Allergan Expects 2016 Non-GAAP Net Revenues To Be About $17 Bln

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The FINANCIAL — Allergan plc reported exceptional performance with net revenue from continuing operations increasing 74 percent to $4.2 billion for the quarter ended December 31, 2015, compared to $2.4 billion in the fourth quarter 2014.

On a non-GAAP basis, diluted earnings per share from continuing operations increased 33 percent to $3.41 for the fourth quarter 2015, compared to $2.57 in the fourth quarter 2014. On a full year basis, net revenue from continuing operations was up 124 percent compared to 2014 and Non-GAAP EPS from continuing operations increased 78 percent to $13.43. GAAP loss from continuing operations per diluted share for the fourth quarter 2015 was $2.13, compared to GAAP loss from continuing operations per diluted share of $4.48 in the prior year period. GAAP results were impacted by amortization and acquisition-related expenses, including license agreements, impairments, acquisition accounting valuation related expenses and severance associated with acquired businesses, mainly the acquisition of Allergan on March 17, 2015 and Kythera on October 1, 2015 and research and development (R&D) expenses resulting from the acquisition of R&D assets from Mimetogen. These results include Allergan results as of the date of the close of the acquisition, March 17, 2015, according to Allergan.

As a result of the announced proposed divestiture of Allergan’s Global Generics business to Teva on July 27, 2015, the financial results of the Company’s Global Generics business are being reported as discontinued operations in the condensed consolidated statements of operations beginning with the third quarter 2015. These portions of the Company’s results will continue to be reported as discontinued operations until the close of that transaction. The Global Generics business delivered solid performance during the fourth quarter. Continuing operations includes the U.S. Brands, U.S. Medical, International Brands and Anda Distribution segments. All prior year results have been recast to reflect continuing operations results.

“Allergan delivered another quarter of exceptional performance across each of our businesses. On a proforma basis, our team drove double-digit branded revenue growth powered by continued strong performance from key products in our U.S. Brands, U.S. Medical and International Brands segments. We also continued our focus on the transformation of Allergan into a branded Growth Pharma leader,” said Brent Saunders, CEO and President of Allergan. “I would like to thank our 30,000 employees around the world for their dedication and commitment to delivering important medicines to customers and patients globally.”

“In the fourth quarter, our R&D team continued to produce robust output from our industry leading pipeline, which delivered nearly 10 percent of all U.S. FDA NME approvals in 2015. We also enhanced our category leadership through the acquisition of Anterios, a licensing agreement with Mimetogen and our research collaboration with Rugen Therapeutics. This progress in our pipeline, matched with our commitment to driving innovation and value through our Open Science model, positions Allergan to address unmet patient needs within our key therapeutic areas.”

“We have also made important progress with Teva on the planned divestiture of our Global Generics business.  And in November, Pfizer and Allergan announced the proposed combination of the two companies. This bold step brings together the best strengths of both companies – adding Allergan’s leading products across seven therapeutic areas and robust mid-to-late stage R&D pipeline to Pfizer’s leading innovative and established businesses, vast worldwide commercial operations and discovery R&D leadership to create a new biopharma leader,” added Saunders.

For the fourth quarter 2015, adjusted EBITDA from continuing operations increased 115 percent to $2 billion, compared to $923 million for the fourth quarter 2014. Adjusted EBIT from continuing operations in the fourth quarter 2015 was $1.9 billion. Cash flow from operations for the fourth quarter of 2015 was $1.6 billion and cash and marketable securities were $1.1 billion as of December 31, 2015. Cash from operations in the quarter was impacted by the acquired R&D assets from Mimetogen, integration expenses and divestiture payments.

Operating Expenses

Total non-GAAP SG&A as a percent of non-GAAP revenue for the fourth quarter 2015 was 24.9 percent compared to 23.5 percent in the prior year period. Non-GAAP R&D investment for the fourth quarter 2015 was $338 million. As of December 31, 2015, the Company had outstanding indebtedness of $42.7 billion primarily as a result of the legacy Allergan, Forest and other recent acquisitions.

Amortization and Tax

Amortization expense for the fourth quarter 2015 was $1.6 billion, compared to $753 million in the fourth quarter of 2014. The increase was primarily due to the acquisition of Allergan. 

The Company’s non-GAAP continuing operations tax rate was 8.2 percent in the fourth quarter 2015. The Company experienced a benefit to its tax rate as a result of the impact of its entire interest expense being included within continuing operations earnings.

For the fourth quarter 2015, total global branded product revenues were $3.7 billion versus $1.9 billion in the prior year quarter. Top key branded product highlights in the quarter included:

Botox revenues in the fourth quarter of 2015 were $656 million, driven by continued strong performance in both aesthetic and therapeutic indications.

Restasis revenues in the fourth quarter of 2015 were $365 million, driven by continuing strong promotional efforts.

Namenda XR revenues in the fourth quarter of 2015 were $190 million, as prescriptions and formulary coverage remained stable following the loss of exclusivity of Namenda IR.

Fillers’ revenues in the fourth quarter of 2015 were $186 million, reflecting continued strong performance.

Bystolic revenues in the fourth quarter 2015 were $169 million, driven by increased promotional efforts.

Linzess/Constella revenues in the fourth quarter of 2015 were $131 million, driven by strong OTC conversion momentum and enhanced presence in long-term care market.

Viibryd/Fetzima revenues in the fourth quarter were $83 million, driven by strong prescription growth of Fetzima®.

LoLoestrin revenues in the fourth quarter of 2015 were $96 million, driven by continuing strong demand and promotional efforts.

Silicone breast implant revenues in the fourth quarter were $84 million, as a result of increased market share.

U.S. Brands net revenue of $2.5 billion for the fourth quarter 2015 represents a 38 percent increase over $1.8 billion in the fourth quarter 2014. Growth was mainly attributed to the acquisition of legacy Allergan products, including Botox, Restasis, Lumigan/Ganfort, and Combigan, and strong growth from Linzess, Viibryd/Fetzima, Saphris, Namenda XR, LoLoestrin, Estrace Cream, Minastrin 24 and Bystolic.

U.S. Brands gross margin for the fourth quarter 2015 was 87.8 percent. Selling & marketing (S&M) expenses increased 25 percent in the fourth quarter 2015 due to the acquisition of Allergan and the launch of Viberzi. G&A expenses decreased 35 percent versus fourth quarter 2014 reflecting the addition of legacy Allergan which was offset by related synergies and synergies from the 2014 acquisition of Forest Laboratories. Overall, net segment contribution for the fourth quarter 2015 increased 61 percent over the prior year period to $1.71 billion mainly as a result of the Allergan acquisition.

Full year 2015 net revenue increased 103 percent to $9 billion and gross margin increased to 87.6 percent for full year 2015 from 83.7 percent.

Fourth quarter 2015 U.S. Medical Aesthetics net revenue was $490 million reflecting strong growth in BOTOX and fillers, such as Juvederm®.

U.S. Medical Aesthetics selling and marketing (S&M) expenses for the fourth quarter of 2015 were $102 million, and general & administrative expenses (G&A) for the fourth quarter 2015 were $12.3 million.

U.S. Medical Aesthetics segment margin for the fourth quarter 2015 was 70.1 percent. U.S. Medical Aesthetics gross margin for the fourth quarter 2015 was 93.4 percent.

International Brands net revenue for the fourth quarter 2015 was $691 million compared to $79 million in the fourth quarter 2014. Growth was mainly attributed to revenues associated with acquired legacy Allergan products, including Botox, Juvederm®, Ganfort®, Combigan®, and Ozurdex. 

International Brands selling and marketing (S&M) expenses for the fourth quarter of 2015 were $175 million, and general & administrative expense (G&A) for the fourth quarter 2015 were $42 million. International Brands segment margin for the fourth quarter 2015 was 52.3 percent. International Brands gross margin for the fourth quarter 2015 was 83.7 percent.

Anda Distribution net revenues for the fourth quarter 2015 were $547 million reflecting new launches and volume growth offset by the loss of a retail customer in mid-December 2015.

Anda Distribution gross margin for the fourth quarter 2015 was 14.5 percent compared to 15.2 percent in the previous year as a result of product mix.

Pipeline Update

R&D productivity continued during the quarter. Key development highlights included:

U.S. and International Branded Product Approvals and Launches during Q4 2015

JUVEDERM ULTRA XC received U.S. Food and Drug Administration (FDA) approval for injection into the lips and perioral area for lip augmentation in adults over the age of 21.

The U.S. Drug Enforcement Agency (DEA) issued a Schedule IV designation for Viberzi (eluxadoline), an FDA approved treatment of Irritable Bowel Syndrome with Diarrhea (IBS-D) in Adults. Allergan launched Viberzi in December 2015.

Allergan launched an over-the-counter artificial tear, REFRESH OPTIVE Gel Drops, a new aqueous gel designed for patients who need or desire a more viscous artificial tear option to relieve their Dry Eye symptoms.

Regulatory Submissions & Clinical Data during Q4 2015

Allergan submitted a Prior Approval Supplement (PAS) with FDA for RESTASIS (Cyclosporine Ophthalmic Emulsion) 0.05%, seeking approval of a Multi-Dose Preservative-Free (MDPF) presentation.

Allergan announced that the U.S. FDA accepted for filing Allergan’s supplemental New Drug Application (sNDA) to expand the label for DALVANCE (dalbavancin) to include single-dose administration for the treatment of acute bacterial skin and skin structure infections (ABSSSI) in adults caused by designated susceptible Gram-positive bacteria, including methicillin-resistant Staphylococcus aureus (MRSA).

Data presented at IDWeek reported that AVYCAZ (ceftazidime and avibactam) demonstrated in vitro antimicrobial activity against common enterobacteriaceae pathogens, including certain carbapenem-resistant bacteria strains.

Allergan and Medicines360 presented data on LILETTA in three abstracts at the FIGO World Congress of Gynecology and Obstetrics.

Allergan completed enrollment in a Phase III study for Esmya in uterine fibroids.

2016 Upcoming Pipeline Milestones

Allergan expects to obtain approvals, submit a number of its late-stage pipeline programs for regulatory review and advance development on additional programs across key therapeutic areas in 2016.

Aesthetics

Allergan expects U.S. approval of its ACZONE 7.5% in the first half of 2016 and VOLBELLA for lips in the second half of 2016.

A CE mark for Volite with lidocaine in the EU is expected in the first half of 2016. Additional international approvals are expected in the second half of 2016, including BOTOX for Crow’s Feet Lines and VOLUMA XC in Japan and Belkyra in the EU.

NDAs for Oxymetazoline in Rosacea and BOTOX for forehead lines are expected to be filed with the FDA in the first and second half of 2016, respectively.

Eye Care

Allergan expects U.S. approval of a multi-dose preservative free formulation of RESTASIS in the second half of 2016.

510k submissions for XEN45, Allergan’s ocular stent to treat glaucoma and Oculeve Tearbud, Allergan’s intranasal neurostimulatory device for dry eye, are expected in the second half of 2016.

Phase III trial enrollment for Bimatoprost SR is expected to be completed by early 2017.

Gastroenterology

An EU approval for eluxadoline for the treatment of IBS-D is expected in the second half of 2016.

An sNDA submission for Linzess 72mcg for the treatment of Chronic Idiopathic Constipation (CIC) is expected in the first half of 2016.

Phase 2b data on Relamorelin, the investigational treatment for diabetic gastroparesis, is expected in the second half of 2016.

Women’s Health

Top-line results from the first Phase 3 study of Esmya are expected in the first half of 2016.

CNS

A U.S. regulatory submission for Semprana, an investigational treatment for chronic migraine, is expected in the second half of 2016.

Initiation of a Phase 3 study for Cariprazine in Bipolar Depression is expected in the first half of 2016; Phase 3 studies for Rapastinel, an investigational treatment for Major Depressive Disorder (MDD) and Ubrogepant, a potential treatment for acute migraine, are expected to begin in the second half of 2016.

Anti-Infectives, Urology and Cardiovascular

The U.S. approval utilizing Phase 3 data for AvyCaz as a potential treatment for complicated intra-abdominal infections (cIAI) is expected in the first half of 2016.

An sNDA submission utilizing Phase 3 data for AvyCaz as a potential treatment for complicated urinary tract infections (cUTI), is expected in the second half of 2016.

An NDA submission for SER 120, an investigational treatment for nocturia, is expected in the first half of 2016.

The U.S. approval for Nebivolol/Valtarsan Fixed-Dose Combination treatment for hypertension is expected in the first half of 2016.

The U.S. and EU regulatory submissions for Allergan and Amgen’s biosimilar version of Avastin are expected in the second half of 2016.

Full Year 2016 Continuing Operations Financial Forecast

Allergan’s full year 2016 continuing operations standalone estimates are based on management’s current belief about prescription trends, pricing levels, inventory levels and the anticipated timing of future product launches and events. Continuing operations includes the U.S. Brands, U.S. Medical, International Brands and Anda distribution segments.

Total Non-GAAP Net Revenues are expected to be ~$17 Billion

Non-GAAP Branded Net Revenues are expected to be ~$15 Billion reflecting strong double-digit growth

No material changes to gross margin from current levels

Non-GAAP R&D investment is expected to be ~$1.5 Billion

SG&A as a percent of non-GAAP Net Revenues is expected to be ~25% and no longer reflects plans to restructure and simplify the business following the divestiture of the Global Generics business as a result of the transaction with Pfizer announced on November 23, 2015

Non-GAAP tax rate anticipated to return to normalized levels following the close of Teva of ~14%

 

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