Allergan Reports Strong 2016 Finish with 7% Increase in GAAP Net Revenues to $3.9 Billion in Fourth Quarter 2016

DUBLIN, Feb. 8, 2017 /PRNewswire/ -- Allergan plc (NYSE: AGN) today reported its fourth quarter and full year 2016 continuing operations performance.

Fourth Quarter and Full-Year 2016 Continuing Operations

Total net revenues of $3.9 billion, a seven percent increase versus the prior year quarter, were driven by strong performance from higher revenues in Facial Aesthetics, BOTOX^® Therapeutic, Eye Care, LINZESS^® and new product launches across therapeutic areas, partially offset by lower revenues from Namenda XR^® and loss of exclusivity of ASACOL^® HD.  For the full year 2016, Allergan reported total net revenues of $14.57 billion, a 15 percent increase versus the prior year, driven by continued strong growth across key therapeutic areas and products, and a full year impact of acquired Allergan brands.

"2016 was a year of transformation for Allergan. We are now a branded biopharmaceutical leader, focused on delivering sustainable revenue growth, advancing our pipeline, maintaining industry leading margins and allocating capital to maximize shareholder return. In the fourth quarter of 2016, we delivered against these priorities. Our top global products and new launches powered revenue growth, including, but not limited to,  BOTOX^®, RESTASIS^®, OZURDEX^®, Fillers, LINZESS^®, VRAYLAR™, VIBERZI^®, KYBELLA^® and Lo LOESTRIN^®. Our R&D team continued to advance key programs and deliver FDA approvals for new products that change lives. And we made fast progress in our capital deployment program, enhancing short- and long-term value for our shareholders," said Brent Saunders, Chairman and CEO of Allergan.

"2017 is a pivotal year for Allergan and we are well-positioned to deliver growth through excellent execution. We have growing products and franchises, with nine product launches planned in 2017. Our Open Science pipeline is advancing innovative, high-value treatments for patients, including our six 'stars' entering or currently in phase 3 development. And our operational excellence and capital deployment initiatives will support our continued growth and enhance shareholder value," added Saunders.

"I thank our 16,000 global colleagues who continue to Be Bold. They are delivering new ideas that allow us to build strong bridges with customers, act fast, and drive results for Allergan. And they are focused on advancing innovative new treatments across our therapeutic areas that can make a profound impact on global health and patient care," added Saunders.  

Fourth-Quarter 2016 Performance
GAAP operating loss from continuing operations in the fourth quarter 2016 was $900 million an increase in losses of 58.0 percent versus prior year primarily due to research and development (R&D)-related charges and impairments. Non-GAAP adjusted operating income from continuing operations in the fourth quarter of 2016 was $1.87 billion. Non-GAAP adjusted operating income was impacted by higher operating expenses.   

Full Year 2016 Performance
GAAP operating loss from continuing operations for the full year 2016 was $1.8 billion, a decrease in losses of 41.7 percent versus prior year primarily due to the fact that 2015 included the impact of selling through acquired inventory, higher acquisition related stock compensation expense and higher restructuring costs all in connection with the Allergan acquisition. Non-GAAP adjusted operating income from continuing operations for the full year 2016 was $7.25 billion, an increase of 7 percent versus prior year. Cash flow from operations of approximately $1.4 billion for the full year, a decrease of 68.5 percent versus prior year, was due primarily to reduced revenues from the Global Generics business, tax payments related to the Global Generics and Anda Distribution divestitures to Teva and increased R&D investment.

Operating Expenses
Total GAAP Selling, General and Administrative (SG&A) Expense was $1.28 billion for the fourth quarter 2016 unchanged from $1.28 billion in the prior year period. Total non-GAAP SG&A Expense increased to $1.07 billion for the fourth quarter 2016 from $997 million in the prior year quarter, primarily due to additional selling and promotional expenses for key products and new product launches. GAAP R&D investment for the fourth quarter 2016 was $913 million, compared to $431 million in the fourth quarter of 2015. Non-GAAP R&D investment for the fourth quarter 2016 was $426 million, an increase of 26 percent over prior year, due to increased costs associated with clinical programs which were weighted toward the back-half of 2016.

Amortization, Tax and Capitalization
Amortization expense from continuing operations for the fourth quarter 2016 was $1.64 billion, compared to $1.58 billion in the fourth quarter of 2015. The Company's GAAP continuing operations tax rate was 96.4 percent in the fourth quarter 2016. The Company's non-GAAP adjusted continuing operations tax rate was 10.4 percent in the fourth quarter 2016. As of December 31, 2016, Allergan had cash and marketable securities of $13.2 billion and outstanding indebtedness of $32.8 billion.

Discontinued Operations and Continuing Operations
As a result of the divestiture of the Company's Anda Distribution business to Teva on October 3, 2016, financial results of this business are being reported as discontinued operations in the condensed consolidated statements of operations up through the date of divestiture. Included in segment revenues are product sales that were sold by the Anda Distribution business once the Anda Distribution business had sold the product to a third-party customer. These sales are included in segment results and are excluded from total continuing operations revenues through a reduction to Corporate revenues. Cost of sales for these products in discontinued operations is equal to our average third-party cost of sales for third-party branded products distributed by Anda Distribution.

U.S. Specialized Therapeutics net revenues grew 11 percent driven by growth in Eye Care, Facial Aesthetics and Neuroscience & Urology.

Eye Care

• Allergan's Eye Care franchise experienced strong results versus prior year.
  • RESTASIS^® net revenues of $393.1 million in the fourth quarter of 2016, up 13 percent driven by demand and pricing.
  • The Glaucoma franchise experienced a modest decline, with ALPHAGAN^®/COMBIGAN^® net revenues in the fourth quarter of 2016 of  $102.3 million, up 2 percent versus prior year quarter offset by LUMIGAN^® net revenues declining 9 percent driven primarily by trade buying patterns.
  • OZURDEX^® net revenues in the fourth quarter of 2016 were strong at $22.6 million, up 18 percent versus prior year quarter driven by continued strong demand from the diabetic macular edema indication.  

Medical Aesthetics

• The Facial Aesthetics franchise continues to deliver strong double-digit growth.
  • BOTOX^® Cosmetic net revenues in the fourth quarter of 2016 were $199.4 million, up 18 percent versus prior year quarter reflecting continued strong volume growth.   
  • Fillers net revenues in the fourth quarter of 2016 were $121.6 million, up 25 percent versus prior year quarter driven by continued strong demand for Voluma and market share gains following the launch of Volbella.
  • KYBELLA^® net revenues in the fourth quarter of 2016 were $12 million. Demand and consumer interest is increasing following DTC launch in mid-August.   
• Plastic Surgery
  • Breast implant net revenues in the fourth quarter of 2016 were $56.8 million, a decline of 9 percent, in-line with overall market declines.
• Skin Care
  • SkinMedica^® net revenues in the fourth quarter of 2016 were $26.8 million, up 7 percent versus prior year quarter driven primarily by the launch of HA⁵.

Medical Dermatology

• ACZONE^® net revenues in the fourth quarter of 2016 were $61.2 million, up 8 percent versus prior year quarter driven by continued strong demand following the launch of ACZONE 7.5%.
• TAZORAC^® net revenues in the fourth quarter of 2016 remained stable at $27.5 million.

Neurosciences & Urology

• BOTOX^® Therapeutic revenues in the fourth quarter of 2016 were $313.5 million, up 14 percent versus prior year quarter driven by continued strong demand across chronic migraine, overactive bladder and adult spasticity indications.
• RAPAFLO^® revenues in the fourth quarter of 2016 were $29.0 million, up 5 percent versus prior year quarter.

U.S. Specialized Therapeutics gross margin for the fourth quarter of 2016 was 95.2 percent. SG&A expenses in the segment in the fourth quarter 2016 were $340 million. Selling and marketing expenses increased $44 million versus prior year primarily attributed to sales force expansion and new product promotion. General and administrative expenses increased $26 million at the segment level due to the Company's new operating management structure that began in 2016 where more costs support the operating segments versus corporate functions. Segment contribution for the fourth quarter 2016 remained strong at $1.2 billion versus the prior year period of $1.1 billion.

U.S. General Medicine net revenues in the fourth quarter 2016 remained stable compared to the prior year quarter, impacted by a decline in Central Nervous System and Diversified  Brands revenues, offset primarily by strong growth in Women's Health products and a stable Gastrointestinal franchise.

Central Nervous System

• Allergan CNS franchise revenues of $339 million decreased $17 million from the prior year quarter as a result of lower revenues of NAMENDA XR^® offset by continued growth from VRAYLAR™.
• NAMZARIC^® net revenues in the fourth quarter of 2016 increased to $19.5 million from $7.9 million in the prior year quarter following the approval in July of an expanded label with new dosages for the product allowing patients to begin combination therapy on NAMZARIC^®.
• NAMENDA XR^® net revenues in the fourth quarter of 2016 were $141.1 million, down 26 percent versus prior year quarter driven primarily by lower demand as a result of a reduction in promotional support and higher rebates and discounts.
• VRAYLAR™ net revenues in the fourth quarter of 2016 were strong at $43.2 million, reflecting its rapid acceptance in its first year post-launch.
• VIIBRYD^®/FETZIMA^® continue to perform well with net revenues in the fourth quarter of 2016 of $89.7 million, up 8 percent versus prior year quarter.
• SAPHRIS^® net revenues were $43.2 million, down 18 percent versus prior year quarter impacted by higher discount rates for Medicaid as a result of pediatric approval and moderately lower demand following a reduction in promotional support.

Gastrointestinal

• LINZESS^® net revenues in the fourth quarter of 2016 were $173.6 million, up 34 percent versus prior year quarter driven primarily by strong demand and continued OTC conversion.
• VIBERZI^® net revenues in the fourth quarter of 2016 were $38 million, driven by continued uptake by gastroenterologists and primary care physicians.
• ASACOL^®/DELZICOL^® net revenues in the fourth quarter of 2016 were $62.9 million, a reduction of 57%, impacted by generic product entry for ASACOL^® HD.

Women's Health

• Lo LOESTRIN^® net revenues in the fourth quarter of 2016 were $107.5 million, up 13 percent versus prior year quarter. Lo LOESTRIN^® remains the number one prescribed branded oral contraceptive.
• ESTRACE^® Cream net revenues in the fourth quarter were $103.0 million and MINASTRIN^® 24 net revenues in the fourth quarter of 2016 were $78.4 million.
• LILETTA^® net revenues in the fourth quarter of 2016 were $8.3 million following launch of the single-hand inserter in September 2016.

Anti-Infectives

• TEFLARO^® and DALVANCE^® net revenues in the fourth quarter of 2016 were $31.7 million and $12.6 million, respectively.
• AVYCAZ^® net revenues in the fourth quarter of 2016 were $9.2 million reflecting a temporary reduction in supply, with supply resuming in the latter part of the fourth quarter.

Diversified Brands and Other Products

• Diversified Brands net revenues in the fourth quarter of 2016 were $327.8 million, impacted by genericization of ENABLEX^®.
• Within Diversified Brands, BYSTOLIC^®/BYVALSON^® net revenues in the fourth quarter of 2016 were $159.8 million, a decline of 5 percent versus prior year quarter when the product experienced higher revenues following inventory re-stocking of the 20 mg dose. BYSTOLIC^® continues to remain the flagship product of Allergan's primary care sales force.

U.S. General Medicine gross margin for the fourth quarter of 2016 remained stable at 85.0 percent. SG&A expenses in the segment were $329.6 million in the fourth quarter of 2016. General and administrative expenses increased $30 million at the segment level due to the Company's new operating management structure that began in 2016 where more costs are directly  supporting the operating segments versus corporate functions. Segment contribution for the fourth quarter 2016 was $973.2 million.  

International net revenues excluding foreign exchange impact increased 11 percent year over year, driven by growth in Facial Aesthetics and Eye Care. 

Medical Aesthetics

• Facial Aesthetics
  • BOTOX^® Cosmetic revenues in the fourth quarter of 2016 were $127.1 million, up 12 percent excluding foreign exchange driven by continued growth mainly in Asia Pacific (APAC) and Turkey, Middle East and Africa (TMEA).
  • Fillers revenues in the fourth quarter of 2016 was $116.2 million, up 34 percent excluding foreign exchange reflecting continued strong performance across most regions.
• Plastic Surgery
  • Breast implant revenues in the fourth quarter of 2016 decreased 6 percent excluding foreign exchange to $37.4 million.

Eye Care

• LUMIGAN^®/GANFORT^® and ALPHAGAN^®/COMBIGAN^® revenues in the fourth quarter of 2016 were $92.5 million, a 2 percent increase excluding foreign exchange versus prior year, and $42.0 million, a 10 percent increase excluding foreign exchange versus prior year, respectively, reflecting solid performance across Allergan's glaucoma product franchise.
• OZURDEX^® revenues in the fourth quarter of 2016 were $48.8 million, up 27 percent excluding foreign exchange reflecting strong demand across all regions.
• OPTIVE^® revenues in the fourth quarter of 2016 were $26.2 million, up 5 percent excluding foreign exchange versus prior year quarter.

Botox Therapeutic & Other Products

• BOTOX^® Therapeutic revenues in the fourth quarter of 2016 were $83.0 million, up 12 percent excluding foreign exchange reflecting continued volume growth across all regions.
• ASACOL^®/DELZICOL^® revenues in the fourth quarter of 2016 were $13.2 million, reflecting continued decline.

International gross margin for the fourth quarter of 2016 was 85.5 percent. SG&A expenses in the segment were $236 million in the fourth quarter of 2016, an increase of 16 percent excluding foreign exchange versus prior year, primarily due to investments in key brands and market expansion. Segment contribution was $408.1 million.

Corporate Function
Included within our corporate function are shared costs, including above site and unallocated costs associated with running our global manufacturing facilities, corporate general and administrative expenses and corporate initiatives.

Pipeline Update
Allergan R&D continues to build and deliver on its pipeline. Key development highlights included:

 U.S. and International Branded Product Approvals and Launches

• Allergan announced that it received approval from the U.S. Food and Drug Administration (FDA) for the XEN^® Glaucoma Treatment System (consisting of the XEN45 Gel Stent and the XEN Injector) for use in the U.S.
• Allergan announced that it received FDA approval to market NATRELLE INSPIRA^® SoftTouch breast implants, offering women undergoing breast reconstruction, augmentation or revision surgery a new medium firmness gel, or cohesive, implant option. 
• Allergan announced that it received FDA approval for RESTASIS MULTIDOSE™ (Cyclosporine Ophthalmic Emulsion) 0.05%, a preservative-free, multi-dose bottle offering the same preservative-free formulation of RESTASIS since the product's launch in 2003.
• Allergan announced that it received FDA approval for RHOFADE™ cream for the topical treatment of persistent facial erythema (redness) associated with rosacea in adults.
• Allergan and Ironwood Pharmaceuticals announced the FDA approval of a 72 mcg dose of LINZESS^® (linaclotide) for the treatment of chronic idiopathic constipation (CIC) in adult patients.
• Allergan announced that the FDA approved the Company's supplemental New Drug Application (sNDA) to update the label for AVYCAZ^® (ceftazidime and avibactam) with clinical data from two Phase 3 trials supporting the indication to treat patients with complicated urinary tract infections (cUTI), including pyelonephritis, caused by designated susceptible Gram-negative microorganisms.
• Allergan announced the launch of TAYTULLA™ (norethindrone acetate and ethinyl estradiol capsules and ferrous fumarate capsules), 1mg/20mcg, the first and only oral contraceptive in a softgel capsule for the prevention of pregnancy.
• Allergan announced the U.S. launch of JUVÉDERM VOLBELLA^® XC for use in the lips for lip augmentation and for correction of perioral rhytids in adults over the age of 21.

Regulatory Milestones & Clinical Updates

• Allergan and Ironwood announced positive data from two Phase IIb clinical trials evaluating the investigational linaclotide in colonic release formulations in adult patients with irritable bowel syndrome with constipation (IBS-C).
• Allergan and Gedeon Richter announced positive results from Venus II, the second of two pivotal phase III clinical trials evaluating the efficacy and safety of ulipristal acetate in women with abnormal bleeding due to uterine fibroids.  A new drug application filing for ulipristal acetate is planned for the second half of 2017.
• Allergan and Medicines360 announced that the FDA accepted for filing the companies' supplemental New Drug Application (sNDA) to potentially extend the duration of use for the prevention of pregnancy from up to three years to up to four years for LILETTA^® (levonorgestrel-releasing intrauterine system) 52 mg.

Update on Allergan's Social Contract and U.S. Drug Pricing Actions

In September 2016, Allergan introduced its Social Contract with Patients. Allergan committed to limit price increases on its products to once per year, and to only increase the list price of a product by single-digits with the expectation that net price increases would be in the low to mid- single digit range after discounts and rebates.

For the full-year 2016, Allergan's net price increases on its U.S. products averaged 4.8 percent (list price increases averaged 8.1 percent).

Effective January 2017, Allergan increased the price of certain U.S. branded products. These changes are consistent with Allergan's Social Contract. The average list price increase was 6.7%.  No single product list price has increased more than single digits and the net increase for these products is expected to be in the low single digits (2-3%) after discounts and rebates. This will be the only increase in 2017 for these branded products.

"We have taken bold actions to address issues impacting our industry and society. We are committed to our Social Contract with Patients, and our recent pricing actions are aligned with its principles.  In November, we announced enhancements to our Patient Assistance Program (PAP) that position Allergan among industry leaders in providing free medicines for those who cannot afford our treatments. These commitments are important to the long-term stability of our Company, but most importantly, they help the people who count on us to find and provide treatments for their most pressing medical needs," said Saunders.

First Quarter and Full Year 2017 Continuing Operations Guidance
Allergan's full year 2017 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. Specialized Therapeutics, U.S. General Medicine and International.

The following guidance includes the following assumptions:

• Full-Year 2017:
  • Contribution of LifeCell as of February 1, 2017
  • NAMENDA XR^® generic launch in the fourth quarter of 2017
  • RESTASIS^® remains stable
  • ~$100 million of foreign exchange impact
  • R&D Expense similar split across quarters
  • Non-GAAP Net Interest Expense weighted toward back-half of 2017
  • Share count reflects current progress on Accelerated Share Repurchase Program settlement – higher share count in the first half of 2017
• First Quarter 2017:
  • Revenue estimate reflects normal seasonality, the addition of two months of LifeCell revenues and a change in U.S. wholesale buying patterns.

Fourth Quarter and Full Year 2016 Conference Call and Webcast Details
Allergan will host a conference call and webcast today, February 8, 2017, at 8:30 a.m. Eastern Time to discuss its fourth quarter 2016 results. The dial-in number to access the call is U.S./Canada (877) 251-7980, International (716) 803-8252, and the conference ID is 50941900. To access the live webcast, go to Allergan's Investor Relations Web site at http://ir.allergan.com.

A taped 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 PM Eastern Time on April 8, 2017. The replay may be accessed by dialing (855) 859-2056 and entering conference ID 50941900.  From international locations, the replay may be accessed by dialing (404) 537-3406 and entering the same conference ID. To access the webcast, go to Allergan's Investor Relations Web site at http://ir.allergan.com. A replay of the webcast will also be available.

About Allergan

Allergan plc (NYSE: AGN), headquartered in Dublin, Ireland, is a bold, global biopharmaceutical company and a leader in a new industry model – Growth Pharma.  Allergan is focused on developing, manufacturing and commercializing branded pharmaceuticals, devices and biologic products for patients around the world.

Allergan markets a portfolio of leading brands and best-in-class products for the central nervous system, eye care, medical aesthetics and dermatology, gastroenterology, women's health, urology and anti-infective therapeutic categories.

Allergan is an industry leader in Open Science, the Company's R&D model, which defines our approach to identifying and developing game-changing ideas and innovation for better patient care. This approach has led to Allergan building one of the broadest development pipelines in the pharmaceutical industry with 65+ mid-to-late stage pipeline programs in development.

Our Company's success is powered by our more than 16,000 global colleagues' commitment to being Bold for Life. Together, we build bridges, power ideas, act fast and drive results for our customers and patients around the world by always doing what is right.

With commercial operations in approximately 100 countries, Allergan is committed to working with physicians, healthcare providers and patients to deliver innovative and meaningful treatments that help people around the world live longer, healthier lives every day.

For more information, visit Allergan's website at www.Allergan.com.

Website addresses are included only as inactive textual references and are not intended to be active links to such websites.  Information contained on such websites or that can be accessed through such websites does not constitute part of this release.

Forward-Looking Statement

Statements contained in this press release that refer to future events or other non-historical facts are forward-looking statements that reflect Allergan's current perspective of existing trends and information as of the date of this release. Except as expressly required by law, Allergan disclaims any intent or obligation to update these forward-looking statements. Actual results may differ materially from Allergan's current expectations depending upon a number of factors affecting Allergan's business. These factors include, among others, the difficulty of predicting the timing or outcome of FDA approvals or actions, if any; the impact of competitive products and pricing; market acceptance of and continued demand for Allergan's products; difficulties or delays in manufacturing; and other risks and uncertainties detailed in Allergan's periodic public filings with the Securities and Exchange Commission, including but not limited to Allergan's Annual Report on Form 10-K for the year ended December 31, 2015 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2016. Except as expressly required by law, Allergan disclaims any intent or obligation to update these forward-looking statements.

This document contains non-GAAP adjusted financial measures. The Appendix hereto presents reconciliations of certain non-GAAP adjusted financial measures to the most directly comparable GAAP measures.

The non‐GAAP adjusted measures include non-GAAP performance net income, non-GAAP performance net income per share, adjusted EBITDA and non-GAAP adjusted operating income.  

We believe these non-GAAP measures provide useful information to investors because these are among the measures used by our management team to evaluate our operating performance, make day to day operating decisions, prepare internal forecasts, communicate external forward looking guidance to investors, compensate management and allocate the Company's resources. We believe this presentation also increases comparability of period‐to‐period results.

Other companies may use similarly titled non-GAAP adjusted financial measures that are calculated differently from the way we calculate such measures. Accordingly, our non-GAAP adjusted financial measures may not be comparable to similar non‐GAAP measures used by other companies. We caution investors not to place undue reliance on such non‐GAAP adjusted measures, but instead to consider them with the most directly comparable GAAP measure. Non‐GAAP adjusted financial measures have limitations as analytical tools and should not be considered in isolation, or as a substitute for our results as reported under GAAP.

The following table presents Allergan plc's Condensed Consolidated Statement of Operations for the three and twelve months ended December 31, 2016 and 2015; select cash flow line items for Allergan plc for the three and twelve months ended December 31, 2016 and 2015 and select balance sheet line items for Allergan plc as of December 31, 2016 and 2015:

The following table details Allergan plc's product revenue for significant promoted products globally, within the U.S. and International for the three and twelve months ended December 31, 2016 and 2015: