Allergan Reports Third Quarter 2016 Continuing Operations Performance with GAAP Net Revenues of $3.6 Billion; Announces Accelerated Share Repurchase, Initiation of Cash Dividend

DUBLIN, Nov. 2, 2016 /PRNewswire/ -- Allergan plc (NYSE: AGN) today reported its third quarter 2016 continuing operations performance.

Logo - http://photos.prnewswire.com/prnh/20150612/222796LOGO

Third Quarter 2016 Continuing Operations

Total net revenues of $3.6 billion, a four percent increase versus the prior year quarter, were driven by strong performance from key brands and new product launches, offset by the loss of ASACOL^® HD exclusivity, lower revenues for NAMENDA XR^®and IR^®, a decline in non-promoted Established Brands revenues and unfavorable foreign exchange impact.  

"Allergan continues to be among the best positioned biopharmaceutical companies to deliver long-term growth. Our top global products powered our performance in the third quarter, including BOTOX^®, RESTASIS^®, LINZESS^® / CONSTELLA^® and Fillers. Our R&D teams continued to deliver exceptional results and build our pipeline with our Open Science R&D approach, including the six new stepping stone acquisitions we announced this quarter. And we substantially added to our share repurchase plan and added a first-ever dividend payable in 2017 to maximize shareholder value," said Brent Saunders, Chairman, CEO and President, Allergan.

"We are focused on finishing 2016 with strong momentum. We are well positioned to leverage our Growth Pharma strategy – deliver strong, durable top-line growth powered by growing franchises; enhance category leadership driven by innovative, high-value treatments; develop new treatments from our Open Science R&D pipeline; enhance our commitment to customer intimacy; and continue to support growth through operational excellence," added Saunders.

"We are also taking bold actions in these turbulent times when healthcare costs are in the spotlight. Through our Social Contract with Patients, we are defining our commitment to balancing investment and innovation with pricing and access, as well as quality and education. We are leading the way with responsible pricing ideals for our branded therapeutic products. This is our commitment to the people who count on us to find new treatments for their most pressing medical needs," said Saunders.

"I want to thank our 16,000 global colleagues who continue to Be Bold. They have remained focused on growing our businesses. They are bringing forward new ideas and approaches to drive our Company. And they are advancing new treatments in each of our therapeutic areas that will have a profound impact on patient care and health," added Saunders.  

GAAP operating loss from continuing operations in the third quarter 2016 was $266 million. Non-GAAP adjusted operating income from continuing operations in the third quarter 2016 was $1.78 billion. For the third quarter 2016, Non-GAAP adjusted EBITDA from continuing operations was $1.9 billion, compared to $2.0 billion for the third quarter 2015. The decrease was primarily due to higher research and development and selling and marketing costs. The Company reported negative cash flow from operations of $1.1 billion for the third quarter of 2016 which was unfavorably impacted by the $2.6 billion current period payment of taxes related to the divestiture of Allergan's Generics business to Teva.

Operating Expenses
Total GAAP Selling, General and Administrative (SG&A) Expense was $1.16 billion for the third quarter 2016 compared to $1.02 billion in the prior year period. Total non-GAAP SG&A Expense was $1.0 billion for the third quarter 2016 compared to $867 million in the prior year period due primarily to new product launches and promotion for key products. GAAP Research & Development (R&D) investment for the third quarter 2016 was $623 million. Non-GAAP R&D investment for the third quarter 2016 was $386 million, an increase over prior year due to costs related to key Eye Care and Central Nervous System development programs.

Amortization and Tax
Amortization expense from continuing operations for the third quarter 2016 was $1.6 billion, compared to $1.56 billion in the third quarter of 2015. The Company's GAAP continuing operations tax rate was 29.5 percent in the third quarter 2016. The Company's non-GAAP adjusted continuing operations tax rate was 8.2 percent in the third quarter 2016.

Capital Allocation Update
As of September 30, 2016, Allergan had cash and marketable securities of $27.4 billion and outstanding indebtedness of $32.8 billion. "Post the completion of the Teva transaction in the third quarter of 2016, we have continued to make important progress in our capital allocation strategy to ensure we maintain our Growth Pharma profile and support long-term growth for Allergan shareholders," said Tessa Hilado, Chief Financial Officer, Allergan. "We have completed $5 billion in our initial share repurchase program ahead of schedule, and are ready to go even further to drive shareholder value."

"The Allergan Board of Directors has expanded the share repurchase authorization to $15 billion including authorization of an accelerated share repurchase (ASR) agreement to purchase up to $10 billion of Allergan common stock and the initiation of a quarterly dividend of $0.70 per share beginning in the first quarter of 2017. These actions underscore the conviction we have in the strong future free cash flow generation of the Company, and demonstrate our desire to achieve the right balance between returning significant capital to our shareholders while maintaining our investment-grade credit ratings and preserving sufficient firepower to continue to invest for growth," added Saunders.   

Discontinued Operations and Continuing Operations
As a result of the completed divestiture of the Company's Global Generics business to Teva on August 2, 2016, and the completed divestiture of the Company's Anda distribution business to Teva on October 3, 2016, the third quarter 2016 financial results of these businesses are being reported as discontinued operations in the condensed consolidated statements of operations. 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 brand products distributed by Anda Distribution.

U.S. Specialized Therapeutics net revenues grew 12 percent driven by growth in Eye Care, Facial Aesthetics and Neuroscience & Urology.

Eye Care

• Our Eye Care franchise experienced strong results with RESTASIS^® net revenues in the third quarter of 2016 of $356.4 million, up 14 percent.
  • Our Glaucoma eye drops also experienced strong results with LUMIGAN^®/GANFORT^® net revenues in the third quarter of 2016 of $78.3 million, up 9 percent.  ALPHAGAN^®/COMBIGAN^® net revenues in the third quarter of 2016 were $93.4 million, up 15 percent.   
  • OZURDEX^® net revenues in the third quarter of 2016 were strong at $20.9 million, up 19 percent driven by demand from the diabetic macular edema indication.  

Medical Aesthetics

• Our Facial Aesthetics franchise continues to experience record results.
  • BOTOX^® Cosmetic net revenues in the third quarter of 2016 were strong at $174.5 million, up 10 percent reflecting strong demand.   
  • Fillers net revenues in the third quarter of 2016 were $105.0 million, up 17 percent driven by strong sales of Voluma and an expanding customer base in advance of the launch of Volbella.
  • KYBELLA^® net revenues in the third quarter of 2016 were $14.2 million. Direct-to-consumer advertising (DTC) efforts were initiated in mid-August.  
• Plastic Surgery
  • Breast implant net revenues in the third quarter of 2016 were stable at $51.1 million despite overall market declines.
• Skin Care
  • SkinMedica^® net revenues in the third quarter of 2016 remained strong at $25.8 million.

Medical Dermatology

• ACZONE^® net revenues in the third quarter of 2016 were $69.0 million, up 44 percent driven by the launch of ACZONE 7.5% and higher net average selling prices.
• TAZORAC^® net revenues in the third quarter of 2016 remained stable at $27.5 million.

Neurosciences & Urology

• BOTOX^® Therapeutic revenues in the third quarter of 2016 were $305.5 million, up 17 percent driven by strong demand across overactive bladder, chronic migraine and adult spasticity indications.
• RAPAFLO^® revenues in the third quarter of 2016 were $25.2 million, down 16 percent impacted by continued conversion of patients to generic products.

U.S. Specialized Therapeutics gross margin for the third quarter of 2016 was 95 percent. SG&A expenses in the segment increased 32 percent in the third quarter 2016 primarily due to sales force expansion and increased promotion for key brands, including Kybella^® DTC advertising. U.S. Segment contribution for the third quarter 2016 remained strong at $1.1 billion versus the prior year period of $971.6 million.

U.S. General Medicine net revenues declined 4 percent year over year, impacted by a decline in Central Nervous System and Established Brands revenues, offset primarily by growth in Gastrointestinal and Women's Health performance

Central Nervous System

• Allergan CNS franchise revenues were primarily impacted by lower revenues for Namenda IR^® and Namenda XR^® offset by the strong launch of VRAYLAR™.
• NAMZARIC^® net revenues in the third quarter of 2016 were $14.9 million. Promotional efforts are increasing in the fourth quarter due to approval of the expanded label for the product.
• NAMENDA XR^® net revenues in the third quarter of 2016 were $146.9 million, down 32 percent driven primarily by a decrease in demand and lower average net selling prices to maintain formulary coverage.
• VRAYLAR™ net revenues in the third quarter of 2016 were strong at $32.4 million, illustrating its rapid acceptance nine months following launch.
• VIIBRYD^®/FETZIMA^® continue to perform well with net revenues in the third quarter of 2016 of $87.6 million, up 4 percent.
• SAPHRIS^® net revenues were $40.8 million, down 20 percent for the quarter reflecting lower average selling prices.

Gastrointestinal

• LINZESS^® net revenues in the third quarter of 2016 were $164.4 million, up 40 percent driven primarily by continued OTC conversion.
• VIBERZI^® net revenues in the third quarter of 2016 were $30.9 million, driven by continued uptake by gastroenterologists and primary care physicians.
• ASACOL^®/DELZICOL^® net revenues in the third quarter of 2016 were $72.2 million, impacted by generic product entry for Asacol^® HD in the third quarter and lower than anticipated generic pricing in the market.

Women's Health

• Lo LOESTRIN^® net revenues in the third quarter of 2016 were $105.7 million, up 18 percent driven by continued demand for the product.
• ESTRACE^® Cream and MINASTRIN^® 24 net revenues both experienced double-digit growth in the third quarter of 2016 with revenues of $98.6 million and $84.9 million, respectively.

Anti-Infectives

• TEFLARO^® and DALVANCE^® net revenues in the third quarter of 2016 were $33.3 million and $10.3 million, respectively.
• AVYCAZ^® net revenues in the third quarter of 2016 were $4.8 million.

Established Brands and Other Products

• Established Brands net revenues in the third quarter of 2016 were $319.3 million, impacted by the divestiture of CERVIDIL^® and genericization of ENABLEX^®.
• Within Established Brands, BYSTOLIC^® net revenues in the third quarter of 2016 were $163.9 million, up 6 percent driven by stable demand and price appreciation.  

U.S. General Medicine gross margin for the third quarter of 2016 remained stable at 85.5 percent. SG&A expenses in the segment were $335.1 million, up 20 percent in the third quarter 2016 primarily due to new product launches, including VIBERZI^® and VRAYLAR™. Segment contribution for the third quarter 2016 was $937.9 million. 

International net revenues increased six percent year over year, driven by growth in Facial Aesthetics and Eye Care. Excluding the impact of an out-of-period adjustment in the three months ended September 30, 2015, net revenues would have increased 11 percent.

Eye Care

• LUMIGAN^®/GANFORT^® and ALPHAGAN^®/COMBIGAN^® revenues in the third quarter of 2016 were $86.6 million and $41.3 million, respectively, reflecting stable performance across Allergan's glaucoma product franchise.
• OZURDEX^® revenues in the third quarter of 2016 were $43.4 million, up 28 percent reflecting volume growth across all regions.  
• OPTIVE^® revenues in the third quarter of 2016 were $25.6 million, up 10 percent reflecting volume growth across most regions.

Medical Aesthetics

• Facial Aesthetics
  • BOTOX^® Cosmetic revenues in the third quarter of 2016 were $115.3 million, up 17 percent driven by continued volume growth across most regions.
  • Fillers revenues in the third quarter of 2016 were $96.8 million, up 24 percent reflecting continued strong performance across most regions.
• Plastic Surgery
  • Breast implant revenues in the third quarter of 2016 increased 3 percent to $35.6 million.

Botox Therapeutic & Other Products

• BOTOX^® Therapeutic revenues in the third quarter of 2016 were $78.1 million, up 11 percent reflecting continued volume growth across most regions.  
• ASACOL^®/DELZICOL^® revenues in the third quarter of 2016 were $14.2 million, reflecting a moderate decline.  

International gross margin for the third quarter of 2016 was 86.4 percent. SG&A expenses in the segment were $216.2 million in the third quarter 2016, an increase versus prior year primarily due to new launches. Segment contribution was $386.5 million.

Corporate Function
Included within our corporate function are shared costs, including above site and unallocated costs associated with running our global manufacturing facilities and corporate general and administrative expenses. In addition, our corporate function includes the impact of segment results that are sold through our former Anda Distribution business that are excluded from total continuing operations revenues through a reduction to Corporate revenues and the correlating cost of goods sold impact.

Pipeline Update
Allergan R&D continued to build and deliver on its pipeline in the quarter. Key development highlights included:

 U.S. and International Branded Product Approvals and Launches

• Allergan announced that BELKYRA^® (deoxycholic acid) has received Marketing Authorization in Sweden after being granted approval by the Swedish Medical Products Agency (MPA). BELKYRA^® was evaluated through a Decentralised Procedure, with the MPA acting as the Reference Member State and included 20 other countries in the European Union, as well as Iceland and Norway. 
• Allergan and Medicines360 announced the launch of the new LILETTA^® (levonorgestrel-releasing intrauterine system) 52 mg IUD single-handed inserter (intrauterine device), for use by women to prevent pregnancy for up to three years. 
• Allergan and Adams announced U.S. availability for four dosage strengths of NAMZARIC^® (memantine and donepezil hydrochlorides) extended-release capsules that allow patients on donepezil 10 mg to start directly on NAMZARIC^®.

Regulatory Milestones & Clinical Updates

• Allergan announced that the Committee for Medicinal Products for Human Use (CHMP) adopted a Positive Opinion for TRUBERZI^® (eluxadoline) in the European Union. Allergan anticipates launching TRUBERZI^® in Europe in 2017.
• Allergan announced that FDA has accepted for filing the company's supplemental New Drug Application (sNDA) for AVYCAZ^® (ceftazidime and avibactam), seeking the addition of new Phase 3 clinical trial data evaluating AVYCAZ^® in patients with complicated urinary tract infections (cUTI), including pyelonephritis, due to designated susceptible pathogens to the current product label.
• Allergan has initiated a Phase 3 study of rapastinel evaluating the efficacy, safety, and tolerability of rapastinel compared to placebo in patients with major depressive disorder (MDD).
• Allergan has initiated a Phase 3 study of ubrogepant evaluating the efficacy, safety, and tolerability of ubrogepant compared to placebo for the acute treatment migraine.
• Allergan has initiated a Phase 2 study of atogepant evaluating the safety and tolerability of various doses of atogepant for the prevention of episodic migraine.
• Allergan and Serenity Pharmaceuticals announced that FDA's Bone, Reproductive and Urologic Drugs Advisory Committee voted in favor of the benefit risk profile of the New Drug Application (NDA) for SER120 (desmopressin nasal spray), an investigational drug developed for the treatment of nocturia, a common yet often under-diagnosed urological disorder, in adults who awaken two or more times per night to empty the bladder.
• Allergan and Motus announced positive results from a Phase 2b study for relamorelin for the treatment of diabetic gastroparesis and other GI functional disorders. The study showed relamorelin administered for 12 weeks demonstrated substantial efficacy for the key diabetic gastroparesis symptoms of nausea, post-prandial fullness, abdominal pain and bloating (measured both individually and as a composite endpoint), along with a potent prokinetic effect on gastric motility. Allergan also announced that it has exercised its option to acquire Motus Therapeutics.

Updated Full Year 2016 Continuing Operations Guidance¹
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. Specialized Therapeutics, U.S. General Medicine and International.

¹ Excludes Anda from Net Revenues and expenses. Guidance based on net revenues.
² GAAP (loss) per share includes the impact of amortization of approximately $6.4 billion, IPR&D impairments and asset sales and impairments, net of $293 million and dividends on preferred shares of approximately $278 million.
³ GAAP EPS shares do not include dilution of shares as earnings are a net loss.  As such, the dilution impact of preferred share conversion and outstanding equity awards is not included in the forecasted shares.
⁴ Includes anticipated impact of $10 billion in Accelerated Share Repurchase (ASR)

Third Quarter 2016 Conference Call and Webcast Details
Allergan will host a conference call and webcast today at 8:30 a.m. Eastern Time to discuss its third quarter 2016 results. The dial-in number to access the call is U.S./Canada (877) 251-7980, International (706) 643-1573, and the conference ID is 96095913. 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 November 16, 2016. The replay may be accessed by dialing (855) 859-2056 and entering conference ID 96095913.  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 70+ 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 June 30, 2016 (certain of such periodic public filings having been filed under the "Actavis plc" name). 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 adjusted net income, non-GAAP adjusted diluted 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 nine months ended September 30, 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 nine months ended September 30, 2016 and 2015:

The following table presents Allergan plc's Condensed Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015:

The following table presents Allergan plc's Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2016 and 2015:

We define non-GAAP adjustments to the reported GAAP measures as GAAP results adjusted for the following net of tax: (i) amortization expenses, (ii) global supply chain and operational excellence initiatives, (iii) acquisition, integration and licensing charges, (iv) accretion and fair market value adjustments on contingent liabilities, (v) impairment/asset sales and related costs, including the exclusion of discontinued operations, (vi) legal settlements and (vii) other unusual charges or expenses. The following table presents Allergan plc's GAAP to Non-GAAP adjustments for the three and nine months ended September 30, 2016 and 2015:

The non-GAAP effective tax rate in the three and nine months ended September 30, 2016 was impacted by income earned in jurisdictions with tax rates lower than the Irish statutory rate partially offset by U.S. income taxed at rates higher than the Irish statutory rate. The non-GAAP effective tax rate in the three months ended September 30, 2016 excludes approximately $135 million of discrete tax benefits related to items including: a change in tax rates applicable to certain temporary differences, a benefit for the New Jersey Grow income tax credit and other non-recurring items. The non-GAAP effective tax rate for the nine months ended September 30, 2016 excludes approximately $60 million of discrete tax benefits related to items including: tax effects of pre-tax impairments, a change in tax rates applicable to certain temporary differences, a benefit for the New Jersey Grow income tax credit, changes in valuation allowances related to the Teva disposition and other non-recurring items.

The following table presents a reconciliation of Allergan plc's reported net (loss) from continuing operations attributable to shareholders and diluted earnings per share to non-GAAP adjusted net income and non-GAAP adjusted diluted net income per share for the three and nine months ended September 30, 2016 and 2015:

We define adjusted EBITDA as an amount equal to consolidated net (loss) from continuing operations attributable to shareholders for such period adjusted for the following: (i) interest expense, (ii) interest income, (iii) (benefit) for income taxes, (iv) depreciation and amortization expenses, (v) stock-based compensation expense, (vi) asset impairment charges and losses / (gains) and expenses associated with the sale of assets, including the exclusion of discontinued operations, (vii) business restructuring charges associated with Allergan's global supply chain and operational excellence initiatives or other restructurings of a similar nature, (viii) costs and charges associated with the acquisition of businesses and assets including, but not limited to, milestone payments, integration charges, other charges associated with the revaluation of assets or liabilities and charges associated with the revaluation of acquisition related contingent liabilities that are based in whole or in part on future estimated cash flows, (ix) litigation charges and settlements and (x) other unusual charges or expenses. We define non-GAAP operating income as adjusted EBITDA including depreciation, certain stock-based compensation charges and excluding dividend income.

The following table presents a reconciliation of Allergan plc's reported net (loss) from continuing operations for the three and nine months ended September 30, 2016 and 2015 to adjusted EBITDA and adjusted operating income:

The following table details Allergan plc's product revenue for significant promoted products within the US Specialized Therapeutic Segment for the three and nine months ended September 30, 2016 and 2015:

The following table details Allergan plc's product revenue for significant promoted products within the US General Medicine Segment for the three and nine months ended September 30, 2016 and 2015:

The following table details Allergan plc's product revenue for significant promoted products within the International Segment for the three and nine months ended September 30, 2016 and 2015:

The following table provides a reconciliation of anticipated GAAP loss from continuing operations to non-GAAP adjusted net income attributable to shareholders for the year ending December 31, 2016:

CONTACTS: 

Allergan:
Investors:
Lisa DeFrancesco
(862) 261-7152

Media:
Mark Marmur
(862) 261-7558

SOURCE Allergan plc

Related Links

http://www.allergan.com