Analysis of Reportable Segments
Allergan Inc. operates in 2 segments: Specialty pharmaceuticals and Medical devices.
Segment Profit Margin
Allergan Inc., profit margin by reportable segment
| Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | |
|---|---|---|---|---|---|
| Specialty pharmaceuticals | 47.11% | 42.74% | 41.75% | 39.79% | 37.80% |
| Medical devices | 34.37% | 28.68% | 30.17% | 31.25% | 33.64% |
Based on: 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31).
The analysis of reportable segment profit margins from 2010 to 2014 reveals divergent performance trajectories between the specialty pharmaceuticals and medical devices divisions.
- Specialty Pharmaceuticals Profitability
- A consistent and positive growth trend is observed in the specialty pharmaceuticals segment. The profit margin increased steadily each year, rising from 37.80% in 2010 to 47.11% in 2014. This represents a total expansion of 9.31 percentage points over the five-year period, indicating sustained improvements in operational efficiency or a strategic shift toward higher-margin product offerings.
- Medical Devices Profitability
- The medical devices segment exhibited a period of margin contraction followed by a sharp recovery. Profit margins declined sequentially from 33.64% in 2010 to a low of 28.68% in 2013. This downward trajectory was reversed in 2014, where the margin rebounded to 34.37%, returning the segment to its 2010 profitability levels.
- Comparative Segment Divergence
- A widening gap in profitability between the two segments is evident. The margin differential was relatively narrow at 4.16 percentage points in 2010, but expanded significantly to 12.74 percentage points by 2014. This divergence highlights the specialty pharmaceuticals segment as the primary driver of margin growth, while the medical devices segment experienced more volatility before stabilizing.
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Segment Profit Margin: Specialty pharmaceuticals
Allergan Inc.; Specialty pharmaceuticals; segment profit margin calculation
| Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||
| Operating income | 2,832,300) | 2,282,000) | 1,997,700) | 1,763,300) | 1,501,900) |
| Product net sales | 6,012,100) | 5,339,000) | 4,784,600) | 4,432,000) | 3,973,400) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 47.11% | 42.74% | 41.75% | 39.79% | 37.80% |
Based on: 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31).
1 2014 Calculation
Segment profit margin = 100 × Operating income ÷ Product net sales
= 100 × 2,832,300 ÷ 6,012,100 = 47.11%
The Specialty Pharmaceuticals segment demonstrated consistent growth in both top-line revenue and operating profitability between 2010 and 2014. A positive correlation is observed between the steady increase in product net sales and the continuous expansion of the segment profit margin, indicating enhanced operational efficiency and scaling capabilities over the five-year period.
- Revenue Performance
- Product net sales exhibited a sustained upward trajectory, increasing from 3,973,400 thousand US dollars in 2010 to 6,012,100 thousand US dollars in 2014. This growth suggests a consistent expansion of market share or successful pricing strategies within the specialty pharmaceuticals portfolio.
- Operating Income Growth
- Operating income rose from 1,501,900 thousand US dollars in 2010 to 2,832,300 thousand US dollars in 2014. The growth rate of operating income exceeded that of net sales, signifying that the segment successfully managed its cost structure while increasing volume.
- Profit Margin Analysis
- The segment profit margin improved every year of the analyzed period, climbing from 37.80% in 2010 to 47.11% in 2014. While the growth was steady between 2010 and 2013, a more pronounced acceleration in margin expansion occurred in 2014, where the margin increased by 4.37 percentage points compared to the previous year.
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Segment Profit Margin: Medical devices
Allergan Inc.; Medical devices; segment profit margin calculation
| Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||
| Operating income | 382,900) | 246,200) | 278,800) | 286,000) | 284,700) |
| Product net sales | 1,114,000) | 858,500) | 924,200) | 915,100) | 846,200) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 34.37% | 28.68% | 30.17% | 31.25% | 33.64% |
Based on: 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31).
1 2014 Calculation
Segment profit margin = 100 × Operating income ÷ Product net sales
= 100 × 382,900 ÷ 1,114,000 = 34.37%
The medical devices segment experienced a period of margin compression between 2010 and 2013, followed by a significant recovery and expansion in 2014. While revenue and operating income fluctuated during the first four years of the period, the final year showed a sharp increase in both top-line growth and operational efficiency.
- Product Net Sales Performance
- Net sales grew from 846,200 thousand US dollars in 2010 to a peak of 924,200 thousand US dollars in 2012. A contraction occurred in 2013, with sales falling to 858,500 thousand US dollars, before a substantial increase in 2014 brought total sales to 1,114,000 thousand US dollars, representing the highest revenue level in the analyzed period.
- Operating Income Trends
- Operating income remained relatively stagnant between 2010 and 2012, hovering around 280,000 thousand US dollars. A notable decline was observed in 2013, where income dropped to 246,200 thousand US dollars. This trend reversed sharply in 2014, with operating income rising to 382,900 thousand US dollars, indicating a significant improvement in the segment's ability to convert sales into profit.
- Segment Profit Margin Analysis
- The profit margin demonstrated a consistent downward trajectory from 2010 to 2013, decreasing from 33.64% to a period low of 28.68%. This suggests that operating expenses grew at a faster rate than net sales during this interval. However, in 2014, the margin rebounded strongly to 34.37%, surpassing 2010 levels and marking a recovery in overall segment profitability.
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Product net sales
Allergan Inc., product net sales by reportable segment
US$ in thousands
| Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | |
|---|---|---|---|---|---|
| Specialty pharmaceuticals | 6,012,100) | 5,339,000) | 4,784,600) | 4,432,000) | 3,973,400) |
| Medical devices | 1,114,000) | 858,500) | 924,200) | 915,100) | 846,200) |
| Total | 7,126,100) | 6,197,500) | 5,708,800) | 5,347,100) | 4,819,600) |
Based on: 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31).
Total net sales exhibited a consistent upward trajectory from 2010 to 2014, increasing from US$ 4.82 billion to US$ 7.13 billion. This represents a total growth of approximately 47.8% over the five-year period, characterized by sustained annual expansions in overall revenue.
- Specialty Pharmaceuticals Performance
- The specialty pharmaceuticals segment demonstrated strong and uninterrupted growth throughout the period. Net sales rose from US$ 3.97 billion in 2010 to US$ 6.01 billion in 2014, representing a compound growth pattern. The most significant annual increase occurred between 2013 and 2014, with a growth rate of approximately 12.6%.
- Medical Devices Performance
- Revenue from medical devices showed higher volatility than the pharmaceuticals segment. After modest growth between 2010 and 2012, a contraction was observed in 2013, where sales decreased from US$ 924.2 million to US$ 858.5 million. This was followed by a sharp recovery in 2014, with sales increasing by nearly 30% to reach US$ 1.11 billion.
- Segment Contribution and Concentration
- A high degree of revenue concentration is evident, with specialty pharmaceuticals serving as the primary driver of total net sales. This segment consistently accounted for over 80% of the total revenue across the analyzed timeframe. While the medical devices segment grew over the long term, its relative contribution to the total revenue remained secondary and subject to more significant annual fluctuations.
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Operating income
Allergan Inc., operating income by reportable segment
US$ in thousands
| Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | Dec 31, 2010 | |
|---|---|---|---|---|---|
| Specialty pharmaceuticals | 2,832,300) | 2,282,000) | 1,997,700) | 1,763,300) | 1,501,900) |
| Medical devices | 382,900) | 246,200) | 278,800) | 286,000) | 284,700) |
| Total | 3,215,200) | 2,528,200) | 2,276,500) | 2,049,300) | 1,786,600) |
Based on: 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31), 10-K (reporting date: 2010-12-31).
Total operating income exhibited a consistent upward trajectory between 2010 and 2014, increasing from US$ 1,786,600 thousand to US$ 3,215,200 thousand. This growth was characterized by steady annual gains from 2010 through 2013, followed by a significant acceleration in the final year of the period.
- Specialty Pharmaceuticals Segment Performance
- The specialty pharmaceuticals segment served as the primary driver of operating income, demonstrating uninterrupted growth throughout the five-year period. Operating income rose from US$ 1,501,900 thousand in 2010 to US$ 2,832,300 thousand in 2014. The growth pattern was consistent, with a particularly sharp increase observed between 2013 and 2014.
- Medical Devices Segment Performance
- The medical devices segment experienced a period of volatility and contraction before a late recovery. Between 2010 and 2013, operating income trended downward, declining from US$ 284,700 thousand to a period low of US$ 246,200 thousand. This trend reversed abruptly in 2014, with income surging to US$ 382,900 thousand, the highest value recorded for this segment within the analyzed timeframe.
- Aggregate Operating Income Analysis
- Overall operating income growth was heavily weighted toward the specialty pharmaceuticals segment, which consistently contributed the vast majority of the total. While the medical devices segment faced headwinds until 2013, the simultaneous growth in pharmaceuticals and the 2014 recovery in medical devices resulted in a total operating income increase of approximately 79.8% over the entire period.
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