Professional Documents
Culture Documents
P/E (F1) Rel to Industry 8.42 Q1 (Current Qtr) Q2 (Next Qtr) F1 (Current Year) F2 (Next Year)
PEG Ratio 1.15 Revisions: 4 Revisions: 5 Revisions: 3 Revisions: 5
Up: 4 Down: 0 Up: 5 Down: 0 Up: 2 Down: 1 Up: 2 Down: 3
P/S (F1) 5.33
Growth Score
Proj. EPS Growth (F1/F0) 20.29% 60 30 7 Current 60 30 7 Current 60 30 7 Current 60 30 7 Current
Days Days Days Days Days Days Days Days Days Days Days Days
Hist. EPS Growth (Q0/Q-1) 4.81 Q1 0% Q2 +0.66% F1 +0.12% F2 -0.39%
Qtr CFO Growth -130.04
2 Yr CFO Growth -29.39 Upside Zacks Consensus Estimate vs. Most Accurate Estimate
Return on Equity (ROE) 6.03%
Momentum Score Most Accurate: 4.19 Most Accurate: 4.56 Most Accurate: 16.10 Most Accurate: 17.99
Zacks Consensus: 4.17 Zacks Consensus: 4.60 Zacks Consensus: 16.11 Zacks Consensus: 18.02
1 week Volume change 14.30%
Q1 0.48% Q2 -0.87% F1 -0.06% F2 -0.17%
1 week Price Cng Rel to Industry 1.69%
Reported: 4.02 Reported: 3.35 Reported: 3.90 Reported: 3.32 Average 4 Qtr
Surprise
Estimate: 3.95 Estimate: 3.32 Estimate: 3.79 Estimate: 3.57
Q End 06/17 Q End 03/17 Q End 12/16 Q End 09/16
© 2017 Zacks Investment Research, All Rights Reserved 10 S. Riverside Plaza Suite 1600 · Chicago, IL 60606
The data on the front page and all the charts in the report represent market data as of 08/03/17, while the report's text is as of
07/21/2017
Overview
Dublin, Ireland-based Allergan plc is a pharma company engaged in
the development, manufacturing, marketing, sale and distribution of
branded pharmaceuticals, devices and select over-the-counter
(“OTC”) products. It addresses central nervous system, eye care,
medical aesthetics and dermatology, gastroenterology, women's
health, urology and anti-infective therapeutic categories.
Allergan reports its business under three segments - US Specialized Therapeutics (40% of 2016 sales), US General Medicine (41%)
and International (19%).
In order to focus on its branded segment, Allergan sold its generics business to Teva. Consequently, Teva acquired Allergan's
legacy Actavis global generics business including the U.S. and international generic commercial units, third-party supplier Medis,
global generic manufacturing operations, the global generic R&D unit, the international OTC commercial unit (excluding OTC eye
care products) and some established international brands. Allergan retained its global branded pharmaceutical and medical
aesthetic businesses as well as the biosimilars development programs. Additionally, Allergan sold its Anda distribution segment to
Teva in October 2016.
The divestiture should help speed up Allergan's goal to transform into a branded growth pharma leader. Moreover, Allergan is using
part of the proceeds from the Teva deal for a share buyback program ($15 billion including a $10 billion accelerated share
repurchase in 2016), while it continues to invest in growth. The company also repaid debt of almost $10 billion in 2016. In Nov 2016,
Allergan announced the initiation of a dividend, which began in Feb 2017.
Focus on Branded Pipeline: With the sale of its generic business, Allergan can now focus on the branded segment. The company
has more than 65 projects in mid-to-late stage development. Meanwhile, Vraylar gained FDA approval in Sep 2015 for
schizophrenia and bipolar disorder and Viberzi for irritable bowel syndrome-diarrhea in May 2015. Both Vraylar and Viberzi
performed above expectation in 2016 with the trend continuing in 2017. The company is also working on expanding the labels of
marketed products like Botox, Linzess and Restasis among others. Focus is on core therapeutic areas like Eye Care, Aesthetics,
CNS, GI, Anti-infectives, Women's Health and Urology.
This year Allergan is extending its R&D pipeline to adjacent categories like NASH, Parkinson's disease, and gene therapy with many
promising phase II/III programs in development.
It also boasts a strong pipeline with nine product launches planned in 2017. In 2016, Allergan launched over 10 new products,
including, Vraylar, Viberzi, Kybella, and Namzaric.
Allergan Inc. Deal Looks Good: The Allergan Inc. acquisition looks good to us. With this acquisition, Allergan, which was previously
known for its strong presence in the generics market, finds itself in the company of the top 10 pharmaceutical companies across the
world based on sales. The companies have complementary product portfolios and ample scope for generating cost synergies.
Allergan has strengthened its global presence especially in Canada, Europe, Latin America and Southeast Asia and other high-
value growth markets like China and India. Meanwhile, the combined U.S. sales force will ensure increased marketing reach. The
addition of several blockbuster therapeutic franchises has boosted Allergan’s North American Specialty Brands business
significantly.
Acquisitions to Drive Growth: Acquisitions form an integral part of Allergan’s expansion strategy as the company completed four
major acquisitions (Arrow, Specifar, Actavis Group and Warner Chilcott) apart from the Forest and Allergan Inc. deals in the past few
years. We view the Arrow acquisition as a positive move – it has helped Allergan expand its footprint in ex-U.S. territories and also
boosted Allergan’s product offerings and pipeline. The acquisition also provided Allergan with operational expertise and
manufacturing capability needed to support its long-term investment in biogenerics.
Allergan enhanced its commercial presence in key European markets and strengthened its foothold in the Greek pharmaceutical
market through the May 2011 Specifar acquisition. Meanwhile, the acquisition of Australia-based Ascent Pharmahealth, the
Australian and Southeast Asian generic pharmaceutical wing of Strides Arcolab Ltd. helped Allergan gain a foothold in Malaysia,
Hong Kong, Vietnam and Thailand.
The Forest acquisition pushed up Allergan’s branded products revenues significantly. The acquisition has led to the creation of a
specialty company with a diversified portfolio and a presence in different geographical areas.
The KYTHERA acquisition also looks good with Kybella representing multi-million dollar sales potential. We are also positive on the
Warner Chilcott acquisition which makes strategic and financial sense.
In 2017 so far, through the accretive acquisitions of LifeCell and ZELTIQ, Allergan has expanded its medical aesthetics business
into regenerative medicine and body sculpting, respectively.
Biosimilars to Boost Revenues: Biosimilars represent significant opportunity. In Dec 2011, Allergan and Amgen entered into a
collaboration agreement for the worldwide development and commercialization of three oncology antibody biosimilars, which include
biosimilar versions of Roche’s Avastin (ABP 215; under review in the U.S. and EU), Herceptin (ABP 980 – U.S. regulatory
submission expected in 2017; under review in the EU) and Rituxan (ABP 798 – phase III). The products developed under the
collaboration will be sold under a joint Amgen/Allergan label.
Reasons To Sell:
Namenda IR Facing Generics: Generic versions of Namenda IR have entered the Allergan is facing generic
market. Allergan, which was looking to stop selling Namenda IR in order to accelerate threat for Namenda IR as
the switching of patients to Namenda XR prior to the entry of IR generics, faced a hitch well as patent challenges
in its plans with a court requiring the company to continue selling the IR version. for some of the other
Namenda IR sales are being severely impacted now that generics have entered the products in its branded
market. Moreover, sales of Namzaric, a once-daily, fixed-dose combination of Namenda portfolio.
XR and Aricept, are yet to pick up.
In 2017, Namenda franchise sales will continue to erode especially with the expected entry of a generic version of Namenda XR in
the fourth quarter of 2017.
Pipeline Setbacks: Allergan has been working on expanding its branded business and is investing a lot in its pipeline. However, the
company has had its share of pipeline setbacks including a complete response letters (CRL) for products like Byvalson and Vraylar,
which resulted in a delay in the approval of these products. The company reported disappointing results from the MD-72 study on
Vraylar in Aug 2016, which was evaluating the drug as an adjunctive treatment to antidepressant therapy in adults with major
depressive disorder (MDD). Allergan currently has several late-stage and regulatory stage candidates in its pipeline. Additional
pipeline and regulatory setbacks would weigh on the stock.
Generic Challenges: Allergan is facing patent challenges for quite a few of its products including Generess Fe, Namenda XR and
Asacol HD. Other products like Bystolic, Linzess and Viibryd are all slated to lose exclusivity over the next few years. The earlier-
than-expected entry of generic competition would impact branded segment sales.
Meanwhile, new competition for key growth drivers, Restasis and Linzess, is an investor concern. Shire’s dry eye disease drug
Xiidra, launched last year, is posing strong competition for Restasis. Meanwhile, Synergy’s Trulance (plecanatide) received FDA
approval in Jan 2017 for CIC, which could pose competition to Linzess.
Global Pricing Pressures: Global efforts toward health care cost containment are creating pricing pressure on drugs and market
access. The health care reforms in the U.S. have significantly increased the number of patients in the Medicaid program under
which sales of drugs are subject to substantial rebates. In many markets outside the U.S., government-mandated pricing actions
have led to lowering of generic and patented drug prices. All these factors are creating pressure on sales and profits of pharma
companies.
Revenues came in at $3.57 billion, up 5.1% from the year-ago period, and beat the Zacks Consensus Estimate of $3.53 billion by 1.2%.
First-quarter revenues gained from the addition of two months of revenues from the LifeCell acquisition, which closed in Jan 2017.
While key products like Botox, Lo Loestrin and Linzess and new products like Vraylar and Viberzi did well in the quarter, sales were hurt
by sales erosion from Namenda XR and loss of exclusivity, mainly from Asacol HD and Minastrin.
Meanwhile, sales were slightly hurt by change in U.S. wholesale buying patterns and normal seasonality in the first quarter.
Segment Discussion
Allergan reports revenues under three segments – U.S. General Medicine, U.S. Specialized Therapeutics and International.
U.S. Specialized Therapeutics’ net revenues increased 14% to $1.48 billion driven by strong growth in Facial Aesthetics, Botox
Therapeutic and the addition of LifeCell’s Alloderm. Products like Botox (cosmetic) and Restasis raked in sales of $183.8 million (up
11%) and $308.8 million (up 3%), respectively. Botox Therapeutic revenues were $308.8 million, up 13%. In addition, Juvéderm
Collection of fillers rose 17%, Kybella rose 34% and Ozurdex sales increased 16%, which contributed to the upside.
U.S. General Medicine net revenues declined 7% to $1.35 billion in the reported quarter with sales declining in four out of five sub-
segments - Central Nervous System, Diversified Brands, Women's Health, and the Gastrointestinal franchise. Anti-Infectives sales rose
8.2% to $55.7 million.
Established products like Linzess and Lo Loestrin as well as new products like Viberzi and Vraylar did well in the quarter. Linzess’
sales rose 8% in the quarter to $147.6 million, driven by strong demand and continued OTC conversion, which offset the negative
impact of trade buying patterns.
However, lower Namenda IR and XR sales hurt the performance of the CNS franchise. Namenda IR sales plunged 90.2% in the
quarter. On the other hand, Namenda XR sales declined 30% to $122.0 million in the quarter due to lower demand, unfavorable trade
buying patterns and shift of promotional efforts to Namzaric.
Namzaric, a once-daily, fixed-dose combination of Namenda XR and Aricept, recorded sales of $23.6 million compared with $19.5
million in the previous quarter. At the call, the company mentioned that Namzaric sales benefited from an increased use of combination
therapy as patients are transitioning from monotherapy Aricept to Namzaric.
Asacol/Delzicol sales declined 46% due to a reduction in demand for Ascaol HD, following the launch of an authorized generic in Aug
2016 as well as lower demand for Delzicol.
In the Women’s Health segment, Minastrin 24 revenues declined 48% to $41.1 million in the quarter due to loss of exclusivity in Mar
2017.
The International segment recorded net revenues of $737.3 million, up 10% from the year-ago period driven by growth in Facial
Aesthetics.
Profits Decline
Adjusted operating income declined 7% in the quarter to $1.62 billion due to higher operating expenses and the addition of lower
margin aesthetic franchises.
Selling, general and administrative (SG&A) expenses rose 14.1% to $1.11 billion in the quarter, primarily due to higher promotional
spend to support new product launches. R&D expenses increased 42.5% to $393.9 million to support an advancing pipeline.
2017 Outlook
Allergan expects total revenue in the range of $15.8 billion to $16.0 billion for 2017 compared with $15.5 billion to $15.8 billion
previously. This represents year-over-year growth in the range of high single-digit. Currency headwinds are expected to hurt revenues
by approximately $100 million.
Adjusted earnings are expected in the range of $15.85–$16.35 compared with $15.80–$16.30 per share previously. Adjusted earnings
guidance continues to reflect strong double-digit growth in the range of 17% to 21%.
At the call, the company said that operating margin will improve as revenues grow during the remainder of the year.
The company expects stable Restasis revenues, while Namenda franchise sales will continue to erode in 2017, especially with the
expected entry of a generic version of Namenda XR in the fourth quarter of 2017. Also, Allergan does not expect any generic version of
Estrace Cream to be launched this year.
Adjusted gross margins are expected between approximately 86% and 87%. R&D expenses are expected to be approximately $1.6
billion compared with $1.45 billion to $1.55 billion expected previously. SG&A spend is expected between $4.45 and $4.55 billion
compared with $4.3 billion and $4.4 billion previously as a result of the inclusion of Zeltiq’s operating costs.
For the second quarter, the company expects revenues of approximately $33.9 billion to $4 billion. Meanwhile SG&A expenses are
expected to be the highest in the second quarter due to continued strong promotion of key brands, the addition of ZELTIQ, and the
launch of Rhofade cream for rosacea.
Recent News
New Data on Viberzi – Jul 10
Allergan announced encouraging results from a pooled analysis of two phase III studies evaluating the efficacy and safety of Viberzi for
the treatment of adults suffering with irritable bowel syndrome with diarrhea (IBS-D).
The pre-specified prospective pooled subgroup analysis from the two phase III studies (IBS-3001 and IBS-3002), was conducted in
nearly 2,500 IBS-D patients. Out of them these patients. 36% reported use of loperamide - a drug indicated for treatment of diarrhea - in
the 12 months prior to study. Data from the study demonstrated that Viberzi safely and effectively treats the IBS-D symptoms of
abdominal pain and diarrhea irrespective of prior use of loperamide. These results were published in The American Journal of
Gastroenterology.
Allergan announced the launch of the over-the-counter (OTC) product Refresh Optive MEGA-3 enhanced with flaxseed oil. The product
is the latest innovation in the Refresh portfolio that fortifies the lipid layer when Meibomian Gland Dysfunction (MGD) patients suffer
from dry eye.
Allergan announced a deal to acquire privately held medical device company Keller Medical, Inc, which makes Keller Funnel, for an
undisclosed amount.
These novel plastic funnels are used in breast augmentation or reconstruction procedures. They are designed to improve breast
implantation and reduce the risks of implant contamination during procedures by minimizing surgeon and patient contact. The
acquisition is a strategic fit for Allergan's plastic surgery and regenerative medicine business.
Value Score - -
Cash/Price 19.21 1.01 9.77 -9.04 -34.48 -20.32
EV/EBITDA 21.26 -1.99 12.74 16.17 25.36 14.03
PEG Ratio 1.15 1.15 1.99 0.56 0.73 9.40
Price/Book (P/B) 1.19 2.87 3.22 1.70 0.99 3.21
Price/Cash Flow (P/CF) 109.76 -1.52 13.49 8.93 5.10 15.06
P/E (F1) 15.54 -1.14 18.98 6.67 5.09 28.19
Price/Sales (P/S) 5.33 7.40 2.50 1.49 1.03 2.51
Earnings Yield 6.42% -8.89% 5.25% 14.11% 14.94% 3.46%
Debt/Equity 0.40 0.15 0.68 1.38 1.02 0.04
Cash Flow ($/share) 32.54 -0.45 5.41 7.61 6.59 2.17
Growth Score - -
Hist. EPS Growth (3-5 yrs) 20.29% 5.79% 7.16% 9.75% -7.31% 5.79%
Proj. EPS Growth (F1/F0) 18.94% 6.52% 9.44% 6.52% -7.77% 15.32%
Curr. Cash Flow Growth -3.74% 16.61% 5.40% 28.42% 11.41% -21.23%
Hist. Cash Flow Growth (3-5 yrs) 62.52% 4.90% 6.71% 24.32% 3.97% -2.18%
Current Ratio 1.32 2.63 1.37 1.56 0.93 1.18
Debt/Capital 25.85% 21.29% 41.65% 57.97% 47.77% 4.21%
Net Margin 82.42% -17.73% 9.86% 4.59% 1.49% 7.92%
Return on Equity 6.03% -31.50% 15.93% 23.54% 16.37% 9.61%
Sales/Assets 0.12 0.39 0.54 0.34 0.26 0.63
Proj. Sales Growth (F1/F0) 5.32% 0.00% 5.19% 12.35% 7.22% 12.36%
Momentum Score - -
Daily Price Chg 0.07% -0.58% -0.10% -6.01% -24.00% -2.51%
1 Week Price Chg 1.69% -2.64% -0.00% -6.67% -23.63% -2.62%
4 Week Price Chg 3.65% -5.92% 2.17% -7.84% -25.24% -12.02%
12 Week Price Chg 8.38% -1.93% 3.07% -12.00% -25.78% -11.00%
52 Week Price Chg -1.22% -15.57% 11.66% -28.53% -57.17% -19.12%
20 Day Average Volume 1,648,008 151,279 0 3,658,027 6,988,939 342,138
(F1) EPS Est 1 week change 0.26% 0.00% 0.08% -0.05% 0.00% 0.00%
(F1) EPS Est 4 week change 0.24% 0.00% 0.32% -0.60% 0.61% -18.99%
(F1) EPS Est 12 week change 0.59% -1.56% 1.00% -1.56% -0.59% -27.27%
(Q1) EPS Est Mthly Chg 0.03% 0.00% 0.00% -1.10% 1.67% NA
Agreement
This is the extent which brokerage analysts are revising their earnings estimates in the same
direction. The greater the percentage of estimates being revised higher, the better the score for this
component.
For example, if there were 10 estimate revisions over the last 60 days, with 8 of those revisions up,
and the other 2 down, then the agreement factor would be 80% positive. If, however, 8 were to the
downside with only 2 of them up, then the agreement factor would be 80% negative. The higher the
percentage of agreement the better.
Magnitude
This is a measure based on the size of the recent change in the current consensus estimates. The
Zacks Rank looks at the magnitude of these changes over the last 60 days.
In the chart to the right, the display shows the consensus estimate from 60-days ago, 30-days ago,
7-days ago, and the most current estimate The difference between the current estimate and the
estimate from 60-days ago is displayed as a percentage. A larger positive percentage increase will
score better on this component.
Upside
This is the difference between the most accurate estimate, as calculated by Zacks, and the
consensus estimate. For example, a stock with a consensus estimate of $1.00, and a most
accurate estimate of $1.05 will have an upside factor of 5%.
This is not an indication of how much a stock will go up or down. Instead, it's a measure of the
difference between these two estimates. This is particularly useful near earnings season as a
positive upside percentage can be used to help predict a future surprise.
Surprise
The Zacks Rank also factors in the last few quarters of earnings surprises. Companies that have
positively surprised in the recent past have a tendency of positively surprising again in the future (or
missing if they recently missed).
A stock with a recent track record of positive surprises will score better on this factor than a stock
with a history of negative surprises. These stocks will have a greater likelihood of positively
surprising again.
Academic research has proven that stocks with the best Growth, Value, and Momentum characteristics outperform the market. The
Zacks Style Scores rate stocks on each of these individual styles and assigns a rating of A, B, C, D and F. An A, is better than a B; a B
is better than a C; and so on.
As an investor, you want to buy stocks with the highest probability of success. That means buying stocks with a Zacks Rank #1 or #2,
Strong Buy or Buy, which also has a Style Score of an A or a B.