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A Closer Look at Allergan’s US Brands Segment

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The US brands segment

As discussed earlier, Allergan (AGN) has classified its business into four segments. The company’s US brands segment is its largest revenue contributor.

The segment includes various franchises, including the cardiovascular, urology, central nervous system, eye care, women’s health, and infectious diseases franchises. The segment considers the revenues of Allergan’s branded products within US markets only.

Revenues for Allergan’s US brands rose by over 27% to $2.3 billion in 1Q16 compared to $1.8 billion in 1Q15. This was due to the additional products added to its portfolio as the result of various acquisitions, including Allergan and Forest Laboratories, during 2015.

The above chart shows the performances of each franchise over the last few quarters.

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Performance of the US brands segment

The central nervous system (or CNS) franchise is a leader in Alzheimer’s disease products. This franchise reported a revenue rise of 1.1% to $554.3 million during 1Q16. Botox, Vraylar, and Namenda XR were the key growth drivers for the CNS franchise.

The eye care franchise’s revenue rose to $533 million in 1Q16 compared to $94.7 million in 1Q15. The growth drivers for the eye care franchise included Restasis and Ozurdex.

The gastroenterology (or GI) franchise reported a revenue rise of 10% to $403 million in 1Q16 compared to $366.6 million in 1Q15. The gastroenterology franchise’s revenue was driven by Linzess and Viberzi.

Allergan’s women’s health franchise leads in the US markets. Its revenue rose by 15% to $263.7 million in 1Q16 compared to $229.3 million in 1Q15. The growth of this franchise was driven by Lo Loestrin and Liletta.

The urology franchise’s revenue rose by ~99% to $74.1 million in 1Q16 compared to $37.3 million in 1Q15, mainly driven by increased sales of Botox OAB.

The infectious disease franchise’s revenue rose by 23% to $51.5 million in 1Q16, mainly due to its strong portfolio and its new products.

New product launches including Viberzi and Vraylar reported strong performances, while growth was offset by lower sales of Asacol and Namenda IR. Allergan’s US brands’ gross margin improved by 0.8% to 88.7% during 1Q16.

Investors can consider ETFs such as the iShares Morningstar Large Growth ETF (JKE), which holds ~2.1% of its total assets in Allergan, or the Fidelity MSCI Healthcare ETF (FHLC), which holds ~2.3% of its total assets in Allergan, in order to divest their risk.

Apart from Allergan, FHLC also holds 3.6% of its total assets in Amgen (AMGN), 6.7% in Pfizer (PFE), and 3.0% in Celgene (CELG).

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