UPDATE: Allergan 4Q Profit Up 19%; EPS Outlooks Below Street

Allergan Inc. (AGN) said Wednesday its fourth-quarter profit increased 19% on year as it saw balanced growth in drugs and medical devices, but the Botox maker issued light earnings guidance as it plans to ramp up spending on research and development.

The company, which won approval last year to sell Botox as a treatment for chronic migraine headaches, is bumping up spending to "reload our pipeline," Chief Executive David E.I. Pyott said. The company aims to spend 16% of sales this year on a host of R&D projects, up nearly a percentage point from the 2010 ratio.

Shares recently traded down 0.6% to $70.89.

Allergan reported a fourth-quarter profit of $263.1 million, or 85 cents a share, compared with a profit of $221.5 million, or 72 cents, a year earlier. Excluding amortization, tax charges and other items, earnings rose to 88 cents from 78 cents as total product sales rose 6.9% to $1.29 billion.

Analysts surveyed by Thomson Reuters had expected earnings of 89 cents a share on sales of $1.25 billion. Leerink Swann analyst Seamus Fernandez said earnings missed expectations due to a higher tax rate and selling, general and administrative spending.

The company's specialty pharmaceutical business posed a 6.9% sales gain, led by an 11% increase for Botox. Allergan said slightly more than half of the injectable neurotoxin's sales last year were for therapeutic uses while the rest was for wrinkle-smoothing cosmetic use. The cosmetic sales grew more sharply on the year, evidence of a rebound in out-of-pocket spending on aesthetic procedures after a dip during the recession.

On Monday, Allergan further expanded its migraine portfolio by agreeing to pay Map Pharmaceuticals Inc. (MAPP) up to $157 million to access Map's experimental migraine treatment Levadex, which the companies will jointly promote to U.S. specialists while sharing profits. Map plans to file a U.S. application in the first half this year. While this deal doesn't cover U.S. primary care doctors or international markets, Pyott said Allergan would consider an expanded agreement with Map to cover those areas.

Sales in the company's medical-devices franchise, which includes breast implants and stomach bands for obesity treatment, rose 7.1%. While the Food and Drug Administration recently said it is investigating a possible link between breast implants and a rare type of cancer, Pyott said Allergan doesn't expect this issue to have a major impact on sales this year.

Overall, the company said it expects 2011 sales of $5.02 billion to $5.22 billion, plus earnings on an adjusted basis of $3.54 to $3.60 per share. The company's sales outlook brackets the average forecast among analysts surveyed by Thomson Reuters, but its earnings outlook is under analysts' $3.63 view.

Wells Fargo analyst Larry Biegelsen said Allergan tends to issue conservative guidance, so there is a chance for improvement as the year progresses.

For the first quarter, Allergan said it expects a profit of 71 cents to 73 cents a share on revenue of $1.17 billion to $1.22 billion, versus analysts' call for 78 cents a share on $1.2 billion.

The maker of Botox has seen its top line rise recently as sales of its medical devices increase and regulatory approvals open up its treatments to new markets. Last year, the FDA widened the approved usage of Botox to include the treatment of migraines.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com

--Drew FitzGerald contributed to this article.

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