Allergan puts up modest 2017 growth forecast as M&A hunt continues

Allergan CEO Brent Saunders
Allergan CEO Brant Saunders today offered some expectations for 2017 sales and earnings.

Allergan, which cut its 2016 earnings forecast after a surprisingly soft Q3, today offered up a preview for this year, saying it expects to see mid-single-digit percentage growth for net revenue but thinks it will see double-digit growth in earnings per share.

The numbers were offered up by CEO Brent Saunders ahead of his appearance today at the Goldman Sachs Healthcare CEO's Unscripted Conference. In the announcement, Allergan said the revenue growth would come from “new product launches, international growth and growth from key products."

But it reminded investors that it will take a revenue hit, probably in the fourth quarter, from the launch of a generic of its Alzheimer’s drug Namenda XR. That will be partially offset by growth in its alternative treatment, Namzaric. It said it expects stable revenue from eye drug Restasis.

Another factor that will keep 2017 revenues in check will be the results of Saunders’ pledge last year to limit price increases after a widespread public backlash to the industry routinely raising prices on older drugs. The company kept January price hikes below 10% on a host of established meds. In its “social contract” with patients in September, the company said it would only raise prices once in 2017, bucking the common industry practice of multiple price hikes in a year.

Responding to Allergan’s forecast In a note to investors today, analysts for Wells Fargo Securities said their current assumption is for 19% growth in non-GAAP EPS, expecting it to hit $15.96 in 2017 from $13.39E in 2016.The Dublin-based drugmaker will report 2016 year-end results in February.

Allergan surprised, disappointed and angered investors in its last earnings report when revenues came in about 2% below analyst projections as sales of Namenda XR and other established meds missed their marks. Saunders apologized to investors and took responsibility acknowledging the company had taken its eye of the ball in the midst of a transformative year.  

After a merger deal with Pfizer went south, it completed a $40.5 billion sale of its extensive generics operations to Teva, then made a series of smaller buys as Saunders had pledged after the Pfizer deal caved.

Mizuho Securities USA analyst Irina Koffler, in a note to investors today reported by Reuters, said the forecast could be expected after the Q3 debacle. "We are not surprised by these conservative expectations as the company is still managing the declines of some of its established products while its newer launches ramp," Koffler wrote.