Here's AGN's report:
IRVINE, Calif.--(BW HealthWire)--July 16, 1997--Allergan, Inc.
(NYSE:AGN) announced second quarter 1997 worldwide sales of $284.5
million, a decrease of $5.1 million or 2 percent compared to the
second quarter of 1996. Excluding the impact of foreign currency
changes, sales increased by 2 percent or $6.8 million over the second
quarter of 1996.
Earnings per share for the second quarter of 1997 were $0.33
compared to $0.01 for the second quarter of 1996. Second quarter
results in 1996 included special charges for restructuring costs of
$34.2 million and asset write-offs of $6.7 million. Net of tax, the
special charges reduced earnings by $0.44 per share. Excluding the
effect of the special charges in 1996, earnings per share for the
second quarter were $0.45 in 1996 compared to $0.33 in 1997, a
decrease of 27 percent.
The effects of foreign currency changes accounted for
approximately fifty percent of the decline in earnings per share in
the second quarter of 1997. Although some foreign currencies have
recently made modest improvements, at current exchange rates sales
and earnings are expected to be adversely affected by foreign
currency changes for the second half of the year compared to 1996
results. Sales in markets outside the United States represented 57
percent of the company's sales in the second quarter of 1997.
Sales for the first six months of 1997 were $540.7 million, a 1
percent decrease over the first six months ended June 30, 1996.
Excluding the impact of foreign currency changes, sales for the six
months ended June 27, 1997 increased by $12.2 million or 2 percent
over the comparable period in 1996. Earnings per share for the first
six months of 1997 were $0.60 compared to $0.36 for the comparable
1996 period. Excluding the impact of the special charges in 1996,
earnings per share for the first six months of 1996 were $0.80.
"We are not satisfied with our financial results for the first
half of the year," stated Allergan Chairman and CEO William C.
Shepherd. "But we are encouraged by the progress being made with our
new products and in our technology portfolio, especially the
retinoids, which are fundamental to Allergan's technology-driven
strategy." Recent findings in retinoid science indicate the broad
potential they have as therapeutic agents. Continued investment in
receptor and function selective retinoids is designed to expand their
use beyond skin disorders and lead the company beyond the eye and
skin care markets and into emerging and new markets such as cancer
and metabolic disease.
"We are committed long term to fully funding our retinoid
technologies. To do so, we are exploring financing alternatives,"
concluded Shepherd.
In commenting on new product performance during the second
quarter, Shepherd said, "Two new products, Alphagan(r) and
Zorac(r)/Tazorac(r), contributed to our sales during the second
quarter and year to date. These product launches reflect the
positive results of our primary strategy of investing in new
technologies that create value and achieve a sustainable competitive
advantage."
"We expect the next significant new technology to be delivered
from our internal R&D efforts will be the AMO(r)Array(r)," added
Shepherd. "We hope to launch the AMO(r)Array(r) in the United States
later this year."
On July 10, 1997, the Food and Drug Administration's (FDA)
Ophthalmic Devices Advisory Panel recommended approval of Allergan's
AMO(r)Array(r) intraocular lens (IOL). The AMO(r)Array(r) is a
foldable IOL that ophthalmic surgeons can implant through a small
incision during cataract surgery. This unique, patented IOL is
designed to provide a range of functional vision from near through
distance. The AMO(r)Array(r) is intended to provide an increased
depth of focus and associated near vision, as well as the potential
for reduced spectacle dependence, when compared to monofocal IOL
implants.
Shepherd continued, "We have made significant reductions to our
overhead structure with the closure of three redundant manufacturing
facilities in Phoenix, AZ, Irwindale, CA, and Colonial Heights, VA.
We should begin to see improvement in our gross profit in the second
half of this year, with a greater benefit recognized in 1998."
Allergan Ligand Retinoid Therapeutics, Inc. (ALRT)
ALRT's (Nasdaq: ALRI) Board of Directors recently approved a
research and development plan for 1997 which represents an
acceleration in spending on ALRT's retinoid programs. The
accelerated spending is the result of more rapid discovery and
development of a significantly larger library of viable retinoid
compounds than anticipated at the time of the formation of ALRT in
1994. This acceleration of spending should result in the use of
substantially all of the funds available for research and development
remaining in ALRT in late 1997. Ligand Pharmaceuticals Incorporated
(Nasdaq: LGND) and Allergan have certain purchase options over the
Callable Common Stock and the assets of ALRT which could be triggered
by the use of substantially all of ALRT's funds.
The shares of the Callable Common Stock are subject to a stock
repurchase option. From June 3, 1997 until June 2, 1998, Ligand has
the right to acquire all ALRT Callable Common Stock for $71.4 million
and Allergan would have the right to pay approximately $9 million to
Ligand for an undivided one-half interest in the assets and
technologies of ALRT.
Inventory in Distribution Channels
Management has determined that in the current market environment
in the United States and certain other markets inventory levels in
some distribution channels are higher than desirable. A deliberate
reduction of these inventories in the second half of 1997 is planned.
This planned inventory reduction is anticipated to have a negative
impact on sales growth during the second half of 1997. The negative
impact of this reduction on earnings is anticipated to be largely
offset by certain one time gains expected to be recorded in the
second half of 1997.
Eye Care Business Unit Performance
Eye Care Pharmaceutical
Worldwide sales for the eye care pharmaceutical business were
$103.8 million for the second quarter of 1997, a 4 percent decrease
compared to the second quarter of 1996. Excluding the impact of
foreign currency changes, pharmaceutical sales decreased 1 percent or
$1.5 million compared to the second quarter of 1996.
Worldwide pharmaceutical sales for the first six months of 1997
were $197.1 million or 4 percent less than the same period last year.
Excluding the impact of foreign currency changes, pharmaceutical
sales decreased 2 percent or $4.7 million compared to the first six
months of 1996.
Pharmaceutical sales have been impacted by continuing weakness in
the base business due to product returns and generic competition
offset by strong initial acceptance of Alphagan(r) (brimonidine) in
the U.K. and the U.S. markets. Approval to market Alphagan(r) in
the balance of the European Union through the Mutual Recognition
Procedure is underway.
Ophthalmic Surgical
Sales for the ophthalmic surgical business were $44.9 million
during the second quarter of 1997, a decrease of 5 percent compared
to the second quarter of 1996. Excluding the impact of foreign
currency changes, surgical sales were essentially flat compared to
the second quarter of 1996.
Worldwide ophthalmic surgical sales for the first six months of
1997 were $85.2 million or 3 percent less than the same period last
year. Excluding the impact of foreign currency changes, surgical
sales increased 2 percent or $1.4 million over the first six months
of 1996.
Optical Contact Lens Care
Sales for the optical contact lens care business were $93.4
million for the second quarter of 1997, a decrease of 10 percent
compared to the second quarter of 1996. Excluding the impact of
foreign currency changes, optical contact lens care sales decreased
4 percent or $4.1 million compared to the second quarter of 1996.
Optical contact lens care sales continue to be negatively impacted in
Europe by the market shift from traditional hydrogen peroxide
disinfection systems to more convenient and lower priced one-bottle
disinfection systems and by new private label competition.
Worldwide optical contact lens care sales for the first six
months of 1997 were $182.8 million or 6 percent less than the same
period last year. Excluding the impact of foreign currency changes,
optical contact lens care sales decreased 1 percent or $2.0 million
compared to the first six months of 1996.
After a successful European launch, a new formulation of
Complete(r) has been launched in the United States. The new
Complete(r) is the only one-bottle solution on the market in the U.S.
with unique dual lubricating agents, Tyloxapol and HPMC
(hydroxypropyl methylcellulose).
Skin Care Business Unit
Sales for the skin care products business were $20.1 million
during the second quarter of 1997, an increase of 40 percent over the
same period last year. Worldwide skin care sales for the first six
months of 1997 were $33.6 million or 19 percent greater than the same
period last year. Sales of Zorac(r)/Tazorac(r) contributed the
majority of the sales increase.
In June, Allergan received approval from the Food and Drug
Administration to market Tazorac(r) (tazarotene topical gel) 0.05%
and 0.1% in the United States for the treatment of stable plaque
psoriasis on up to 20 percent body surface area and the 0.1% gel for
mild-to-moderately severe facial acne vulgaris. Allergan shipped
initial wholesaler stocking orders of Tazorac(r) gel in the United
States during the second quarter of 1997.
Also in June, Allergan successfully completed the Zorac(r)
(tazarotene topical gel) European Mutual Recognition Procedure, led
by the German licensing authority BfArM, with the acceptance of a
harmonized Summary of Product Characteristics (SPC) (European
labeling) by 12 Member States of the European Union. These include
the following countries: Austria, Belgium, Finland, France, Germany,
Greece, Ireland, Italy, Luxembourg, Spain, Sweden and the United
Kingdom. Based on the harmonized SPC and the prior marketing
approval in Germany, it is expected that the national licenses will
be issued across Europe during the fourth quarter.
Botox/Neuromuscular Business Unit
Sales for Botox(r) (Botulinum Toxin Type A) purified neurotoxin
complex were $22.3 million during the second quarter of 1997, an
increase of 36 percent from the same period last year. Worldwide
Botox(r) sales for the first six months of 1997 were $42.0 million or
37 percent greater than the same period last year. In April 1997,
Botox(r) was launched in Japan for the treatment of blepharospasm.
Stock Repurchase Program
In March 1997, the company activated its Stock Repurchase
Program. Under the terms of a stock repurchase plan previously
approved by the Board of Directors in 1993, Allergan is authorized to
make repurchases from time to time, at the discretion of management,
in the open market or through privately negotiated transactions.
Repurchased common shares are added to Allergan's treasury shares and
used to meet common stock requirements for employee benefit plans.
Since March 1997, the company has purchased 1.2 million shares.
On June 27, 1997, the company had 64.8 million shares outstanding.
The existing Board approval allows repurchase of approximately 2.2
million additional shares at this time.
Additional Financial Highlights
Gross profit for the second quarter of 1997 was $184.4 million or
64.8 percent of net sales. The gross profit percentage for the
second quarter of 1996 was 66.4 percent of net sales, which
represents a 1.6 percentage point decrease from the second quarter of
1996. The gross profit percentage for the six months ended June 27,
1997, was 64.4 percent representing a 2.2 percentage point decrease
from the comparable 1996 percentage. The gross profit percentage
declined in 1997 compared to 1996 primarily as a result of the
negative impact of foreign currency changes, product mix shifts, and
increased allowances for product returns in 1997. Gross profit
decreased by $7.9 million or 4 percent in the second quarter and
$16.7 million or 5 percent in the first six months of 1997 from
comparable 1996 results.
In spite of the significant increase associated with promotional
spending for Alphagan(r) and Zorac(r)/Tazorac(r) during the second
quarter of 1997, SG&A expenses increased only $0.2 million over the
same period last year to $123.4 million. SG&A as a ratio to net
sales was 43.4 percent for the second quarter of 1997, compared to
42.5 percent for the same period last year.
Compared to the first six months of 1996, research and
development expenditures increased $4.2 million or 8 percent to $58.5
million during the first six months of 1997. R&D investing in the
pharmaceutical businesses (Eye Care, Skin Care and Botox(r)) amounted
to 16 percent as a ratio to net sales for the pharmaceutical
businesses.
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Forward-looking Statements
Any of the above statements that refer to the company's estimated
or anticipated future results or product performance are forward-
looking and reflect the company's current analysis of existing trends
and information. Actual results may differ from current expectations
based on a number of factors affecting Allergan's businesses,
including new product performance, competitive conditions, changing
market conditions, the timing and uncertainty of results of both
research and regulatory processes, and, the performance, including
consumer acceptance, of new products, and realization of the
favorable gross profit margin impact expected from the company's
previously announced strategic restructuring, as well as the
availability of retinoid financing, and the impact of wholesaler
inventory reductions. In addition, matters generally affecting the
economy, such as currency exchange rates and the state of the economy
worldwide, can affect the company's results. These forward-looking
statements represent the company's judgment only as of the date of
this press release. Actual results could differ materially from
expectations reflected in this release. As a result, the reader is
cautioned not to rely on these forward-looking statements. The
company disclaims any intent or obligation to update these
forward-looking statements.
Additional information concerning these factors can be found in
press releases as well as in the company'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 the company's 1996 Form 10-K. These filings are
available publicly and upon request from Allergan's Investor Relations
Department: 714/246-4636 or on the internet at allergan.com .
Allergan, Inc., headquartered in Irvine, California, is a
technology-driven, global health care company focused on specialty
pharmaceutical products for specific disease areas that deliver value
to customers, satisfy unmet medical needs and improve patients'
lives.
The following tables represent condensed consolidated statements
of income, condensed consolidated balance sheets, and a statement of
net sales by division.
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*T
ALLERGAN, INC.
Condensed Consolidated Statements of Income
Three Months Six Months
in millions, Ended Ended
except per
share June 27, June 30, % Inc. June 27, June 30, % Inc.
1997 1996 (Dec.) 1997 1996 (Dec.)
Net Sales $284.5 $289.6 (2%) $540.7 $547.7 (1%)
Costs and expenses
Cost of sales 100.1 97.3 192.7 183.0
Selling, general and
administrative 123.4 123.2 236.4 237.5
Research &
development 30.9 27.5 58.5 54.3
Restructuring charge -- 34.2 -- 34.2
Asset write-offs -- 6.7 -- 6.7
Operating Income 30.1 0.7 53.1 32.0
Interest income 2.0 2.6 3.8 4.9
Interest expense (2.5) (3.5) (4.7) (6.8)
Other, net 0.3 0.7 2.7 2.9
Interest and other,
net (0.2) (0.2) 1.8 1.0
Total costs and
expenses 254.6 289.1 485.8 514.7
Earnings before income taxes
and minority
interest 29.9 0.5 54.9 33.0
Provision for income
taxes 8.6 0.2 15.9 9.6
Minority interest (0.1) (0.4) (0.2) (0.4)
Net Earnings $ 21.4 $ 0.7 $ 39.2 $ 23.8
Net earnings per
common share: $ 0.33 $ 0.01 $ 0.60 $ 0.36
Weighted average number
of common shares
outstanding 65.6 65.9 65.8 65.7
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ALLERGAN, INC.
Condensed Consolidated Balance Sheets
in millions June 27, December 31,
1997 1996
Assets
Cash and equivalents $ 125.5 $ 112.0
Trade receivables, net 215.2 242.5
Inventories 139.9 130.1
Other current assets 117.2 115.1
Total current assets 597.8 599.7
Property, plant and equipment, net 339.9 348.5
Other noncurrent assets 389.8 401.6
Total assets $1,327.5 $1,349.8
Liabilities and stockholders' equity
Notes payable $ 96.7 $ 66.6
Accounts payable 67.3 75.4
Accrued expenses and income taxes 195.2 233.3
Total current liabilities 359.2 375.3
Long-term debt 173.4 170.0
Other liabilities 52.4 54.7
Stockholders' equity 742.5 749.8
Total liabilities and
stockholders' equity $1,327.5 $1,349.8
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