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Understanding Allergan’s Revenue Stream for 2017

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Allergan’s revenues

Allergan’s (AGN) revenues are driven by the strong performance of products under its key brands as well as the inclusion of revenues from LifeCell and other acquisitions. Its revenue growth has been partially offset by lower revenues from products like Asacol HD and Namenda due to the loss of exclusivity.

US markets are the largest revenue contributors for Allergan, and so the company has segregated and reclassified its business operations into the following: US General Medicine, US Specialized Therapeutics, and International. The company completed the divestiture of its global generics business and Anda Distribution to Teva Pharmaceuticals (TEVA) in 2016. This divestiture is expected to have a negative impact on its total reported revenues.

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Revenue performance in 1Q17

Allergan reported revenues of $3.57 billion in 1Q17, which was a 5.1% growth over its $3.40 billion in 1Q16. This growth was mainly driven by the performance of key products from its specialized therapeutics portfolio, partially offset by lower sales of general medicines in both US and international markets.

The above divestiture also had a negative impact on overall revenues for 1Q17. However, the inclusion of LifeCell products increased revenues.

Revenue estimates for 2Q17

Wall Street analysts’ estimates show revenues of $3.95 billion for Allergan in 2Q17, which would mean 7% growth over its revenues of $3.68 billion in 2Q16. This growth is expected to be driven by the strong performance of new products and acquired businesses, partially offset by lower sales from general medicines products and the divestiture of businesses.

To divest risk, investors can consider ETFs like the SPDR S&P Pharmaceuticals ETF (XPH), which has 5.1% of its total assets in Allergan. XPH also has 5.1% in Eli Lilly (LLY), 4.6% in Johnson & Johnson (JNJ), and 4.6% in Merck (MRK).

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