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Allergan’s US Specialized Therapeutics Key to Future Growth

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The US Specialized Therapeutics segment

As discussed earlier, Allergan (AGN) has classified its business into three segments. The US Specialized Therapeutics segment refers to branded products like eye care, medical aesthetics, medical dermatology, and the neuroscience and urology franchise.

During 2Q16, the revenues for US Specialized Therapeutics rose by 11% to $1.5 billion as compared to $1.4 billion during 2Q15.

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2Q16 performance of US Specialized Therapeutics

  • The eye care franchise ranks number two globally. The eye care revenues rose to $636.1 million in 2Q16, a 10% increase as compared to 2Q15. The growth was driven by Restasis, Alphagan/Combigan, and Ozurdex sales, partially offset by lower sales of Lumigan/Ganfort and other eye care products. The sales of eye drops were nearly constant at $49 million during 2Q16.
  • The US medical aesthetics segment includes facial aesthetics, medical dermatology products, and a wide range of silicone gel and saline breast implants. The facial aesthetics division reported revenues of $320.2 million during 2Q16, as compared to $263.7 million in 2Q15. The product portfolio includes Botox Cosmetics, which reported a 19% increase in sales during 2Q16, fillers, which reported 12% growth, and the newly launched Kybella.
  • The plastic surgery products reported revenues of $52.8 million during 2Q16, a decline as compared to $54.1 million in 2Q15. The franchise sales were driven by an increase in revenues from breast implants and breast reconstruction products, partially offset by lower sales of other plastic surgery products.
  • The skincare product revenues fell to $46.8 million in 2Q16, following the growth of revenues of SkinMedica products, which were more than offset by lower sales of Latisse products.
  • The medical dermatology division reported revenues of $97.1 million during 2Q16 as compared to $120.7 million in 2Q15. This franchise offers advanced dermatology products to treat skin diseases and also improve skin appearance. During 2Q16, the franchise reported lower sales of Aczone, Tazorac, Botox, Hyperhidrosis, and other dermatology products.
  • The revenues for the neuroscience and urology franchise rose by ~17% to $326.3 million in 2Q16 as compared to $277.7 million in 2Q15, mainly driven by increased sales of Botox Therapeutics, followed by an increase in Rapaflo sales.

The gross margin for the US Specialized Therapeutics segment improved by 0.5% to 95% during 2Q16 as compared to 94.5% during 2Q15. The selling, general, and administration expenses rose by 2.5% during 2Q16 due to the launch of Kybella, overall sales force expansion, and the increase in ACA pharma fees during the quarter.

Investors can consider ETFs like the Fidelity MSCI Healthcare ETF (FHLC), which holds ~2.3% of its total assets in Allergan, in order to divest the risk. Apart from Allergan, FHLC also holds 2.9% of its total assets in Biogen (BIIB), 6.7% in Pfizer (PFE), and 3.3% in Medtronic (MDT).

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