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Allergan Boosts XLV Large-Caps with Positive 4Q15 Earnings

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Allergan reported 4Q15 earnings

Allergan (AGN) reported its 4Q15 earnings on February 22, 2016. It reported net revenue of $4.2 billion for 4Q15, an increase of 74% compared to $2.4 billion in 4Q14. Revenues were driven mainly by Botox sales of $655.7 million. Restasis contributed a revenue of $364.6 million during the quarter. Total product revenues stood at ~$3.7 billion. Revenues from ANDAs (Abbreviated New Drug Applications) stood at $547 million for 4Q15.

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The above graph reflects Allergan’s revenues since 4Q14. On a non-GAAP (generally accepted accounting principles) basis, diluted EPS (earnings per share) stood at $3.41 for 4Q15. On February 22, 2016, Allergan closed at $285.82 and was trading above the 20-day moving average of $280.72. Year-to-date (YTD), Allergan has returned -8.5%.

Operating expenses and 2016 forecast

Non-GAAP SG&A (selling, general, and administrative) expenses were 24.9% of non-GAAP revenue compared to 23.5% in the prior period. Non-GAAP R&D (research and development) expenses for 4Q15 were $338 million.

Allergan also issued the following financial guidance on continuing operations for 2016:

  • Total Non-GAAP net revenues are expected to be ~$17 billion.
  • Non-GAAP branded net revenues are expected to be ~$15 billion, reflecting strong double-digit growth.
  • Non-GAAP R&D investment is expected to be ~$1.5 billion.
  • SG&A as a percent of non-GAAP net revenues is expected to be ~25%. It no longer reflects plans to restructure and simplify the business following the divestiture of the Global Generics business as a result of the transaction with Pfizer (PFE) announced on November 23, 2015.
  • The non-GAAP tax rate is anticipated to return to normalized levels of ~14% following the close of Teva.

Allergan has a weight of 4.6% in the Health Care Select Sector SPDR ETF (XLV). XLV’s holdings Celgene (CELG) and Medtronic (MDT) returned 1.9% and 1.7%, respectively, on February 22, 2016.

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