Allergan Continues at Neutral - Analyst Blog
August 29 2011 - 5:00AM
Zacks
We continue to have a Neutral recommendation on Allergan
Inc. (AGN) following the release of second quarter 2011
financial results.
The company has a solid track record of meeting or beating its
earnings guidance. Allergan second quarter earnings of 96 cents per
share were above the company’s guidance range of 93 cents – 95
cents per share and a penny ahead of the Zacks Consensus Estimate.
Strong sales helped boost earnings. While earnings increased 12.9%
from the year-ago quarter, revenues increased 13.6% to $1,417.2
million. Revenues easily surpassed the Zacks Consensus Estimate of
$1,339 million.
Allergan has been expanding into new therapeutic areas through
acquisitions and collaboration agreements over the past few years.
The company’s March 2006 acquisition of global healthcare company,
Inamed Corporation, allowed it to expand its product portfolio
significantly. Other acquisitions by Allergan include those of
Groupe Corneal Laboratories, the company’s partner and licensor of
Juvederm dermal fillers in the US, Canada, and Australia; the Swiss
medical technology developer EndoArt SA (specializes in the
development of remote-controlled implants used in the treatment of
morbid obesity and other conditions); and the US-based
pharmaceutical company Esprit Pharma. Further, in the first quarter
of 2010, Allergan acquired a medical device company, Serica
Technologies, Inc., and, in July 2011, Allergan announced the
acquisition of dermatology company, Vicept Therapeutics.
Collaboration agreements include Allergan’s licensing agreement
with Serenity Pharmaceuticals for the development and
commercialization of a treatment for nocturia. The company also has
an agreement with Bristol-Myers Squibb Co. (BMY)
for the development and commercialization of a drug for neuropathic
pain. Additionally, in January 2011, Allergan entered into a
collaboration agreement with MAP Pharmaceuticals
Inc. (MAPP) for the US promotion of Levadex, which has
completed late-stage trials for the treatment of acute migraine in
adults, a self-administered, orally inhaled therapy. Moreover, in
May 2011, Allergan entered into a licensing agreement with
Molecular Partners AG and obtained global rights to MP0112, which
is being investigated for the treatment of retinal diseases.
We note that Allergan’s lead drug, Botox, faces competition from
Medicis Pharmaceutical Corp.’s (MRX) Dysport.
Botox sales have been impacted in the past due to weak consumer
spending and negative news surrounding the product’s safety.
Additional competition in the market could result in the company
losing share to its competitors, thereby leading to a decline in
Botox sales.
Additionally, several products in Allergan’s portfolio like
Botox cosmetic, facial aesthetics, obesity intervention and breast
implants have limited reimbursement or are not covered by
government or other health care plans. Moreover, these products are
not life-saving in nature. As such, demand for these products is
dependent on discretionary spending by customers. Sales of such
products are, therefore, likely to be affected by weakness in the
economy as consumers postpone their requirements for these
products. A decline in sales of these products was witnessed in
2009 and continuing weakness in the global economy could lead to an
additional decline in consumer demand.
However, we believe that Allergan’s presence across different
segments and geographies will help maintain growth going forward.
The stock carries a Zacks #2 Rank (Buy rating) in the short
run.
ALLERGAN INC (AGN): Free Stock Analysis Report
BRISTOL-MYERS (BMY): Free Stock Analysis Report
MAP PHARMACEUT (MAPP): Free Stock Analysis Report
MEDICIS PHARM-A (MRX): Free Stock Analysis Report
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