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Allergan Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 7, 2012 05:29PM

Allergan Inc. (AGN) filed Quarterly Report for the period ended 2012-03-31. Allergan Inc has a market cap of $29.37 billion; its shares were traded at around $93.74 with a P/E ratio of 26.4 and P/S ratio of 5.4. The dividend yield of Allergan Inc stocks is 0.2%. Allergan Inc had an annual average earning growth of 14.9% over the past 10 years.



Highlight of Business Operations:

Eye care pharmaceuticals product net sales increased in the first quarter of 2012 compared to the first quarter of 2011 in all of our principal geographic markets. The increase in sales of our eye care pharmaceutical products is primarily due to an increase in sales of Restasis®, our therapeutic treatment for chronic dry eye disease, an increase in sales of our glaucoma drug Lumigan® 0.01%, which was launched in the United States in the fourth quarter of 2010, an increase in net sales of Ozurdex®, our biodegradable, sustained-release steroid implant for the treatment of certain retinal diseases, an increase in sales of Combigan®, our Alphagan® and timolol combination for the treatment of glaucoma, an increase in sales of Alphagan® P 0.1%, an increase in sales of Zymaxid®, our next-generation anti-infective product in the fluoroquinolone category indicated for the treatment of bacterial conjunctivitis, and an increase in sales of our artificial tears products Refresh® and Refresh® Optive™, partially offset by decreases in sales of our older-generation products, including our glaucoma drugs Alphagan® and Lumigan® 0.03%, our fluoroquinolone product Zymar®, and our topical allergy medication Elestat®.

We increased prices on certain eye care pharmaceutical products in the United States in the second half of 2011 and the first quarter of 2012. Effective January 7, 2012, we increased the published U.S. list price for Alphagan® P 0.15% by three percent, Acular®, Acular LS® and Acuvail® by four percent, Lumigan® 0.1% and Lumigan® 0.3% by five percent, Alphagan® P 0.1%, Combigan® and Zymaxid® by eight percent and Lastacaft® by ten percent. These price increases had a positive net effect on our U.S. sales in the first quarter of 2012 compared to the first quarter of 2011, but the actual net effect is difficult to determine due to the various managed care sales rebate and other incentive programs in which we participate. Wholesaler buying patterns and the change in dollar value of the prescription product mix also affected our reported net sales dollars, although we are unable to determine the impact of these effects.

product net sales, in the first quarter of 2012 compared to $589.5 million, or 47.1% of product net sales, in the first quarter of 2011. SG&A expenses in the first quarter of 2012 include aggregate charges of $9.4 million for external costs of stockholder derivative litigation associated with the 2010 global settlement with the U.S. Department of Justice, or DOJ, regarding our past U.S. sales and marketing practices relating to certain therapeutic uses of Botox® and other legal contingency expenses, and a $0.6 million charge related to the change in fair value of contingent consideration liabilities associated with certain business combinations. SG&A expenses in the first quarter of 2011 include an upfront payment of $60.0 million related to the Levadex® collaboration and co-promotion agreement with MAP Pharmaceuticals, Inc., or MAP, a gain of $9.4 million from the substantially complete liquidation of a foreign subsidiary and fixed asset impairment charges of $2.3 million related to the discontinued development of EasyBand™ and $1.6 million of stockholder derivative litigation costs associated with the 2010 global settlement with the DOJ regarding our past U.S. sales and marketing practices relating to certain therapeutic uses of Botox®. Excluding the effect of the items described above, SG&A expenses increased $40.1 million, or 7.5%, to $575.1 million, or 42.1% of product net sales, in the first quarter of 2012 compared to $535.0 million, or 42.7% of product net sales in the first quarter of 2011. The increase in SG&A expenses in dollars, excluding the charges described above, primarily relates to increases in selling, marketing, promotion and general and administrative expenses. The increase in selling and marketing expenses in the first quarter of 2012 compared to the first quarter of 2011 principally relates to increased personnel and related incentive compensation costs that support the 9.0% increase in product net sales, and additional costs supporting the expansion of our sales forces, including the addition of several new direct operations in emerging markets. The increase in promotion expenses is primarily due to an increase in direct-to-consumer advertising, primarily related to Botox® for the treatment of chronic migraine in the United States, partially offset by a small decline in advertising for Restasis® and Juvéderm®. The increase in general and administrative expenses is primarily due to increased compliance and legal costs, an increase in compensation costs, including an increase in regional management costs related to the expansion of our direct selling operations in emerging markets, and an increase in bad debt expense and general insurance costs.

Total net non-operating expense in the first quarter of 2012 was $29.6 million compared to $32.3 million in the first quarter of 2011. Interest income in the first quarter of 2012 was $1.2 million compared to interest income of $2.3 million in the first quarter of 2011. The decrease in interest income was primarily due to lower average cash equivalent and short-term investment balances earning interest and a decrease in average interest rates earned on all cash equivalents and short-term investment balances. Interest expense decreased $8.9 million to $15.8 million in the first quarter of 2012 compared to $24.7 million in the first quarter of 2011. Interest expense decreased primarily due to the conversion of our 1.50% Convertible Senior Notes due 2026 in the second quarter of 2011. Other, net expense was $15.0 million in the first quarter of 2012, consisting primarily of a net unrealized loss on derivative instruments of $12.5 million and $2.6 million in net realized losses from foreign currency transactions. Other, net expense was $9.9 million in the first quarter of 2011, consisting primarily of a net unrealized loss on derivative instruments of $6.9 million and $4.0 million in net realized losses from foreign currency transactions, partially offset by a gain of $0.5 million on the sale of a third party equity investment.

Our effective tax rate in 2011 was 27.8%. Included in our earnings before income taxes for 2011 are a $60.0 million upfront payment and a $20.0 million regulatory milestone payment related to a collaboration and co-promotion agreement with MAP, a $45.0 million upfront payment related to a collaboration and license agreement with Molecular Partners AG, intangible asset impairment charges of $20.4 million, restructuring charges of $4.6 million, fixed asset impairment charges of $2.2 million and a gain of $9.4 million from the substantially complete liquidation of a foreign subsidiary resulting from the discontinued development of EasyBand™. In 2011, we recorded income tax benefits of $22.2 million and $7.4 million, respectively, associated with the upfront payment and regulatory milestone payment related to the collaboration and co-promotion agreement with MAP and income tax benefits of $4.6 million associated with the upfront payment related to the collaboration and license agreement with Molecular Partners AG. In 2011, we did not record any tax benefits related to the intangible asset impairment charges, restructuring charges, fixed asset impairment charges and the gain from the substantially complete liquidation of our investment in a foreign subsidiary resulting from the discontinued development of EasyBand™ since a portion of these charges are not tax deductible and we do not expect to be able to utilize the deductions for the tax deductible portion of these charges in the jurisdiction where the costs were incurred. Excluding the impact of the net pre-tax charges of $142.8 million and the net income tax benefits of $34.2 million for the items discussed above, our adjusted effective tax rate for 2011 was 27.4%.

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