Allergan Watchers Don’t Anticipate More Q1 Wrinkles
By VITA REED
Will there be a wrinkle when Allergan Inc. reports its first-quarter financial results on Friday?
Investors were thrown for a bit of a curve in January, when the drug maker gave earnings guidance for the first quarter that fell short of Wall Street expectations.
At the time, Allergan projected net income of about $76 million for the quarter ended March 31, less than the $81 million forecast by analysts polled by Reuters Research.
If Allergan matches current revenue expectations, it will post $454 million in sales in the first quarter, up 16% versus a year earlier. Net income is projected to rise 8% based on the $76 million estimate.
Higher spending on promoting dry-eye treatment Restasis and anti-wrinkling treatment Botox, along with an expansion of Allergan’s Botox sales staff in Europe, accounted for the mild earnings surprise, said Ken Kulju, who follows Allergan for Credit Suisse First Boston.
Kulju, in a research report, said Allergan’s quarterly guidance was “back-end loaded,” with numbers below his estimates for the first three quarters of 2004, but higher for the fourth quarter.
A positive on the revenue front is expected from sales of Allergan’s glaucoma drug Alphagan. Makers of a generic version of Alphagan aren’t cutting into Allergan sales as quickly as initially believed.
Alcon Inc., the Fort Worth, Texas-based rival with some 580 workers in Irvine, and Rochester, N.Y.’s Bausch & Lomb Inc. are reportedly gearing up to introduce generic drugs for an older version of Alphagan.
Allergan had taken Alcon and Bausch & Lomb to court in 2002 in a bid to stop them from producing the generic version. But after losing the case, Allergan borrowed a page from other drug companies and came out with a newer version of the treatment,Alphagan P.
Meanwhile, Kulju said Allergan’s flagship Botox drug eventually could produce $1 billion in annual sales by 2007. This year, Botox sales are pegged at $683 million, up from $564 million last year. About 40% of Botox sales came from cosmetic uses last year. Non-cosmetic uses include treatment for uncontrollable eye blinking, among others.
Banc of America Securities analyst David Maris said in a report that Allergan has provided guidance for back-end loaded years before, “and has met such targets.”
Maris has a “buy” rating on Allergan shares with a 12-month price target of 95. Shares were trading at 89 at recent check, making Allergan OC’s second-biggest company by market value at $11.2 billion, trailing only Irvine-based chipmaker Broadcom Corp.
He upgraded the drug maker’s rating from “neutral” after attending an Allergan research and development presentation in New York in February. Maris said he walked away from the event more confident of the drug maker’s long-term pipeline, including oral tazarotene for skin disease and more uses for Botox.
Allergan, Maris said, “has several catalysts that should support the stock, including additional product launches, including new indications for Botox as well as the launch of Elestat/Relesat in time for the (U.S. and European) allergy seasons.”
The drug maker is awaiting Food and Drug Administration approval for Botox as a treatment of hyperhidrosis, or excessive sweating. Botox also is in clinical trials for treating spasticity, overactive bladder and headaches.
Also bullish on Allergan’s drug pipeline is Timothy Coan, a senior research analyst with U.S. Bancorp Piper Jaffray in Minneapolis. He said the specialty drug maker could get a revenue hike going forward because of price increases.
Allergan drugs slated for price hikes include Alphagan P, Lumigan, another glaucoma treatment, and Tazorac, which is used in several skin indications, Coan said.
Allergan previously said that Botox would have an average price increase of 7% this year.
