While 2017 was a great year for many biopharmaceutical companies, for Allergan (AGN), it was a different story. Allergan stock plunged last year with its big stake in Teva Pharmaceutical tanking and the prospects of generic competition for dry-eye medication Restasis looming ahead.
Could 2018 be a better year for Allergan? The company announced its first-quarter earnings results before the market opened on Monday. Although those results weren't fantastic, they could give Allergan some momentum. Here are the highlights from the company's Q1 results.
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By the numbers
Allergan reported Q1 revenue of $3.67 billion, up 2.8% year over year. The company's performance was better than Wall Street expected, with the average analysts' estimate projecting Q1 revenue of $3.59 billion.
The bad news was that Allergan posted a net loss in the first quarter of $332.5 million, or $0.99 per share, on a GAAP basis. However, this loss was an improvement from the company's GAAP net loss of $2.63 billion, or $7.86 per share, in the prior-year period.
On an adjusted non-GAAP basis, though, Allergan reported positive Q1 earnings of $1.3 billion, or $3.74 per share. This adjusted net income was an increase of 9.2% over the company's adjusted earnings in the first quarter of 2017. On a per-share basis, Allergan's adjusted earnings jumped 11.6%.
Even better, Allergan handily beat Wall Street expectations. The consensus analysts' estimate for the company's Q1 earnings was $3.35.
Allergan's operating cash flow improved considerably from the prior-year period. In the first quarter, the drugmaker reported operating cash flow of $1.46 billion, more than double the operating cash flow generated in the prior-year period.
The company ended the first quarter of 2018 with cash, cash equivalents, and marketable securities totaling $2.03 billion. That amount was less than the $6.45 billion on hand at the end of 2017, primarily due to Allergan paying down debt and completing a $2 billion share-repurchase program.
Behind the numbers
Allergan's revenue growth was due in large part to a strong first quarter for Botox. The product is used for a variety of purposes, including cosmetic reduction of wrinkles, treating chronic migraine, and treating overactive bladder. Botox generated revenue of $817.3 million in Q1, up 14.5% year over year.
A new product also made a big difference for Allergan in the first quarter. The company received FDA clearance in December for CoolSculpting, a fat-freezing fat reduction procedure gained from an acquisition a year ago. Allergan's launch of CoolSculpting was a big hit, with net revenue of $87.1 million in the first quarter.
Allergan received a boost from another acquisition, also. The company closed on the LifeCell acquisition in February 2017. That deal added Alloderm, a product for soft tissue repair, to Allergan's lineup. First-quarter sales for Alloderm totaled $101.7 million, an increase of 83.9% over the prior-year period.
Several other products generated strong sales growth in Q1 as well. Sales for antipsychotic drug Vraylar were $84.4 million, a 57.5% year-over-year jump. Birth control pill Lo Loestrin's sales increased 14.8% from the prior-year period to $99.8 million. First-quarter sales for Allergan's Juvederm dermal fillers grew 11.1% year over year to $242 million.
There were some headwinds, though. Sales for Allergan's No. 2 best-selling product, Restasis, fell 15.1% from the same quarter in 2017 to $322.7 million. While international sales for the product enjoyed solid momentum, sales dropped in the U.S., where Restasis generates most of its revenue. Allergan also saw significant sales declines for a number of other products due to generic competition, including Asacol, Namenda XR, Estrace cream, and Minastrin.
Looking ahead
Allergan expects Q2 revenue between $3.85 billion and $4 billion, which is higher than analysts were initially projecting. The company also thinks that adjusted non-GAAP earnings per share (EPS) will be between $4 and $4.20. This range is also higher than the consensus analysts' Q2 EPS estimate of $3.94.
The drugmaker narrowed its revenue guidance for the full year. Allergan now projects 2018 revenue in the range of $15.15 billion to $15.35 billion. Previously, the company's guidance called for full-year revenue between $15 billion and $15.3 billion.
But Allergan raised its 2018 adjusted earnings guidance based on its Q1 performance. The company now expects adjusted EPS between $15.65 and $16.25, compared to its previous projection of full-year adjusted EPS between $15.25 and $16.
Although Allergan will continue to face challenges with its products battling generic rivals, continued success for Botox and new products like CoolSculpting will help. In addition, the company's pipeline could deliver promising products over the next few years. Allergan hopes to file for U.S. regulatory approval of migraine drug ubrogepant next year. The company also expects to submit for a new indication for Vraylar in treating bipolar I depression later in 2018.
