Bad Weather, Recall Will Cut Into Earnings, Allergan Says
Allergan Inc. said Monday it will report lower-than-expected results for the first quarter as bad weather across the country forced postponement of patients’ cataract surgeries, and the company began a recall of a popular lens implant.
Jeff D’Eliscu, a spokesman for the maker of eye- and skin-care products, said it’s too early to predict how far earnings will fall below analysts’ estimates of 40 cents a share. He noted, however, that one investment firm, Oppenheimer & Co., cut its estimate by a nickel a share on the news of the company’s diminished prospects. In the first quarter last year, Allergan earned $21.5 million, or 34 cents a share, on sales of $228.3 million.
Separately, Allergan acknowledged receiving two regulatory warning letters in the last year, including one last month, citing manufacturing problems at its Irvine plant. The latest letter from the Food and Drug Administration, dated Jan. 4, cited Allergan for failure to make sure factory equipment is properly cleaned, quality control procedures are followed and employees understand drug manufacturing standards.
D’Eliscu said that the issues raised in both letters were quickly resolved with regulators.
Elaine Messa, director of the FDA’s regional office in Irvine, said Allergan’s response was “timely” and “adequate.” The agency last year inspected 1,132 companies in the region, which includes Southern California and Arizona, and issued 88 warning letters.
As for the first-quarter outlook, the company said the recent East Coast blizzard, sub-zero temperatures in the Midwest and severe flooding in the Pacific Northwest caused many elderly patients to postpone surgeries to have cataracts removed.
Allergan sells cataract surgery kits to doctors. The kits cost about $150 to $200 apiece and include lens implants, drugs and related items.
The company also began a voluntary recall of tens of thousands of its lenses last week, after doctors reported finding a slight yellowish discoloration in some items examined by microscope. The lenses, made at the company’s Puerto Rico factory between mid-July and the end of October, don’t present a safety hazard, D’Eliscu said.
He said people wearing the discolored lenses won’t notice the defect and the lenses will work as they should. The discolored lenses represented less than 1% of those made during the period in question last year, he said.
Altogether, lenses constitute about 10% of Allergan’s total sales, he said. Last year, the company earned $72.5 million, or $1.12 a share, on $1.067 billion in total sales.
D’Eliscu said he doesn’t know how costs associated with the recall, including replacements for doctors, will affect the company’s financial results. “We just started notifying doctors a week ago,” he said.
He noted, however, that most of the defective inventory likely will be returned within a month.
In New York Stock Exchange trading, Allergan stock slipped nearly 3% Monday to close at $37.375 a share, down $1.125 for the day. About 264,000 shares changed hands in heavy trading.
