Allergan Posts 3Q Loss of $4 BillionBy
Allergan has reported a third-quarter operating loss of $4.02 billion due to impairment charges for its top-selling drug, Restasis (cyclosporine ophthalmic emulsion), following a setback in patent litigation as well as charges relating to its stake in Teva Pharmaceutical Industries and for market erosion of its acne drug, Aczone (dapsone).
Allegan reported total revenues of $11.6 billion for the first nine months of 2017 and third-quarter revenues of $4.03 billion. The company reported a GAAP (generally accepted accounting principles) operating loss from continuing operations in the third quarter 2017 of $4.02 billion, which included the impact of amortization, asset sales and impairments, net, in-process research and development (IPR&D) impairments, and foreign exchange transactional losses.
Allergan took a $3.2-billion impairment charge related to Restasis in the third-quarter following an adverse trial decision by a federal district court in October 2017 that found that four asserted patents covering Restasis were invalid. Restasis is one of the company’s top-selling products with global 2016 sales of $1.4 billion. Allergan is involved in patent litigation for Restasis with several generic-drug companies, and the US District Court for the Eastern District of Texas ruled the four asserted patents covering Restasis are invalid based on obviousness. Allergan said it is appealing the decision.
As a result of the federal court’s decision, however, the company evaluated all of its dry-eye related assets and all potential scenarios related to these assets and recognized an impairment of $3.2 billion related to Restaisis as well as an impairment of $164.0 million related to other dry-eye IPR&D assets. The company also impaired the intangible asset related to Aczone (dapsone), an acne drug, by $646 million as a result of branded-acne-market erosion. Additionally, the company impaired an IPR&D asset due to a delay in an anticipated launch of a women’s healthcare project and an anticipated decrease in product demand.
Allergan also took a $1.3-billion impairment charge related to its approximate 10% equity stake in Teva Pharmaceutical Industries, which it secured as part of its $40.5-billion sale of its generics business to Teva in 2015, due to a change in market value of Teva shares. The company said on its-third-quarter earnings call that it plans to sell its Teva shares in a measured approach beginning shortly with plans to complete the selling of the shares in 2018.