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MarketScreener Homepage  >  Equities  >  Nyse  >  Allergan plc    AGN   IE00BY9D5467

ALLERGAN PLC

(AGN)
  Report  
Delayed Quote. Delayed Nyse - 10/18 04:01:01 pm
173.6 USD   +0.64%
10/18ALLERGAN : Form 8.3 -
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10/17ALLERGAN : Form 8.3 -
DJ
10/17ALLERGAN : to Report Third Quarter 2019 Financial Results
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ALLERGAN : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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05/07/2019 | 05:29pm EDT
The following discussion of our financial condition and the results of
operations should be read in conjunction with the "Consolidated Financial
Statements" and notes thereto included elsewhere in this Quarterly Report on
Form 10-Q ("Quarterly Report") and our audited consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 31, 2018
(the "Annual Report"). This discussion contains forward-looking statements that
are subject to known and unknown risks, uncertainties and other factors that may
cause our actual results to differ materially from those expressed or implied by
such forward-looking statements. These risks, uncertainties and other factors
include, among others, those identified under "Risk Factors" in our Annual
Report, and elsewhere in this Quarterly Report.

References throughout to "we," "our," "us," the "Company" or "Allergan" refer to
financial information and transactions of Allergan plc. References to "Warner
Chilcott Limited" refer to Warner Chilcott Limited, the Company's indirect
wholly-owned subsidiary, and, unless the context otherwise requires, its
subsidiaries. Warner Chilcott Limited is an indirect wholly-owned subsidiary of
Allergan plc, the ultimate parent of the group (together with other direct or
indirect parents of Warner Chilcott Limited, the "Parents"). The results of
Warner Chilcott Limited are consolidated into the results of Allergan plc. Due
to the deminimis activity between Warner Chilcott Limited and the Parents
(including Allergan plc), content throughout this filing relates to both
Allergan plc and Warner Chilcott Limited. Warner Chilcott Limited disclosures
relate only to itself and not to any other company.

                                       53

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Recent Business Transactions

The following are the significant transactions that were completed or announced in the three months ended March 31, 2019.

Envy Medical, Inc.


On March 26, 2019, the Company acquired Envy Medical, Inc. ("Envy"), a privately
held medical aesthetics company that specializes in non-surgical, non-invasive
skin resurfacing systems for an acquisition accounting purchase price of $81.4
million, which includes $67.4 million of product rights and other intangibles,
$34.1 million of goodwill and other assets and liabilities. The transaction was
treated as a business combination.  The acquisition combines Envy's skin care
product portfolio with the Company's leading medical aesthetics business.

Operating Results for the Three Months Ended March 31, 2019 and 2018

Results of operations, including segment net revenues, segment operating expenses and segment contribution consisted of the following for the three months ended March 31, 2019 and 2018 ($ in millions):




                                                                    Three Months Ended March 31, 2019
                                              US Specialized           US General
                                               Therapeutics             Medicine            International             Total
Net revenues                                $          1,542.9       $      1,249.9       $            801.5       $   3,594.3

Operating expenses:
Cost of sales(1)                                         120.1                190.5                    109.7             420.3
Selling and marketing                                    356.8                210.5                    237.6             804.9
General and administrative                                54.6                 43.8                     25.7             124.1
Segment contribution                        $          1,011.4       $        805.1       $            428.5       $   2,245.0
Contribution margin                                       65.6 %               64.4 %                   53.5 %            62.5 %
Corporate(2)                                                                                                             258.0
Research and development                                                                                                 435.0
Amortization                                                                                                           1,399.4
Goodwill impairments                                                                                                   2,467.0
Asset sales and impairments, net                                                                                          (5.2 )
Operating (loss)                                                                                                   $  (2,309.2 )
Operating margin                                                                                                         (64.2 )%

(1) Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales
not attributable to segment results.
(2) Corporate includes net revenues of $2.8 million.


                                       54

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                                                                  Three Months Ended March 31, 2018
                                              US Specialized           US General
                                               Therapeutics             Medicine            International         Total
Net revenues                                $          1,578.6       $      1,223.7       $           864.0     $ 3,666.3

Operating expenses:
Cost of sales(1)                                         134.2                182.6                   120.9         437.7
Selling and marketing                                    313.2                225.5                   245.7         784.4
General and administrative                                50.2                 38.9                    31.4         120.5
Segment contribution                        $          1,081.0       $        776.7       $           466.0     $ 2,323.7
Contribution margin                                       68.5 %               63.5 %                  53.9 %        63.4 %
Corporate(2)                                                                                                        270.3
Research and development                                                                                            474.7
Amortization                                                                                                      1,697.6
In-process research and development
impairments                                                                                                         522.0
Asset sales and impairments, net                                                                                     13.1
Operating (loss)                                                                                                $  (654.0 )
Operating margin                                                                                                    (17.8 )%

(1) Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of
sales not attributable to segment results.
(2) Corporate includes net revenues of $5.8 million.






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US Specialized Therapeutics Segment


The following table presents top product sales and net contribution for the US
Specialized Therapeutics segment for the three months ended March 31, 2019 and
2018 ($ in millions):



                                               Three Months Ended March 31,                      Change
                                                2019                   2018              Dollars              %
Total Eye Care                              $      465.1$      491.1$        (26.0 )         (5.3 )%
Restasis®                                          231.7                  255.8                (24.1 )         (9.4 )%
Alphagan®/Combigan®                                 83.0                   84.2                 (1.2 )         (1.4 )%
Lumigan®/Ganfort®                                   57.7                   66.8                 (9.1 )        (13.6 )%
Eye Drops                                           49.4                   46.2                  3.2            6.9 %
Ozurdex®                                            30.3                   25.5                  4.8           18.8 %
Other Eye Care                                      13.0                   12.6                  0.4            3.2 %
Total Medical Aesthetics                           648.2                  635.6                 12.6            2.0 %
Facial Aesthetics                                  366.5                  327.7                 38.8           11.8 %
Botox® Cosmetics                                   229.5                  196.7                 32.8           16.7 %
Juvederm® Collection                               129.7                  122.8                  6.9            5.6 %
Kybella®                                             7.3                    8.2                 (0.9 )        (11.0 )%
Plastic Surgery                                     61.2                   60.7                  0.5            0.8 %
Breast Implants                                     61.2                   60.7                  0.5            0.8 %
Regenerative Medicine                              122.9                  128.2                 (5.3 )         (4.1 )%
Alloderm®                                           95.0                   99.5                 (4.5 )         (4.5 )%
Other Regenerative Medicine                         27.9                   28.7                 (0.8 )         (2.8 )%
Body Contouring                                     62.9                   87.1                (24.2 )        (27.8 )%
Coolsculpting® Consumables                          47.8                   53.4                 (5.6 )        (10.5 )%
Coolsculpting® Systems & Add On                     15.1                   33.7                (18.6 )
Applicators                                                                                                   (55.2 )%
Skin Care(3)                                        34.7                   31.9                  2.8            8.8 %
Total Medical Dermatology                            6.1                   36.7                (30.6 )        (83.4 )%
Aczone®                                              1.6                   16.0                (14.4 )        (90.0 )%
Other Medical Dermatology(4)                         4.5                   20.7                (16.2 )        (78.3 )%
Total Neuroscience and Urology                     409.4                  398.6                 10.8            2.7 %
Botox® Therapeutics(5)                             397.6                  375.8                 21.8            5.8 %
Rapaflo®                                            11.8                   22.8                (11.0 )        (48.2 )%
Other revenues                                      14.1                   16.6                 (2.5 )        (15.1 )%
Net revenues                                $    1,542.9$    1,578.6$        (35.7 )         (2.3 )%
Operating expenses:
Cost of sales(1)                                   120.1                  134.2                (14.1 )        (10.5 )%
Selling and marketing                              356.8                  313.2                 43.6           13.9 %
General and administrative                          54.6                   50.2                  4.4            8.8 %
Segment contribution                        $    1,011.4$    1,081.0$        (69.6 )         (6.4 )%
Segment margin                                      65.6 %                 68.5 %                              (2.9 )%
Segment gross margin(2)                             92.2 %                 91.5 %                               0.7 %

(1) Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost
of sales not attributable to segment results.
(2) Defined as net revenues less segment related cost of sales as a percentage of net revenues.
(3) Includes SkinMedica® and Latisse®.
(4) Includes Tazorac® sales of $9.4 million which were previously disclosed separately in the three months ended
March 31, 2018.
(5) Includes Botox® Hyperhidrosis of $17.3 million which was previously disclosed under Medical Dermatology in the
three months ended March 31, 2018.




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Net Revenues


The decrease in net revenues in the three months ended March 31, 2019 was
primarily driven by decreases in Restasis®, Body Contouring and the third
quarter 2018 divestiture of our Medical Dermatology business, partially offset
by growth in Botox® Cosmetics and Botox® Therapeutics. The decline in Restasis®
revenues was primarily due to price declines. Body Contouring decreased versus
the prior year period primarily due to lower volumes of systems. Botox®
Cosmetics and Botox® Therapeutics increased versus the prior year period
primarily due to demand growth.

Cost of Sales

The decrease in cost of sales in the three months ended March 31, 2019 was primarily due to the decrease in net revenues and product mix.

Selling and Marketing Expenses

The increase in selling and marketing expenses in the three months ended March 31, 2019 was primarily related to increased promotional costs for Facial Aesthetics products.

General and Administrative Expenses

General and administrative expenses remained stable period over period.

                                       57

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US General Medicine Segment


The following table presents top product sales and net contribution for the US
General Medicine segment for the three months ended March 31, 2019 and 2018 ($
in millions):



                                               Three Months Ended March 31,                         Change
                                                2019                   2018               Dollars                 %
Total Central Nervous System (CNS)          $      293.5$      262.8       $          30.7                11.7 %
Vraylar®                                           143.7                   84.4                  59.3                70.3 %
Viibryd®/Fetzima®                                   85.0                   71.7                  13.3                18.5 %
Saphris®                                            31.9                   32.7                  (0.8 )              (2.4 )%
Namzaric®                                           23.4                   33.4                 (10.0 )             (29.9 )%
Namenda®(3)                                          9.5                   40.6                 (31.1 )             (76.6 )%
Total Gastrointestinal (GI)                        358.2                  388.7                 (30.5 )              (7.8 )%
Linzess®                                           161.3                  159.3                   2.0                 1.3 %
Zenpep®                                             63.0                   52.9                  10.1                19.1 %
Carafate®/Sulcrate®                                 54.3                   56.0                  (1.7 )              (3.0 )%
Viberzi®                                            37.2                   35.9                   1.3                 3.6 %
Asacol®/Delzicol®                                   24.7                   38.2                 (13.5 )             (35.3 )%
Canasa®/Salofalk®                                   10.2                   38.6                 (28.4 )             (73.6 )%
Other GI                                             7.5                    7.8                  (0.3 )              (3.8 )%
Total Women's Health                               201.0                  163.3                  37.7                23.1 %
Lo Loestrin®                                       125.8                  114.6                  11.2                 9.8 %
Liletta®                                            14.8                    8.1                   6.7                82.7 %
Other Women's Health(4)(5)                          60.4                   40.6                  19.8                48.8 %
Total Anti-Infectives                               81.6                   71.6                  10.0                14.0 %
Teflaro®                                            33.5                   32.2                   1.3                 4.0 %
Avycaz®                                             29.7                   21.8                   7.9                36.2 %
Dalvance®                                           12.0                   11.9                   0.1                 0.8 %
Other Anti-Infectives                                6.4                    5.7                   0.7                12.3 %
Diversified Brands                                 270.9                  274.9                  (4.0 )              (1.5 )%
Bystolic®/ Byvalson®                               128.3                  132.8                  (4.5 )              (3.4 )%
Armour Thyroid                                      50.0                   48.2                   1.8                 3.7 %
Savella®                                            20.7                   19.9                   0.8                 4.0 %
Other Diversified Brands(6)(7)                      71.9                   74.0                  (2.1 )              (2.8 )%
Other revenues                                      44.7                   62.4                 (17.7 )             (28.4 )%
Net revenues                                $    1,249.9$    1,223.7       $          26.2                 2.1 %
Operating expenses:
Cost of sales(1)                                   190.5                  182.6                   7.9                 4.3 %
Selling and marketing                              210.5                  225.5                 (15.0 )              (6.7 )%
General and administrative                          43.8                   38.9                   4.9                12.6 %
Segment contribution                        $      805.1$      776.7       $          28.4                 3.7 %
Segment margin                                      64.4 %                 63.5 %                                     0.9 %
Segment gross margin(2)                             84.8 %                 85.1 %                                    (0.3 )%

(1) Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of
sales not attributable to segment results.
(2) Defined as net revenues less segment related cost of sales as a percentage of net revenues.
(3) Includes Namenda XR® and Namenda® IR.
(4) Includes Estrace® Cream sales of $6.4 million which were previously disclosed separately in the three months ended
March 31, 2018.
(5) Includes Minastrin® 24 sales of $5.2 million which were previously disclosed separately in the three months ended
March 31, 2018.
(6) Includes Lexapro® sales of $14.7 million which were previously disclosed separately in the three months ended March
31, 2018.
(7) Includes PacPharma sales of $4.4 million which were previously disclosed separately in the three months ended March
31, 2018.


                                       58
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Net Revenues


The increase in net revenues in the three months ended March 31, 2019 was
primarily due to growth in CNS and Women's Health, offset, in part, by a decline
in GI revenues. CNS revenues increased primarily due to strong demand growth for
Vraylar® and Viibryd®, offset, in part by the decline in Namenda XR® as a result
of loss of exclusivity. Women's Health revenues increased primarily due to an
increase in demand for Lo Loestrin®. GI was negatively affected by the generic
impact on Canasa®/Salofalk® and Asacol®, offset, in part by an increase in
demand growth for Zenpep®.

Cost of Sales

The increase in cost of sales in the three months ended March 31, 2019 was primarily due to an increase in net revenues.

Selling and Marketing Expenses

The decrease in selling and marketing expenses in the three months ended March 31, 2019 was related to lower promotional costs.

General and Administrative Expenses

General and administrative expenses increased $4.9 million period over period.




                                       59

--------------------------------------------------------------------------------

International Segment


The following table presents top product sales and net contribution for the
International segment for the three months ended March 31, 2019 and 2018 ($ in
millions):



                             Three Months Ended March 31,                                                           Change
                                                                       $                    $                     $                %                 %                %
                                                                    Overall            Operational             Currency         Overall        

Operational Currency

                               2019                2018             Change             Change (3)               Change           Change         Change (3)          Change
Total Eye Care              $     291.8$     343.7$     (51.9 )     $           (22.3 )     $        (29.6 )        (15.1 )%            (6.5 )%         (8.6 )%
Lumigan®/Ganfort®                  85.1               100.4             (15.3 )                  (7.8 )               (7.5 )        (15.2 )%            (7.8 )%         (7.4 )%
Ozurdex®                           63.1                64.4              (1.3 )                   4.3                 (5.6 )         (2.0 )%             6.7 %          (8.7 )%
Eye Drops(4)                       55.4                68.8             (13.4 )                  (7.3 )               (6.1 )        (19.5 )%           (10.6 )%         (8.9 )%
Alphagan®/Combigan®                37.6                44.2              (6.6 )                  (2.4 )               (4.2 )        (14.9 )%            (5.4 )%         (9.5 )%
Restasis®                          10.4                18.3              (7.9 )                  (6.5 )               (1.4 )        (43.2 )%           (35.5 )%         (7.7 )%
Other Eye Care                     40.2                47.6              (7.4 )                  (2.6 )               (4.8 )        (15.5 )%            (5.5 )%        (10.0 )%
Total Medical Aesthetics          352.8               358.5              (5.7 )                  26.0                (31.7 )         (1.6 )%             7.3 %          (8.9 )%
Facial Aesthetics                 306.8               296.1              10.7                    39.6                (28.9 )          3.6 %             13.4 %          (9.8 )%
Juvederm® Collection              157.8               146.1              11.7                    26.7                (15.0 )          8.0 %             18.3 %         (10.3 )%
Botox® Cosmetics                  147.4               148.6              (1.2 )                  12.6                (13.8 )         (0.8 )%             8.5 %          (9.3 )%
Belkyra® (Kybella®)                 1.6                 1.4               0.2                     0.3                 (0.1 )         14.3 %             21.4 %          (7.1 )%
Plastic Surgery                    11.6                44.5             (32.9 )                 (31.8 )               (1.1 )        (73.9 )%           (71.5 )%         (2.4 )%
Breast Implants                    11.2                44.1             (32.9 )                 (31.8 )               (1.1 )        (74.6 )%           (72.1 )%         (2.5 )%
Other Plastic Surgery               0.4                 0.4                 -                       -                    -            0.0 %              0.0 %           0.0 %
Regenerative Medicine               3.3                 4.9              (1.6 )                  (1.4 )               (0.2 )        (32.7 )%           (28.6 )%         (4.1 )%
Alloderm®                           1.6                 2.2              (0.6 )                  (0.6 )                  -          (27.3 )%           (27.3 )%          0.0 %
Other Regenerative                  1.7                 2.7              (1.0 )                  (0.8 )               (0.2 )        (37.0 )%           (29.6 )%         (7.4 )%
  Medicine
Body Contouring                    28.4                 9.2              19.2                    20.5                 (1.3 )         n.m.               n.m.            n.m.
Coolsculpting®                     17.8                 8.1               9.7                    10.5                 (0.8 )         n.m.               n.m.            n.m.
Consumables
Coolsculpting® Systems &           10.6                 1.1               9.5                    10.0                 (0.5 )         n.m.               n.m.            n.m.
  Add On Applicators
Skin Care                           2.7                 3.8              (1.1 )                  (0.9 )               (0.2 )        (28.9 )%           (23.7 )%         (5.2 )%
Botox® Therapeutics and
  Other                           138.8               149.7             (10.9 )                   0.8                (11.7 )         (7.3 )%             0.5 %          (7.8 )%
Botox® Therapeutics                93.9                96.2              (2.3 )                   6.4                 (8.7 )         (2.4 )%             6.7 %          (9.1 )%
Asacol®/Delzicol®                  10.3                11.7              (1.4 )                  (0.7 )               (0.7 )        (12.0 )%            (6.0 )%         (6.0 )%
Constella®                          5.5                 5.6              (0.1 )                   0.3                 (0.4 )         (1.8 )%             5.4 %          (7.2 )%
Other Products                     29.1                36.2              (7.1 )                  (5.2 )               (1.9 )        (19.6 )%           (14.4 )%         (5.2 )%
Other revenues                     18.1                12.1               6.0                     6.3                 (0.3 )         49.6 %             52.1 %          (2.5 )%
Net revenues                $     801.5$     864.0$     (62.5 )     $            10.8       $        (73.3 )         (7.2 )%             1.3 %          (8.5 )%
Operating expenses:
Cost of sales(1)                  109.7               120.9             (11.2 )                  (1.9 )               (9.3 )         (9.3 )%            (1.6 )%         (7.7 )%
Selling and marketing             237.6               245.7              (8.1 )                  12.2                (20.3 )         (3.3 )%             5.0 %          (8.3 )%
General and                        25.7                31.4              (5.7 )                  (3.4 )               (2.3 )        (18.2 )%           (10.8 )%         (7.4 )%
administrative
Segment contribution        $     428.5$     466.0$     (37.5 )     $             3.9       $        (41.4 )         (8.0 )%             0.8 %          (8.8 )%
Segment margin                     53.5 %              53.9 %                                                                        (0.4 )%
Segment gross margin(2)            86.3 %              86.0 %                                                                         0.3 %

(1) Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results.
(2) Defined as net revenues less segment related cost of sales as a percentage of net revenues.
(3) Defined as overall change excluding foreign exchange impact.
(4) Includes Optive® sales of $27.8 million which were previously disclosed separately in the three months ended March 31, 2018.






                                       60
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The following table presents our revenue disaggregated by geography for our International segment ($ in millions):



                                                          Three Months Ended March 31,
                                                           $               $               %                %
                                                        Overall       Operational       Overall        Operational
                               2019         2018        Change          Change          Change           Change
Europe                       $  354.4$  398.4$   (44.0 )$        (6.5 )       (11.0 )%            (1.6 )%
Asia Pacific, Middle East       250.7
and Africa                                   240.8           9.9              25.9           4.1 %             10.8 %
Latin America and Canada        178.2        212.1         (33.9 )           (14.7 )       (16.0 )%            (6.9 )%
Other*                           18.2         12.7           5.5               6.1          43.3 %             48.0 %
Total International$  801.5$  864.0$   (62.5 )$        10.8          (7.2 )%             1.3 %

*Includes royalty and other revenue




Net Revenues

The decrease in net revenues in the three months ended March 31, 2019 was
primarily due to the negative impact of foreign currency as well as declines in
Eye Care and Plastic Surgery, offset, in part, by operational growth in Facial
Aesthetics and Body Contouring. Within Eye Care, the decrease in sales is due to
trade buying patterns, the generic impact of Restasis in Canada and price
erosion in Europe as well as a loss from foreign currency. Plastic Surgery
decreased versus the prior year period, primarily driven by a fourth quarter
2018 suspension of sales and withdrawal of the remaining textured breast
implants from the market in Europe. The operational growth in Facial Aesthetics
and Body Contouring was due to an increase in demand growth.

Cost of Sales

The decrease in cost of sales in the three months ended March 31, 2019 was primarily due to the decrease in net revenues.

Selling and Marketing Expenses


The decrease in selling and marketing expenses in the three months ended March
31, 2019 was primarily due to the impact from foreign currency, offset, in part,
by an expansion of the sales force in certain markets.

General and Administrative Expenses

General and administrative expenses remained stable period over period.

Corporate

Corporate represents the results of corporate initiatives as well as the impact of select revenues and shared costs. The following represents the Corporate amounts for the three months ended March 31, 2019 and 2018 ($ in millions):

Three Months Ended March 31, 2019

                                                        Non-
                                                     Acquisition
                             Integration /             Related           Fair Value        Effect of Purchase                   Revenues and
                              Divestiture           Restructuring       Adjustments            Accounting           Other       Shared Costs        Total
Net revenues                $              -       $             -     $            -     $                  -     $     -     $          2.8     $      2.8
Operating expenses:
Cost of sales(1)                           -                   4.6               16.2                      0.3           -               56.4           77.5
Selling and                                -                  (1.8 )                -                      0.9           -                  -           (0.9 )
  marketing
General and
  administrative                         5.4                   0.1                  -                      0.3        11.2              167.2          184.2
Contribution                $           (5.4 )     $          (2.9 )   $        (16.2 )   $               (1.5 )   $ (11.2 )$       (220.8 )$   (258.0 )

(1) Excludes amortization and impairment of acquired intangibles including product rights.



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Three Months Ended March 31, 2018

                                                       Non-
                                                    Acquisition
                            Integration /             Related           Fair Value         Effect of Purchase                  Revenues and
                             Divestiture           Restructuring        Adjustments            Accounting          Other       Shared Costs        Total
Net revenues               $              -       $             -     $             -     $                  -     $    -     $          5.8     $      5.8
Operating expenses:
Cost of sales(1)                        0.5                  12.6                 3.4                      1.1          -               67.5           85.1
Selling and                             0.9                  10.3                   -                      4.3          -                0.1           15.6
  marketing
General and
  administrative                       13.8                   7.3                   -                      1.6        9.0              143.7          175.4
Contribution               $          (15.2 )     $         (30.2 )   $          (3.4 )   $               (7.0 )   $ (9.0 )$       (205.5 )$   (270.3 )

(1) Excludes amortization and impairment of acquired intangibles including product rights.




Integration


In the three months ended March 31, 2019 and 2018, integration and restructuring charges included costs related to the integration of LifeCell Corporation ("LifeCell') and Zeltiq® Aesthetics, Inc. ("Zeltiq").

Non-Acquisition Related Restructuring


In the three months ended March 31, 2018, the Company incurred charges related
to the restructuring of its internal infrastructure. The restructuring programs
included charges associated with scaling our manufacturing plants as well as the
acceleration of share-based compensation charges for severed employees over
their shortened vesting periods.

Fair Value Adjustments

Fair value adjustments primarily relate to changes in estimated contingent liabilities for future amounts to be paid based on achievement of sales levels for the respective products.

Effect of Purchase Accounting




In the three months ended March 31, 2019 and 2018, the Company incurred charges
related to the purchase accounting impact on share-based compensation related to
the Zeltiq and Allergan, Inc. ("Legacy Allergan") acquisitions, which increased
cost of sales, selling and marketing and general and administrative expenses.

Other

In the three months ended March 31, 2019 and 2018, general and administrative costs included legal settlement charges of $10.4 million and $10.3 million, respectively.

Revenues and Shared Costs

Shared costs primarily include above site and unallocated costs associated with running our global manufacturing facilities and corporate general and administrative expenses.

In the three months ended March 31, 2019 and 2018, the Company incurred transactional foreign exchange losses of $6.8 million and $4.9 million, respectively.

Research and Development Expenses

R&D expenses consist predominantly of personnel-related costs, active pharmaceutical ingredient costs, contract research, license and milestone fees, biostudy and facilities costs associated with product development.

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R&D expenses consisted of the following in the three months ended March 31, 2019
and 2018 ($ in millions):



                                                Three Months Ended March 31,
                                                                    $           %
                                          2019        2018       Change      Change
        Ongoing operating expenses       $ 397.9$ 355.8$  42.1        11.8 %
        Milestone expenses and upfront
          license payments                  34.1       113.4       (79.3 )     (69.9 )%
        Contingent consideration
          adjustments, net                   2.5         1.9         0.6        31.6 %
        Acquisition accounting fair
          market value adjustment to
          share-based compensation           0.4         2.8        (2.4 )     (85.7 )%
        Acquisition, integration, and
          restructuring charges              0.1         0.8        (0.7 )     (87.5 )%
        Total R&D Expenses               $ 435.0$ 474.7$ (39.7 )      (8.4 )%




Operating Expenses

The increase in ongoing operating expenses in the three months ended March 31,
2019 is mainly due to increased product development spending in early stage
development programs and increased spending in the Central Nervous System and
Gastrointestinal therapeutic areas.

Milestone Expenses and Upfront License Payments




The following represents milestone expenses, asset acquisitions and upfront
license payments in the three months ended March 31, 2019 and 2018, respectively
($ in millions):



                                              Three Months Ended March 31,
                                              2019                   2018
      Akarna Therapeutics, Ltd.           $        10.0         $             -
      Chase Pharmaceuticals Corporation               -                   

75.0

      Repros Therapeutics, Inc.                       -                   
33.2
      Other                                        24.1                     5.2
      Total                               $        34.1         $         113.4




Amortization

Amortization in the three months ended March 31, 2019 and 2018 was as follows ($
in millions):



                                        Three Months Ended March 31,
                                                             $            %
                                2019          2018         Change      Change
               Amortization   $ 1,399.4$ 1,697.6$ (298.2 )     (17.6 )%




Amortization for the three months ended March 31, 2019 decreased as compared to
the three months ended March 31, 2018 primarily as a result of a decrease in
amortization for Restasis® due to a reduced book value and remaining life as a
result of an anticipated launch of a generic.



                                       63

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Goodwill, IPR&D and Other Impairments and Asset Sales, Net


Goodwill, IPR&D and other impairments and asset sales, net consisted of the
following in the three months ended March 31, 2019 and 2018 ($ in millions):



                                                  Three Months Ended March 31,
                                                                      $            %
                                          2019         2018        Change        Change
     Goodwill impairments               $ 2,467.0     $     -     $ 2,467.0          n.a
     IPR&D impairments                          -       522.0        (522.0 )     (100.0 )%
     Asset sales and impairments, net        (5.2 )      13.1         (18.3 )       n.m.



Refer to "NOTE 11 - Goodwill, Product Rights and Other Intangible Assets" for the description of the goodwill impairments and IPR&D impairments that the Company recorded in the three months ended March 31, 2019 and 2018.


As of December 31, 2018, the net asset value of the General Medicine Reporting
Unit equaled fair value. On March 6, 2019, Allergan announced negative topline
results from three pivotal studies of rapastinel as an adjunctive treatment of
Major Depressive Disorder (MDD). These results represented a triggering event
for the Company's General Medicine Reporting Unit.

In the three months ended March 31, 2019, primarily as a result of the impairment indicator noted above and a delay in clinical studies and anticipated launch of brazikumab, the Company recorded a $2,467.0 million goodwill impairment charge to its General Medicine Reporting Unit.

Interest Income


Interest income in the three months ended March 31, 2019 and 2018 was as follows
($ in millions):



                                         Three Months Ended March 31,
                                                             $            %
                                   2019         2018       Change      Change
               Interest income   $   21.3$ 17.3$    4.0        23.1 %



Interest income represents interest earned on cash and cash equivalents and marketable securities held during the respective periods.

Interest Expense

Interest expense consisted of the following in the three months ended March 31, 2019 and 2018 ($ in millions):



                                            Three Months Ended March 31,
                                                                $           %
                                      2019        2018       Change      Change
            Fixed Rate Notes         $ 173.8$ 228.9$ (55.1 )     (24.1 )%
            Euro Denominated Notes      14.9         8.6         6.3        73.3 %
            Floating Rate Notes          5.0         6.4        (1.4 )     (21.9 )%
            Other                        8.1         6.7         1.4        20.9 %
            Interest expense         $ 201.8$ 250.6$ (48.8 )     (19.5 )%




Interest expense in the three months ended March 31, 2019 decreased versus the
three months ended March 31, 2018 due to scheduled maturities and early debt
extinguishment of senior secured notes period-over-period, as well as the impact
from debt refinancing in the prior year.

                                       64

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Other Income / (Expense), Net

Other income / (expense), net consisted of the following in the three months ended March 31, 2019 and 2018 ($ in millions):



                                                Three Months Ended March 31,
                                                                   $           %
                                          2019       2018       Change       Change
         Teva Share Activity             $    -     $ (77.7 )$  77.7

(100.0 )%

         Debt extinguishment other         (0.3 )         -        (0.3 )        n.a
         Other income / (expense), net     14.1        (1.1 )      15.2         n.m.
         Other income / (expense), net   $ 13.8$ (78.8 )$  92.6         n.m.



Refer to "NOTE 6 - Other Income / (Expense)" for further details regarding the components of other income / (expense), net.

(Benefit) for Income Taxes

(Benefit) for income taxes in the three months ended March 31, 2019 and 2018 was as follows: ($ in millions):



                                               Three Months Ended March 31,
                                                                   $           %
                                        2019         2018       Change      Change
          (Benefit) for income taxes   $ (68.6 )$ (682.2 )$ 613.6
  (89.9 )%
          Effective tax rate               2.8 %       70.6 %




The Company's effective tax rate for the three months ended March 31, 2019 was
2.8%, compared to 70.6% for the three months ended March 31, 2018. The effective
tax rate for the three months ended March 31, 2019 was favorably impacted by a
tax benefit of $91.5 million related to excess tax over book basis in a U.S.
subsidiary that will reverse in the foreseeable future. The effective tax rate
was unfavorably impacted by a goodwill impairment charge of $2,467.0 million,
for which no tax benefit was recorded.

The effective tax rate for the three months ended March 31, 2018 was favorably
impacted by income earned in jurisdictions with tax rates lower than the Irish
statutory rate and U.S. losses tax benefited at rates greater than the Irish
statutory rate. This was offset by the additional U.S. tax on the earnings of
certain non-U.S. subsidiaries which are considered Global Intangible Low Taxed
Income ("GILTI") and the tax impact of amortization of intangible assets at
rates less than the Irish statutory rate. Additionally, the tax benefit for the
three months ended March 31, 2018 included tax benefits of $421.9 million
related to the restructuring of an acquired business, $117.5 million related to
the impairment of an IPR&D project obtained as part of the acquisition of Vitae
Pharmaceuticals, Inc. and $89.7 million related to excess tax over book basis in
a U.S. subsidiary that will reverse in the foreseeable future.

The effective tax rate for the three months ended March 31, 2019 was lower
compared to the three months ended March 31, 2018 primarily due to the goodwill
impairment recorded in the first quarter of 2019 with no associated tax benefit
and the absence of certain discrete tax benefits recorded in the first quarter
of 2018.

                                       65
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Liquidity and Capital Resources

Working Capital Position


Working capital at March 31, 2019 and December 31, 2018 is summarized as follows
($ in millions):



                                               March 31,       December 31,       Increase
                                                  2019             2018          (Decrease)
Current Assets:
Cash and cash equivalents                      $    788.5$        880.4$     (91.9 )
Marketable securities                               995.2            1,026.9           (31.7 )
Accounts receivable, net                          2,731.2            2,868.1          (136.9 )
Inventories                                         943.2              846.9            96.3
Current assets held for sale                         45.7               34.0            11.7
Prepaid expenses and other current assets           785.5              819.1           (33.6 )
Total current assets                              6,289.3            6,475.4          (186.1 )
Current liabilities:
Accounts payable and accrued expenses          $  4,634.4$      4,787.2$    (152.8 )
Income taxes payable                                126.9               72.4            54.5
Current portion of long-term debt                 3,971.8              868.3         3,103.5
Current portion of lease liability - operating      116.1                  -           116.1
Total current liabilities                         8,849.2            5,727.9         3,121.3
Working Capital                                $ (2,559.9 )$        747.5$  (3,307.4 )
Current Ratio                                        0.71               1.13



Working capital movements were primarily due to the following:

• The Company generated cash flows from operations of $1,234.0 million;

• The Company paid dividends of $246.1 million and repurchased ordinary

       shares of $829.2 million in the three months ended March 31, 2019; and


    •  The Company repurchased $152.0 million face value of senior notes through

open market debt purchases and $3,123.8 million of notes were classified as

current during the quarter based on their maturity date.

Cash Flows

The Company's cash flows are summarized as follows ($ in millions):



                                                       Three Months Ended March 31,
                                                    2019           2018         $ Change

Net cash provided by operating activities $ 1,234.0$ 1,458.3

$ (224.3 )

Net cash (used in) / provided by investing

 activities                                      $   (104.8 )$  2,932.3

$ (3,037.1 )

Net cash (used in) financing activities $ (1,227.0 )$ (5,207.7 )$ 3,980.7





Cash flows from operations represent net income adjusted for certain non-cash
items and changes in assets and liabilities. Cash provided by operating
activities decreased $224.3 million in the three months ended March 31, 2019
versus the prior year period, due to an increase in cash taxes of $69.7 million,
reduced accounts receivable collections and increased inventories.

Management expects that available cash balances and the remaining 2019 cash
flows from operating activities will provide sufficient resources to fund our
operating liquidity needs and expected capital expenditure funding requirements
for at least the next twelve months.



Investing cash flows for the three months ended March 31, 2019 reflect the cash
used in acquisitions of businesses of $80.6 million. Investing cash flows for
the three months ended March 31, 2018 reflect the net cash provided by the net
sale of investments of $3,433.6 million offset, in part, by payments to settle
Teva related matters of $466.0 million.



                                       66

--------------------------------------------------------------------------------


Financing cash flows consist primarily of borrowings and repayments of debt,
repurchases of ordinary shares, dividend payments and proceeds from the exercise
of stock options. Cash used in financing activities in the three months ended
March 31, 2019 primarily related to the repayment of indebtedness of $159.4
million, the repurchase of ordinary shares of $829.2 million and the payment of
dividends of $246.1 million. Cash used in financing activities in the three
months ended March 31, 2018 primarily related to the repayment of indebtedness
of $4,322.1 million, the repurchase of ordinary shares of $1,439.6 million, the
payment of dividends of $319.5 million and payments to settle Teva related
matters of $234.0 million, which was outstanding greater than one year, offset,
in part, by borrowings under the revolving credit facility and other borrowings
of $709.0 million and proceeds from the forward sale of Teva shares of $372.3
million.



Long-term obligations

The following table lists certain of our enforceable and legally binding
obligations as of March 31, 2019. Certain amounts included herein are based on
management's estimates and assumptions about these obligations, including their
duration, the possibility of renewal of lease agreements, anticipated actions by
third parties and other factors. Because these estimates and assumptions are
necessarily subjective, the enforceable and legally binding obligation we will
actually pay in future periods may vary from those reflected in the table.

The following is a summary of select contractual commitments as of March 31, 2019, including amounts accrued as of the balance sheet date to be paid in future periods ($ in millions):



                                                    Payments Due by Period
                                        Nine Months
                                          Ending
                                       December 31,
                          Total            2019           2020-2021        2022-2023        Thereafter
Sales based and
other milestone
  obligations             10,222.8              30.0             35.0             41.0         10,116.8
R&D / approval
milestone
  obligations              6,061.9             204.7          1,042.8            540.8          4,273.6
Total                  $  16,284.7$       234.7$    1,077.8$      581.8$   14,390.4




The table above reflects the anticipated timing of R&D and approval related
milestones and sales based milestones. Certain agreements also include royalties
based on commercial sales which are excluded from the table above. The following
are contractual commitments relating to the R&D and approval related milestones
and sales based milestones ($ in millions):



                                                                   R&D /          Sales Based
                                                  Maximum         Approval         and Other
    Transaction               Product           Milestones       Milestones       Milestones
Heptares               Neurological disorders
Therapeutics, Ltd                               $   3,224.5$      649.5$     2,575.0
Assembly               Gastrointestinal
Biosciences, Inc.      products                     2,459.0          1,069.0           1,390.0
AstraZeneca plc        Brazikumab
License                                             1,250.0            210.0           1,040.0
Akarna Therapeutics,   Inflammatory and
Ltd                    fibrotic diseases              975.0            600.0             375.0
Tobira Therapeutics,   Cenicriviroc
Inc.                                                  800.1            400.1             400.0
Chase                  Neurodegenerative
Pharmaceuticals        disorders
  Corporation                                         800.0            250.0             550.0
Merck & Co.            Ubrogepant & Atogepant         780.0            350.0             430.0
Retrosense             RST-001
Therapeutics, LLC                                     495.0            245.0             250.0
AqueSys, Inc.          Xen Gel Stent                  300.0                -             300.0
Topokine               XAF5
Therapeutics, Inc.                                    260.0            110.0             150.0
Oculeve, Inc.          TrueTear®                      150.0             50.0             100.0
Forsight VISION5,      Bimatoprost Ring
Inc.                                                  125.0            125.0                 -
All Other                                           4,666.1          2,003.3           2,662.8
Total                                           $  16,284.7$    6,061.9$    10,222.8


                                       67
--------------------------------------------------------------------------------

Such milestone payments will only be payable in the event that the Company achieves contractually defined, success-based milestones, such as:

• the advancement of the specified research and development programs;

• the receipt of regulatory approval for the specified compounds or products;

       and/or


  • reaching a sales threshold of the specified compounds or products.

Off-Balance Sheet Arrangements


We do not have any material off-balance sheet arrangements that have, or are
reasonably likely to have, a current or future effect on our financial
condition, changes in financial condition, net revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources.

Available Information


From time to time, we use our website, our Facebook, Instagram, LinkedIn and
Twitter accounts and other social media channels as additional means of
disclosing public information to investors, the media and others interested in
the Company. Additionally, our Chairman, President and Chief Executive Officer,
Brent L. Saunders, and our Executive Vice President and Chief Commercial
Officer, Bill Meury, may use similar social media channels to disclose public
information. It is possible that certain information we post on our website and
on social media could be deemed to be material information, and we encourage
investors, the media and others interested in the Company to review the business
and financial information we post on our website and on the social media
channels identified above. The information on our website and those social media
channels is not incorporated by reference into this Form 10-Q.

Cautionary note regarding forward-looking statements


Any statements made in this report that are not statements of historical fact or
that refer to estimated or anticipated future events are "forward­looking
statements", as contemplated in the Private Securities Litigation Reform Act of
1995. Without limiting the generality of the foregoing, words such as "may,"
"will," "expect," "believe," "anticipate," "plan," "intend," "could," "would,"
"should," "estimate," "continue," or "pursue," or the negative or other
variations thereof or comparable terminology, are intended to identify
forward­looking statements. We have based our forward­looking statements on
management's beliefs and assumptions based on information available to our
management at the time these statements are made. Such forward­looking
statements reflect our current perspective of our business, future performance,
existing trends and information as of the date of this filing. The statements
are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict. We caution the
reader that these statements are based on certain assumptions, risks and
uncertainties, many of which are beyond our control. We do not undertake any
responsibility to release publicly any revisions to these forward-looking
statements to take into account events or circumstances that occur after the
date of this report.

Actual results may differ materially from our current expectations depending
upon a number of factors affecting our business. These factors include, among
others:

                                       68
--------------------------------------------------------------------------------

  • global economic and trade conditions;


  • our ability to successfully develop and commercialize new products;


  • uncertainty associated with the continued success of major products;


  • generic product competition with our branded products;

• expiration of our patents on our branded products and the potential for

       increased competition from generic manufacturers;


  • the highly competitive nature of the pharmaceutical industry;

• our ability to protect our technology rights, patents or other intellectual

property;

• costs and efforts to defend or enforce technology rights, patents or other

intellectual property;

• our ability to obtain and afford third-party licenses and proprietary

       technology that we need;


  • our potential infringement of others' proprietary rights;


    •  our dependency on third-party service providers and third-party

manufacturers and suppliers that in some cases may be the only source of

       finished products or raw materials that we need;


  • availability of raw materials and other key ingredients;

• our vulnerability to and ability to defend against product liability claims

       and obtain sufficient or any product liability insurance;


  • difficulties or delays in manufacturing;

• the effect of regulation including our ability to comply with and operate

       successfully under regulatory regimes that apply to us, including
       healthcare and privacy regulations;


  • uncertainty and costs of legal actions and government investigations;

• the difficulty of predicting the timing or outcome of product development

efforts and regulatory agency approvals or actions, if any;

• our ability to successfully navigate consolidation of our distribution

network and concentration of our customer base;

• risks associated with acquisitions, mergers and joint ventures, such as

difficulties integrating businesses, uncertainty associated with financial

       projections, projected synergies, restructuring, increased costs, and
       adverse tax consequences;


  • the inherent uncertainty associated with financial projections;


  • fluctuations in our operating results and financial conditions;

• the adverse impact of substantial debt and other financial obligations on

the ability to fulfill and/or refinance debt obligations;

• the effect of intangible assets and resulting impairment testing and

impairment charges on our financial condition;

• our ability to obtain additional debt or raise additional equity on terms

       that are favorable to us;


  • our ability to retain qualified employees and key personnel;

• risks associated with cyber-security and vulnerability of our information

and employee, customer and business information that we store digitally;


  • our ability to manage environmental liabilities;

• our ability to continue foreign operations in countries and to maintain

global operations;

• uncertainty related to our dividend plan and share repurchase program;

• risks associated with tax liabilities, or changes in U.S. federal or

international tax laws or tax rulings to which we and our affiliates are

subject, including changes that impact our effective tax rate and the risk

       that the Internal Revenue Service disagrees that we are a foreign
       corporation for U.S. federal tax purposes;


  • risks of fluctuations in foreign currency exchange rates;


  • our ability to maintain internal control over financial reporting;


  • the ability of Irish law to protect our shareholders;

• the impact of Irish laws and regulations on our business, including

limitations on capital management;

• uncertainty on the enforceability of judgements against our officers and

directors in an Irish court;

• risks associated with Irish tax liabilities, which could subject us or our

shareholders to Irish stamp duty, dividend withholding tax, income tax

and/or capital acquisition tax; and

• other risks and uncertainties including those discussed in "Risk Factors"

       in our Annual Report on Form 10-K.






                                       69

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