Allergan, Inc. (AGN - Analyst Report) reported third-quarter 2014 earnings of $1.78 per share, above the Zacks Consensus Estimate of $1.76. The company had guided third-quarter earnings in the range of $1.44–$1.47 per share.

While earnings climbed 44.7% from the year-ago quarter, revenues increased 16.6% to $1,817.1 million, above the Zacks Consensus Estimate of $1,770 million.

The Quarter in Detail

Specialty Pharmaceuticals sales increased 14.3% to $1,520 million, with eye-care pharmaceuticals, Botox and skin-care sales driving growth.

Eye-care pharmaceutical sales increased 14.2% to $818.8 million with Restasis (up 14.2%) contributing significantly to growth.

Alphagan franchise sales went up 15.9% to $130.2 million in the reported quarter. While Latisse sales decreased 8.1% to $22.4 million, Lumigan franchise sales went up 7.9% to $165.6 million.

Allergan increased its Lumigan franchise sales guidance. The company now expects Lumigan franchise sales to be in the range of $650 million to $670 million in 2014 (previous guidance: $600–$620 million). Alphagan franchise sales guidance was also raised to the range of $500–$510 million (previous: $460–$480 million) for 2014.

Restasis sales are now expected to be within $1,070–$1,090 million (previous: $1,040–$1,070 million) in 2014. Allergan still expects Latisse sales to be approximately $100 million in 2014.

In the third quarter of 2014, Botox sales increased 15.3% year over year to $560.1 million. Allergan reduced its 2014 Botox sales guidance to the range of $2,200 million to $2,240 million (previous: $2,220 million to $2,280 million).

Meanwhile, Allergan’s Medical Devices segment posted sales of $270.7 million, up 36.3%. Breast aesthetics sales increased 6.1% to $97.5 million and facial aesthetics sales increased 51.3% to $161.4 million.
 
Other Details
 
Selling, general and administrative (SG&A) expenses increased 5.9% during the quarter to $617.6 million. Research and development (R&D) expenses amounted to $267.2 million, up 6.5%.
 
Guidance Up
 
Allergan now expects 2014 earnings of $6.27–$6.30 per share as compared to the prior guidance of $5.74–$5.80 per share. The earnings guidance is above the Zacks Consensus Estimate which is currently at $6.24 per share.

The company expects product net sales in a band of $7,080–$7,155 million in 2014 (previous guidance: $6,900–$7,050 million). The guidance excludes revenues from transition services agreements related to the sale of the obesity intervention business.

For 2014, Allergan expects total Specialty Pharmaceuticals net sales of $5,990–$6,045 million (previous guidance: $5,865–$5,975 million).

The company expects Medical Devices net sales of $1,050–$1,070 million (previous guidance: $1,010–$1,050 million). Performance at the segment will be driven mainly by facial aesthetics. Facial aesthetics sales are expected in the range of $650 million to $660 million, above the previous guidance of $610 million to $630 million.

Breast aesthetics sales guidance has been narrowed to the range of $400 million to $410 million (prior guidance: $400 million to $420 million).

The company expects cost of sales to product net sales ratio of about 12% in 2014. The company expects its SG&A expenses to product net sales ratio to come in at 37% and R&D expense to product net sales ratio at 16%.

Allergan expects fourth quarter earnings in the range of $1.80–$1.83 per share on product net sales of $1,845 million to $1,920 million. The Zacks Consensus Estimate currently stands at $1.72, below the company’s guidance range.

Valeant Continues to Chase Allergan
 
Meanwhile, Valeant Pharmaceuticals International, Inc. (VRX - Analyst Report), which has been pursuing Allergan since Apr 2014, is back with a new offer once again. In a letter recently sent to Allergan, it said that it is ready to offer a whopping $200 per share to acquire Allergan. Allergan has continuously rejected Valeant’s offers. Valeant’s last offer was rejected in June this year (read more: Allergan Rejects Valeant's Deal).

Shares of Allergan, which ended its trading session on Oct 24 at $184.21, are expected to rise with the new offer. However, the question remains whether Allergan will take the Valeant bait this time around.

Our Take
 
Allergan’s third-quarter results came in above expectations yet again with the company beating the Zacks Consensus Estimate as well as exceeding its guidance. The company’s new guidance also surpasses expectations. Allergan’s presence across different segments will help maintain growth.

Currently, we expect investor focus to remain on how Allergan reacts to the Valeant offer.

Allergan carries a Zacks Rank #2 (Buy). Some other stocks worth considering in the health care sector include AMAG Pharmaceuticals, Inc. (AMAG - Snapshot Report) and Biogen Idec Inc. (BIIB - Analyst Report). Both stocks hold a Zacks Rank #1 (Strong Buy).