Allergan (NYSE:AGN) is sitting pretty, following stronger than expected results for the 2nd quarter, despite a precipitous drop-off in the company’s Lap-Band obesity treatment business.
The Irvine, Calif-based medical aesthetic medical device and pharmaceutical company reported net earnings of $295.4 million on $1.49 billion in sales, a 19% increase from the $246.6 million on $1.42 billion in sales the company reported for the same period last year.
The company’s medical device business grew 4% to $254.8 million, compared to $245.1 million for the same period last year. Allergan shrugged off slow sales in its Lap-Band weight loss treatment, which fell 24% to $41.3 million for the 3-month period ended June 30, compared to $54.4 million for the same period last year.
Allergan CEO David Pyott said the slide in Lap-Band sales was due to a combination of factors including reimbursement pressures and continuing softness in the bariatrics business overall.
He told investors during a conference call that the company has "directed considerable" effort to improving the reimbursement landscape for Lap-Band surgery but that "in a time of high unemployment, high patient co-pays are a barrier."
He added that on a macro economic level gastric banding procedures are losing market share to sleeve gastroectomy, a procedure where a portion of the stomach is removed. Allergan’s Lap-Band device is implanted during surgery and uses an adjustable silicon ring to constrict the upper portion of the stomach.
Lap-band sales have been slow all year, down 20% through the first 6 months to $85.3 million. Allergan officials expect the business to pull in about $170 million in 2012.
Allergan’s breast aesthetics business fared much better, notching a 6% increase in sales to $101.2 million, and the company’s facial aesthetics business jumped 18% to $112.3 million.
On Wall Street, shares of Allergan stock were up 5% in afternoon trading on news that the company had increased its full-year earnings guidance to $4.15 to $4.19 per share on sales between $5.65 billion and $5.8 billion, compared with earlier estimates of $4.13 to $4.19.
