Allergan Reports Year End Operating Results
- Pharmaceutical sales increased 21.2 percent for the full year on a comparable basis
- Full year earnings per share up 27.0 percent, on a pro forma basis
For the quarter ended December 31, 2002, Allergan's net sales were $378.2 million including $17.3 million of non-pharmaceutical product sales primarily consisting of contract manufacturing sales to Advanced Medical Optics, Inc. (AMO), a former subsidiary that was spun-off from Allergan on June 29, 2002. Excluding sales of non-pharmaceutical and divested products, net sales were up 19.9 percent at constant currency, compared with net sales from continuing operations in the fourth quarter of 2001.
For the year ended December 31, 2002, net sales from continuing operations were $1,385.0 million including $27.8 million of non-pharmaceutical product sales. Excluding the sales of non-pharmaceutical and divested products, net sales from continuing operations were up 20.6 percent, or 21.2 percent at constant currency, compared with 2001.
Including the effect of non-recurring pre-tax charges of $9.8 million, or $0.05 per share on an after tax basis, Allergan reported diluted earnings per share from continuing operations of $0.49 for the quarter ended December 31, 2002. Excluding non-recurring pre-tax charges, Allergan's diluted earnings per share from continuing operations were $0.54 for the fourth quarter of 2002, up 25.6 percent from the $0.43 per share unaudited estimate of pro forma diluted earnings per share for Allergan's continuing pharmaceutical operations for 2001. For a detailed breakout of non-recurring items, see the "Description of the non-recurring items" section of this press release.
Including the effect of non-recurring pre-tax charges of $261.6 million, or $1.43 per share on an after tax basis, described in detail in the "Description of the non-recurring items" section of this press release, Allergan reported $0.49 diluted earnings per share from continuing operations for the year ended December 31, 2002. Excluding those non-recurring pre-tax charges, Allergan's diluted earnings from continuing operations were $1.92 per share for the year ended December 31, 2002. The 2002 unaudited estimate of pro forma diluted earnings for Allergan's continuing operations was $1.88 per share, a 27.0 percent increase over the unaudited estimate of pro forma diluted earnings per share of $1.48 for 2001. The pro forma earnings per share estimates reflect the approximate impact of additional expenses that would have been incurred in 2001 and the first six months of 2002 if Allergan's specialty pharmaceutical businesses and AMO had been operating as stand-alone companies. For the year ended December 31, 2001, earnings per share includes amortization of goodwill of $0.02 per share. There was no amortization of goodwill included in 2002 as a result of the adoption of SFAS No. 142.
"2002 marked a turning point in the evolution of Allergan as we completed our journey to become a specialty pharmaceutical company. I am particularly pleased that with all of the change, Allergan exceeded the financial objectives we provided last January, executed the spin-off of AMO on time, under budget, and with no service issues for any of our customers." said David E.I. Pyott, Chairman of the Board, President and CEO.
Eye Care Pharmaceutical Product Line
At constant currency and excluding products divested at the end of 2001, fourth quarter 2002 worldwide eye care pharmaceutical sales increased 11.3 percent over the fourth quarter of 2001. Including the effects of currency rates and divested products, fourth quarter 2002 worldwide eye care pharmaceutical sales amounted to $210.8 million, an 8.3 percent increase over the $194.6 million reported in the same quarter of 2001.
For the year ended December 31, 2002, at constant currency and excluding divested products, worldwide eye care pharmaceutical sales increased 12.7 percent over the prior year. Including the effects of currency rates and divested products, worldwide eye care pharmaceutical sales for the year ended 2002 amounted to $827.3 million, a 9.8 percent increase over the $753.7 million reported for 2001.
Sales of Allergan's glaucoma products, comprised of Alphagan® (Brimonidine Tartrate Ophthalmic Solution 0.2%), Alphagan® P (Brimonidine Tartrate Ophthalmic Solution 0.15%) preserved with Purite® (Alphagan® Franchise), Lumigan® (Bimatoprost Ophthalmic Solution 0.03%), Betagan®, Propine® and other glaucoma products increased by 24.6 percent at constant currency for the year ended December 31, 2002 as compared to 2001.
For the quarter ended December 31, 2002, worldwide net product sales for the Alphagan® Franchise were $64.7 million, a decrease of 1.2 percent, or a 2.5 percent decrease at constant currency over the $65.5 million reported in the same quarter last year. As of the week ended December 31, 2002, new prescriptions of Alphagan® P as a percentage of the new prescriptions for the total Alphagan® Franchise were 96.2 percent according to VeriSpan (Scott Levin). For the year ended 2002, worldwide net product sales for the Alphagan® Franchise were $248.5 million, a 0.9 percent decrease, or a 1.2 percent decrease at constant currency, over 2001.
For the quarter ended December 31, 2002, worldwide net product sales for Lumigan® were $35.1 million, an increase of 130.8 percent, or 128.8 percent at constant currency over the same period last year. For the year ended December 31, 2002, worldwide net product sales for Lumigan® were $123.0 million, an increase of 245.8 percent, or 245.0 percent at constant currency, over 2001. Lumigan® sales were driven by continued growth in U.S. market share and a successful European launch of the product.
At the end of the fourth quarter of 2002, Allergan received approval from the FDA for RESTASISTM (cyclosporine ophthalmic emulsion, 0.05%), the first and only therapy approved by the FDA for patients with keratoconjunctivitis sicca (chronic dry eye disease-CDED), whose tear production is presumed to be suppressed due to ocular inflammation. Allergan anticipates launching RESTASISTM in the U.S. during the second quarter of 2003.
Botox®/Neuromodulator Product Line
At constant currency rates, Botox® (Botulinum Toxin Type A) fourth quarter 2002 worldwide net sales increased by 46.0 percent over the fourth quarter of 2001. Including the effects of currency rates, fourth quarter 2002 sales for Botox® were $128.2 million, a 45.2 percent increase over the $88.3 million reported in the same quarter last year.
For the year ended December 31, 2002, worldwide net sales of Botox® were $439.7 million, an increase of 43.1 percent over the prior year at constant currency rates. Including the effects of currency rates, net sales for Botox® increased 42.1 percent over the $309.5 million reported in 2001. Botox® sales primarily fall into two categories, therapeutic and cosmetic. On a year to date basis, therapeutic sales accounted for approximately 60 percent of total sales and grew at over 30 percent. Over the same period, cosmetic sales accounted for approximately 40 percent of total sales and grew at over 60 percent. Allergan currently intends to break down the Botox® sales mix and growth rates on an annual basis in the fourth quarter of each year.
Skin Care Product Line
Sales for Allergan skin care products were $21.9 million for the quarter ended December 31, 2002, a decrease of 8.0 percent from the $23.8 million in sales reported in the fourth quarter of 2001. Allergan reported skin care product sales of $90.2 million for the year ended 2002, an increase of 14.3 percent over 2001.
For the quarter ended December 31, 2002, worldwide net product sales for the Tazorac® and Zorac® brands (Tazarotene Gel and Cream 0.05% and 0.1%), indicated for the treatment of acne and psoriasis, were $15.2 million, a decrease of 3.3 percent.
For the year ended December 31, 2002, worldwide net product sales for Tazorac® and Zorac® brands were $62.1 million, an increase of 36.7 percent, over the $45.4 million reported in 2001. For the year ended December 31, 2002, Tazorac® total prescriptions in the United States grew 38 percent over the same period last year, according to VeriSpan (Scott-Levin).
The launch of Avage(TM) (tazarotene cream 0.1%), an adjunctive agent recently approved by the FDA for the topical treatment of facial fine wrinkling, mottled hypo-and hyperpigmentation (blotchy skin discoloration), was originally anticipated for the fourth quarter of 2002. We commenced shipments to wholesalers in January 2003 and are currently preparing for the product launch in the first quarter of 2003.
During the fourth quarter of 2002, Allergan announced that it had entered into a research collaboration and license agreement with Peplin Biotech Ltd. for the right to develop and commercialize PEP005 for the topical treatment for non-melanoma skin cancer and actinic keratosis.
Description of the non-recurring items
For the quarter ended December 31, 2002, the following non-recurring items amounted to a $9.8 million pre-tax, or a $0.05 per share (all per share amounts are after tax) charge against earnings:
- Unrealized gain on mark-to-market adjustment to derivative investments of $1.0 million pre-tax, or $0.01 per share
- Duplicate operating expenses associated with the AMO spin-off of $1.4 million pre-tax, or $0.01 per share
- Charge for the early extinguishment of convertible debt of $11.7 million pre-tax, or $0.06 per share
- Restructure charge and asset write-off reversal of $2.3 million pre-tax, or $0.01 per share
- Litigation settlement costs of $118.7 million pre-tax, or $0.65 per share, associated with the global settlement with Pharmacia and Columbia University of all intellectual property disputes involving Lumigan®
- Net expenses of $100.3 million pre-tax, or $0.56 per share associated with the AMO spin-off which consist of:
- Restructuring charge and asset write-off of $63.5 million pre-tax, or $0.35 per share
- Duplicate operating expenses before tax of $42.5 million, or $0.24 per share
- Gain of $5.7 million pre-tax, or $0.03 per share, on the sale of a facility
- Mark-to-market loss on investments and related third-party collaborations of $30.2 million pre-tax, or $0.16 per share
- Unrealized mark-to-market adjustment on derivative instruments that amounted to a loss of $1.7 million pre-tax, or $0.01 per share
- Gain on partnering deals of $1.0 million pre-tax, or $0.01 per share
- Charge for the early extinguishment of convertible debt of $11.7 million pre-tax, or $0.06 per share.
For the quarter ended December 31, 2002, gross profit excluding non-recurring one-time items was $308.7 million, or 81.6 percent of net sales. For the quarter ended December 31, 2002, pharmaceutical only gross profit excluding contract sales and non-recurring one-time items was 85.5 percent of net sales. For the year ended December 31, 2002, gross profit from continuing operations and excluding non-recurring one-time items, was $1,167.0 million, or 84.3 percent of net sales.
For the fourth quarter of 2002, selling, general and administrative expenses (SG&A) amounted to $148.7 million, or 39.3 percent of net sales. For the year ended December 31, 2002, SG&A from continuing operations and excluding one-time items was $590.3 million, or 42.6 percent of net sales.
For the fourth quarter of 2002, research and development expenses amounted to $62.8 million and, as a ratio to net sales, was 16.6 percent. For the year ended December 31, 2002, research and development expenses from continuing operations and excluding one-time items were $228.4 million, or 16.5 percent of net sales.
At December 31, 2002, Allergan's stockholders' equity was $808.3 million. The Company had cash net of debt of $157.9 million. Cash and cash equivalents were $774.0 million and debt was $616.1 million. Allergan's debt-to-capital percentage was 43.3 percent. The Company's days sales outstanding was 53 and inventory days-on-hand level was 92.
During the fourth quarter of 2002, Allergan sold $641.5 million principal amount at maturity of zero coupon convertible senior notes due 2022. The notes carry a yield to maturity of 1.25%. In December 2002, Allergan completed a tender offer to purchase approximately 90 percent of the Company's previously issued and outstanding liquid yield option zero coupon convertible subordinated notes due 2020. Allergan paid approximately $380 million to complete the tender offer.
Outlook
Consistent with prior mid-term guidance of revenue growth in the mid-to-high teens and diluted earnings per share growth at 22 - 25 percent, the Company forecasts 2003 sales between $1,610 and $1,690 million, an increase of between 16 percent and 22 percent over 2002. The Company anticipates diluted earnings per share to be between $2.29 and $2.31 for the year ended 2003, an increase of between 22 percent and 23 percent over the unaudited estimate of pro forma diluted earnings per share of $1.88 for 2002. Allergan's full-year product sales guidance is as follows:
Alphagan® Franchise $205 million to $215 million, Botox® $540 million to $580 million, Lumigan® $175 million to $195 million, RESTASISTM $20 million to $40 million, Tazorac® / Avage(TM) $75 million to $85 million, and pharmaceutical only revenue of $1,550 million to $1,610 million, an increase of between 14 percent and 19 percent over 2002 pharmaceutical only revenue.
Allergan is forecasting income statement ratios for the full year 2003 as follows: pharmaceutical only gross profit, excluding contract sales, of approximately 85.0 percent, SG&A of approximately 39 – 40 percent, research and development of approximately 16 – 17 percent, and operating profit of approximately 25 – 26 percent. Days sales outstanding are forecasted at approximately 60 – 65 days due to a continued shift in sales mix.
For the first quarter of 2003, the Company estimates total worldwide sales of between $375 million and $395 million, and diluted earnings per share of between $0.52 and $0.53.
Forward-Looking Statements
In this press release, the statements regarding the outlook for Allergan's earnings per share and revenue forecasts, and statements from Mr. Pyott, among other statements above, are forward-looking statements. Because forecasts are inherently estimates that cannot be made with precision, the Company's performance at times differs from its estimates and targets, and the Company often does not know what the actual results will be until after a quarter's end and year's end. Therefore, the Company will not report or comment on its progress during the quarter. Any statement made by others with respect to progress mid-quarter cannot be attributed to the Company.
Any other statements in this press release that refer to Allergan's estimated or anticipated future results are forward-looking statements. All forward-looking statements in this press release reflect Allergan's current analysis of existing trends and information and represent Allergan's judgment only as of the date of this press release. Actual results may differ from current expectations based on a number of factors affecting Allergan's businesses, including among other things, changing competitive, market and regulatory conditions; the timing and uncertainty of the results of both the research and development and regulatory processes; domestic and foreign health care and cost containment reforms; technological advances and patents obtained by competitors; the performance, including the approval, introduction and consumer acceptance of new products and the continuing acceptance of currently marketed products; the effectiveness of advertising and other promotional campaigns; the timely and successful implementation of strategic initiatives; the uncertainty associated with the identification of and successful consummation and execution of external corporate development initiatives and strategic partnering transactions; and Allergan's ability to obtain and successfully maintain a sufficient supply of products to meet market demand in a timely manner. In addition, matters generally affecting the economy, such as changes in interest and currency exchange rates; international relations; and the state of the economy worldwide, can affect Allergan's results. Therefore, the reader is cautioned not to rely on these forward-looking statements. Allergan expressly disclaims any intent or obligation to update these forward-looking statements.
Additional information concerning these and other risk factors can be found in press releases issued by Allergan as well as Allergan's public periodic filings with the Securities and Exchange Commission, including the discussion under the heading "Certain Factors and Trends Affecting Allergan and its Businesses" in Allergan's 2001 Form 10-K and Allergan's Form 10-Q for the quarter ended September 27, 2002. Copies of Allergan press releases and additional information about Allergan is available on the World Wide Web at, www.allergan.com or you can contact the Allergan Investor Relations Department by calling 714-246-4636.
About Allergan, Inc.
Allergan, Inc., with headquarters in Irvine, California, is a technology-driven, global health care company providing eye care and specialty pharmaceutical products worldwide. Allergan develops and commercializes products in the eye care, neuromodulator and skin care markets that deliver value to our customers, satisfy unmet medical needs, and improve patients' lives.
