Allergan's Pipeline Matters More Than Its Earnings Do: RBC

Don't expect any surprises from Allergan PLC (AGN) when the pharmaceuticals company reports fourth-quarter and full-year financials before the opening bell Tuesday, Feb. 6.

According to RBC Capital Markets analysts in a Feb. 4 note, there aren't likely to be any shocks tied to revenue or earnings, as Allergan already provided main 2018 line-item guidance forecasting revenue between $15 billion and $15.3 billion and earnings less than $15.25a share.

But Allergan is expected to address "recurring questions" related to its U.S. Botox aesthetics business, RBC noted, given possible upcoming market entry from Evolus, plus a decision expected in the second half of 2018 about Allergan's U.S. Botox migraine business.

U.S. aesthetic Botox business represents about 5% of Allergan's total revenue and migraine Botox represents about 4% of total revenue. In its migraine business, Allergan has suggested previously that there could be a short-term impact to the 10% to 20% growth previously seen as other calcitonin gene-related peptide (CGRP) migraine treatments launch later this year.

"The biggest focus should be on pipeline and specifically the oral CGRP updates and Esmya as the value of its pipeline remains the biggest debate in the stock," analysts wrote. The expected action date for uterine fibroids treatment Esmya is in May, suggesting the product could launch at some point in 2018. In the second half of 2018, updates are expected on strides made in the abicipar age-related macular degeneration product. Pending approval, that product could launch as soon as 2020, RBC said.

Positive pipeline updates are the "biggest upside driver," RBC said. Only 3% of analysts' 2020 year-end revenue guidance currently comes from Allergan's pipeline. The company has said just two years later at year-end 2022 about 10% to 15% of revenue will be pipeline-related.

RBC said it doesn't expect any new updates regarding potential asset sales, but it will be "listening for messaging around the anti-infectives business." A sale of the business unit, which represents about 2% of revenue, would bring net dilution of about 20 cents in earnings, but would "message a more aggressive portfolio management intent," RBC noted.

Wall Street is looking for revenue of $4.28 billion for the full year, according to analysts polled by FactSet. RBC's revenue forecast is slightly ahead of consensus at $4.33 billion. FactSet analysts expect full-year earnings of $4.74 a share, and RBC anticipates a slightly higher earnings figure of $4.76.

RBC analysts rate Allergan shares outperform with a $218 price target, implying a 26% upside for shares from their $172.51 closing price Friday, Feb. 2.

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