The Dublin-based drug maker Actavis (ACT, Financial) reported its first quarter earnings on May 11 which impressed analysts. In fact, the latest acquisition of Allergan contributed to the whopping growth in the top line which improved 59% for the quarter, though the bottom line reported a first-quarter loss. The company has provided a forecast on revenue and earnings for the full fiscal year, which looks close to the Street estimates. Let’s get into the financial playbook of Actavis and unravel the key findings of the first quarter.
The quarter numbers were impressive
Soon after the earnings release, the stock moved 3% higher in pre-market trading, reflecting the optimism of the investors on the company’s strength in its core fundamentals. In fact, the purchase of Botox maker Allergan for $66 billion in March helped to boost its top line that increase to $4.23 billion, from $2.66 billion reported a year ago. Revenue beat the analysts’ estimate of $4.05 billion for the first quarter.
Brand sales rose to $1.7 billion in the quarter, from $572 million reported in the year earlier’s similar quarter. This was chiefly due to the inclusion of Forest and Allergen’s branded meds that pushed the sales to a new peak during the quarter.
The drug maker has disclosed that through the Allergen acquisition, it was able to pump in $258 million as net revenue from Allergen’s branded drug business and of that $113 million dropped into its bottom line.
CEO, Brent Saunders, said during the earnings call – “Actavis achieved exceptional operational performance while simultaneously focusing on the completion of the Allergan acquisition and accelerating the integration of our combined company to create a growth Pharma leader…”
However, the drug maker posted a first quarter loss of $512 million, or $1.85 a share, from the net income of $96.5 million, or $0.55 a share, a year earlier. But adjusted earnings, barring the effect of one-time gains and costs, stood at $4.30 a share that clearly topped the Street’s expectations of $3.92 a share and represented a growth of 267.5% year-over-year when compared to the adjusted earnings of $1.17 per share reported in the past year’s similar quarter. Hence, the company’s loss in net income can be easily attributed to the high charges linked with the acquisition of Allergan.
Going forward
The growth in the revenue through the acquisition of Allergan has made the drug maker one of the leading pharmaceutical companies in the world. Through this purchase, the product portfolio has seen vivid diversification with inclusion of products which range from eye to skincare, to those aimed in treating stomach ailments. The accretive value of this large acquisition is already being felt and the company expects its annual revenue to improve by nearly 10% year-over-year as a result of strong portfolio of products which could aid in generating higher sales volume.
The management has been upbeat in the earnings and revenue guidance; earnings is expected to be in the range of $17-$18.5 per share for the full year, while revenue is forecasted to lie between $20.5-$21 billion. Though the earnings guidance seems be in range as per the consensus estimate of $17.7 per share, the revenue falls short of expectations for $21.5 billion for the entire fiscal year.
Concluding note
Actavis is keen in creating a strong commercial footprint and aims to work hard to deliver the sales guidance it has provided in the first quarter earnings’ call. Let’s stay tuned and keep watching how the drug maker attains the numbers it has projected for the entire fiscal year in the next quarters.
