Earnings Preview For Allergan (AGN, MRK, ISPH, VRX, CEPH)

Allergan is expected to announce its Q1 earnings results on Wednesday, May 4, before the markets open. Analysts are predicting earnings per share to reach $0.74, up 13.8% on the last year's level of $0.65. Within the last 60 days, consensus estimate was lowered by $0.01. Revenues are projected to reach $1.22 billion this quarter, an increase of 8.7% year-over-year. Allergan is a multi-specialty health care company focused on developing and commercializing pharmaceuticals, biologics, medical devices and over-the-counter products. The company discovers, develops and commercializes specialty pharmaceutical, biologics, medical device and over-the-counter products for the ophthalmic, neurological, medical aesthetics, medical dermatology, breast aesthetics, obesity intervention, urological and other specialty markets in more than 100 countries globally. Looking ahead, Allergan is expected to report similar growth in earnings and revenues for the rest of the year. For Q2, earnings per share is expected to increase by 8.2% on a yearly basis to stand at $0.92, while revenues should reach $1.32 billion, an increase of 5.9% from the last year's level. For the whole year, earnings per share is estimated to be 14.2% higher than a year ago, while revenues are expected to increase by 7%. To see if Allergan can match or outperform these expectations, investors will keep a close eye on Lap-Band, Allergan's diabetes treatment. On the one hand, investors will be encouraged that some diabetes experts groups backed the use of weight-loss surgery, which includes Lap-Band, to treat diabetes. Investors will be more concerned by findings of another expert group, which found evidence that gastric bypass has better weight-loss results than Allergan's Lap-Band. Reuters reported that the research found obese diabetics who had gastric bypass surgery lost 64% of their excess weight after a year, compared with 36% in those treated with Allergan's Lap-Band device. Some analysts believe there is a new wave of mergers and acquisitions in the pharmaceutical industry. Merck MRK recently announced it would acquire eye treatment maker Inspire Pharmaceuticals ISPH for about $430 million to expand its ophthalmology business. Inspire Pharmaceuticals receives royalties on sales of Allergan's dry-eye drug Restasis. In another takeover attempt, Valeant Pharmaceutical International VRX initiated a $5.7 billion bid for Cephalon CEPH in early April. This bid is unique in that it challenges the industry wisdom that a drugmaker about to lose patent protection for top products does not make an attractive buyout target. Some analysts believe Allergan might also become a pray for one of pharmaceutical industry's giants. The majority of rating agencies currently has a Buy or Strong Buy on Allergan's shares. In the last 30 days, Allergan's shares added 10.4% to their value. On Monday, its shares closed at $80.35.