MAPP Map Pharmaceuticals, Inc. (MM)

Allergan, Inc.’s (AGN) second quarter 2011 earnings of 96 cents per share inched ahead of the Zacks Consensus Estimate by a penny and surpassed the company’s guidance range of 93 – 95 cents. Earnings increased 12.9% from the year-ago quarter.

Revenues

Revenues increased 13.6% to $1,417.2 million, easily exceeding the Zacks Consensus Estimate of $1,339 million.

Specialty pharmaceuticals sales increased 14.0% to $1,155.3 million, with eye care pharmaceutical sales increasing 13.8%. Strong performance of products like Lumigan and Restasis helped drive eye-care sales.

Alphagan and Combigan franchise sales went up 4.1% to $108.5 million in the reported quarter. New product Latisse contributed $21.9 million to the second quarter sales.

Botox sales increased 16.1% year on year to $418.4 million. Going forward, Allergan is looking to boost Botox sales by gaining approval for additional indications.

Meanwhile, Allergan’s medical devices segment also delivered growth, with sales increasing 12.2% to $245.1 million. While breast aesthetics sales increased 17.0% to $95.5 million, facial filler sales shot up 26.9% to $95.2 million.

However, obesity intervention sales continued to disappoint with sales declining 12.1% to $54.4 million. The medical devices segment faces competition from companies like Johnson & Johnson (JNJ) and Medicis Pharmaceutical Corp. (MRX).

Other Details

Selling, general and administrative (SG&A) expenses went up 13.9% during the quarter to $563.2 million, while research and development (R&D) expenses amounted to $212.4 million, reflecting an upside of 13.2%.

Allergan declared a quarterly dividend of 5 cents per share for the second quarter.

Pipeline Update

During the second quarter, Allergan submitted a New Drug Application (NDA) to the US Food and Drug Administration (FDA) for Levadex to be used as a treatment of migraine in adults. The company had entered into an agreement with MAP Pharmaceuticals, Inc. (MAPP) in January for the marketing of Levadex in the US.

In June, the European Medicines Agency (EMA) approved the use of Ozurdex as a treatment for inflammation of the posterior segment of the eye presenting as non-infectious uveitis. The drug is already marketed in the European Union (EU) for the treatment of macular edema associated with retinal vein occlusion. Moreover, Ozurdex is available in the US for both the indications.

We would like to remind investors that Allergan is seeking approval for the use of Botox for the treatment of urinary continence. The company has already filed the supplemental Biologics License Application (sBLA) for the said indication and expects to gain approval by the end of 2011.

2011 Guidance Revised

Allergan increased it 2011 earnings guidance to a range of $3.59 - $3.63 per share from a range of $3.56 - $3.62. The Zacks Consensus Estimate of $3.64 lies above the company’s guidance range. Allergan expects product net sales to range from $5,220 - $5,370 million (previous guidance: $5,050 - $5,250 million).

For 2011, Allergan expects total specialty pharmaceuticals net sales in the range of $4,310 - $4,440 million (previous guidance: $4,170 - $4,310 million). Sales is expected to be driven by Botox (guidance: $1,550 - $1,590 million; revised from $1,500 - $1,550 million).

Medical devices net sales are expected in the range of $910 - $930 million (previous guidance: $880 - $940 million) in 2011. Here, performance will be driven mainly by facial aesthetics (guidance: $360 - $370 million; revised from $330 - $350 million). The US approval of Juvederm XC, Allergan’s latest facial filler product, should help drive facial aesthetics sales.

Allergan also provided guidance for the third quarter of 2011. The company expects to earn 88 - 90 cents on total product net sales of $1,265 - $1,340 million. The Zacks Consensus Estimate lies within the guidance range at 91 cents.

Neutral on Allergan

We currently have a Neutral recommendation on Allergan. The stock carries a Zacks #3 Rank (Hold rating) in the short-run. Although the company is facing significant challenges due to the global economic weakness, European pricing pressure, US healthcare reform, safety issues surrounding the use of Botox, and increased competition, we think Allergan will be able to counter these challenges and will be back on its historical earnings growth trajectory.

 
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