, their demand is dependent on discretionary spending by customers. Sales of such products are, therefore, likely to be affected by weakness in the economy as consumers postpone their requirements for these products.
ALLERGAN INC (AGN): Free Stock Analysis Report
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