62.4 F
Laguna Hills
Monday, Mar 18, 2024
-Advertisement-

Allergan Hikes R&D, Reviews Wish List

Pyott: “prolific free cash flow” has company eyeing deals

Irvine-based Allergan Inc. plans to boost spending to reload its product pipeline in 2012, an effort that could be supplemented by some shopping.

The drug maker will put $904 million to $936 million toward research and development this year, Chief Executive David Pyott said in an interview after the company released its fourth-quarter and 2011 earnings last week.

That comes to about 16% of Allergan’s projected full-year product sales of $5.65 billion to $5.85 billion.

The commitment keeps Allergan in line with last year on a percentage basis in terms of research and development spending. Actual spending will rise anywhere from $56 million to $78 million, based on a projected increase of be-tween 6.5% and 10.4% for this year’s product sales, which are slightly less than total sales.

The company sees “robust investment in R&D” as a key to long-term growth “whether it’s internal programs” or “my statement that we’re going to use our prolific free cash flow, which last year was over $1 billion, to buy new assets,” Pyott said.

Allergan is coming off a busy stretch for research and development, with several products cleared by the Food and Drug Administration, including the use of its flagship Botox for migraine headaches.

“We have all the benefits of this huge number of product approvals from the FDA—seven products in the last two years, 2010 and 2011. Unless we do something really stupid, we’re going to be blessed with a lot of growth from all these approvals,” Pyott said.

Allergan’s current research and development projects include Latisse for hair growth on the scalp. Latisse is now used for eyelash growth.

Allergan will have “more shots on goal” when it comes to potential acquisitions, according to Pyott, who said he borrowed the phrase from his son, a fan of the Anaheim Ducks hockey team.

Allergan’s R&D projections surprised company watchers, according to Pyott, who has run Allergan since 1998.

Analysts on Allergan’s conference call had “quite a big disconnect—they saw much lower R&D growth in 2012 than we have signaled.”

Allergan also continued its long-standing tradition of conservative forecasts.

The company said it expects profits of $260.4 million to $266.6 million for the current quarter.

Analysts, on average, expect $282.1 million in the first quarter.

Allergan said it expects first-quarter product sales (which are slightly less than total sales) of $1.34 billion to $1.39 billion.

Wall Street expects the company’s total revenue for the current quarter to be $1.38 billion.

Allergan could see a profit of $1.28 billion to $1.3 billion this year, slightly below analyst expectations of nearly $1.31 billion, according to Pyott.

Wall Street projects the drug maker’s 2012 total revenue at $5.89 billion.

“People know that we would rather be on the cautious side,” Pyott said. “It’s been like that for year after year after year.”

Wall Street, however, may have expected a bit more this time around. Allergan’s shares fell about 3% to a market value of $25.9 billion on the day it released its results and projections.

“Given heightened Street expectations and the stock’s high multiple, we are not surprised to see some weakness in (Allergan) shares today,” Seamus Fernandez, an analyst who follows Allergan for Boston-based Leerink Swann LLC, said in a flash note issued after results.

Leerink remains a long-term buyer of Allergan, Fernandez wrote.

Allergan’s fourth-quarter results were in line with expectations, and the on-target performance might have led analysts to raise the stakes on the projections for this year.

“The fourth quarter was fine,” Pyott said. “We over-delivered on the bottom line, top line was in the zone, and all the attention moved to 2012 guidance.”

The company said it earned $310 million before items during the fourth quarter, up 14% from a year earlier.

Analysts expected Allergan to make $310 million in the quarter.

Including items, Allergan’s fourth-quarter profit was $279.8 million, up 6% from a year ago.

Revenue came in at $1.4 billion, up 7% from a year earlier and in line with analysts’ consensus estimate of $1.41 billion.

Botox sales grew 8% to $415.3 million. Eye drug sales, which are Allergan’s historical core product, were up 9% to $659.1 million in the quarter. Allergan also announced plans to halt sales of its Lap-Band weight-loss device to customers affiliated with the company behind the 1-800-GET-THIN marketing campaigns, which have drawn lawsuits and regulators’ scrutiny over the deaths of five patients at clinics since 2009.

Want more from the best local business newspaper in the country?

Sign-up for our FREE Daily eNews update to get the latest Orange County news delivered right to your inbox!

-Advertisement-

Featured Articles

-Advertisement-
-Advertisement-
-Advertisement-
-Advertisement-

Related Articles

-Advertisement-
-Advertisement-