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Allergan posts growth in core products Botox, Juvederm — but profits lag

Allergan PLC's sales from the second quarter of 2019 showed growth in key products while lagging in other areas, providing a snapshot of the kind of company AbbVie Inc. is slated to acquire by early 2020.

The second quarter for Allergan was dominated by the June announcement that AbbVie would acquire the Irish company for $63 billion. The combined companies' success would depend heavily on sales of Botox, which represent about two-thirds of Allergan's revenue. While Allergan did not host a second-quarter earnings call, the company did issue detailed results and provided some color on the earnings in an Aug. 6 release.

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Sales of Botox grew 8.4% for cosmetic uses and 5% in therapeutic indications year over year, totaling $974 million for both uses.

Many of Allergan's core products beyond Botox signaled an upward trajectory as well. The company's line of dermal fillers, called Juvederm, had revenues of $329 million for the quarter, up more than 15% year-over-year.

Revenue for depression drug Vraylar, newly approved in the U.S. for bipolar depression in May, shot up more than 71% from the same time in 2018 to $196 million.

Breast implant recall an anchor on revenue

Despite the sales gains, Allergan's net revenue dropped almost 1% from year to year as the company recalled its textured breast implants, notching a loss of about $44 million in the quarter. The segment declined more than 67% year over year.

The U.S. Food and Drug Administration warned in July that the saline- and silicone-filled implants could cause cancer, and Allergan voluntarily performed a worldwide recall.

The recall also poses litigation risk for Allergan, which the company acknowledges. However, Allergan said the low incidence rate and curable nature of the cancer associated with the implants mean that the legal risk is not significant enough to be a financial threat.

Also contributing to the loss was a decline in revenue from Allergan's line of fat-reduction systems called CoolSculpting, which fell short by more than 19% to $111 million in the quarter. Sales of the system fell from 336 in 2018's second quarter to only 168 in 2019, while the number of treatments fell 16%.

But Allergan is doubling down on body contouring, with plans to launch the newest version of the system called CoolTone in the second half of 2019. Preorders have reached 300, which could explain the drastic drop in sales of the older system.

Prepping for AbbVie

To avoid any run-ins with the Federal Trade Commission in connection with the AbbVie deal, Allergan has begun to divest its immunology drug candidate brazikumab, which is in the same class of drugs as AbbVie's best-selling product Humira.

AbbVie Chief Legal Officer Laura Schumacher had said during a July 26 earnings call that neither asset would need to be divested because they are approved for different uses.

Allergan also plans to divest the digestion drug Zenpep.

"We and AbbVie have notified the Federal Trade Commission of our intention to divest these products in connection with the proposed transaction, irrespective of whether such divestitures are required by the regulators," Allergan wrote in the release.