Analysis of Reportable Segments
Allergan PLC operates in 3 segments: US Specialized Therapeutics; US General Medicine; and International.
Segment Profit Margin
Allergan PLC, profit margin by reportable segment
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | |
|---|---|---|---|---|---|
| US Specialized Therapeutics | 66.88% | 69.38% | 69.53% | 72.43% | 75.01% |
| US General Medicine | 64.12% | 64.68% | 63.68% | 62.18% | 65.14% |
| International | 52.97% | 54.13% | 54.42% | 54.06% | 53.02% |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
An analysis of segment profit margins from 2015 to 2019 reveals divergent performance trends across the three primary reportable segments. While the International and US General Medicine segments maintained relatively stable margins, the US Specialized Therapeutics segment experienced a consistent and significant decline throughout the period.
- US Specialized Therapeutics
- A sustained downward trend is observed in this segment, which began as the highest-margin operation at 75.01% in 2015 and declined to 66.88% by 2019. This represents a total contraction of 8.13 percentage points. The decline was most pronounced between 2015 and 2017, followed by a period of relative stabilization in 2018 before another drop in 2019.
- US General Medicine
- This segment exhibited a pattern of initial volatility followed by stabilization. After a decrease from 65.14% in 2015 to 62.18% in 2016, margins recovered steadily to reach 64.68% in 2018, eventually settling at 64.12% in 2019. The margin ended the period within 1.02 percentage points of its 2015 level.
- International
- The International segment demonstrated the highest level of stability with the lowest overall variance. Margins fluctuated minimally, peaking at 54.42% in 2017 and concluding the period at 52.97% in 2019. The margin range remained tightly constrained between approximately 53% and 54% for the duration of the five-year period.
Comparatively, the margin gap between the most profitable segment (US Specialized Therapeutics) and the least profitable segment (International) narrowed significantly. In 2015, the spread was 21.99 percentage points, which reduced to 13.91 percentage points by 2019, primarily driven by the erosion of profitability in the US Specialized Therapeutics portfolio.
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Segment Profit Margin: US Specialized Therapeutics
Allergan PLC; US Specialized Therapeutics; segment profit margin calculation
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||
| Segment contribution | 4,561,300) | 4,801,500) | 4,730,500) | 4,209,600) | 3,232,900) |
| Net revenues | 6,820,000) | 6,920,300) | 6,803,600) | 5,811,700) | 4,309,800) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 66.88% | 69.38% | 69.53% | 72.43% | 75.01% |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Segment profit margin = 100 × Segment contribution ÷ Net revenues
= 100 × 4,561,300 ÷ 6,820,000 = 66.88%
The US Specialized Therapeutics segment experienced a period of absolute growth in both revenue and contribution from 2015 through 2018, followed by a moderate contraction in 2019. Despite the increase in top-line figures during the initial growth phase, there was a continuous and systemic decline in the segment's profit margins throughout the entire five-year period.
- Revenue and Contribution Growth
- Net revenues exhibited strong upward momentum between 2015 and 2018, increasing from 4,309,800 thousand US dollars to a peak of 6,920,300 thousand US dollars. Segment contribution mirrored this trend, rising from 3,232,900 thousand US dollars to 4,801,500 thousand US dollars over the same period. In 2019, both metrics shifted downward, with net revenues decreasing to 6,820,000 thousand US dollars and segment contribution falling to 4,561,300 thousand US dollars.
- Segment Profit Margin Compression
- A consistent downward trajectory is observed in the segment profit margin, which declined every year from 2015 to 2019. The margin started at 75.01% in 2015 and decreased steadily to 66.88% by the end of 2019. This represents a total reduction of 8.13 percentage points over the analyzed timeframe.
- Analysis of Operational Efficiency
- The divergence between increasing revenues (up to 2018) and decreasing profit margins indicates that operating expenses grew at a rate exceeding revenue growth. The steady erosion of the margin suggests a decrease in operational efficiency or an increase in the cost of goods and services required to maintain the segment's market position. The decline in margin persisted even during the 2019 period when both revenues and contribution experienced a slight contraction.
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Segment Profit Margin: US General Medicine
Allergan PLC; US General Medicine; segment profit margin calculation
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||
| Segment contribution | 3,741,200) | 3,442,800) | 3,690,900) | 3,683,500) | 4,128,900) |
| Net revenues | 5,834,900) | 5,322,900) | 5,796,200) | 5,923,900) | 6,338,400) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 64.12% | 64.68% | 63.68% | 62.18% | 65.14% |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Segment profit margin = 100 × Segment contribution ÷ Net revenues
= 100 × 3,741,200 ÷ 5,834,900 = 64.12%
The US General Medicine segment exhibited a period of revenue volatility between 2015 and 2019, characterized by a multi-year decline followed by a partial recovery. Despite fluctuations in total revenue and absolute contribution, the segment maintained a consistently high profit margin, demonstrating operational stability.
- Revenue and Contribution Trends
- Net revenues decreased steadily from 6,338.4 million USD in 2015 to a period low of 5,322.9 million USD in 2018. A recovery was observed in 2019, with revenues rising to 5,834.9 million USD. Segment contribution mirrored this trajectory, falling from 4,128.9 million USD in 2015 to 3,442.8 million USD in 2018 before increasing to 3,741.2 million USD in 2019.
- Profit Margin Analysis
- The segment profit margin experienced an initial contraction from 65.14% in 2015 to 62.18% in 2016. Following this dip, margins trended upward, reaching 64.68% in 2018 and stabilizing at 64.12% in 2019. This stability indicates that the segment's cost structure remained resilient despite the fluctuations in top-line revenue.
- Operational Correlation
- A strong positive correlation is evident between net revenues and segment contribution throughout the five-year period. The consistency of the profit margin, which remained within a narrow range of approximately 3 percentage points, suggests a disciplined management of variable costs relative to revenue changes.
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Segment Profit Margin: International
Allergan PLC; International; segment profit margin calculation
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||
| Segment contribution | 1,802,000) | 1,897,200) | 1,806,400) | 1,557,700) | 1,159,600) |
| Net revenues | 3,402,000) | 3,504,700) | 3,319,500) | 2,881,300) | 2,187,300) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 52.97% | 54.13% | 54.42% | 54.06% | 53.02% |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 2019 Calculation
Segment profit margin = 100 × Segment contribution ÷ Net revenues
= 100 × 1,802,000 ÷ 3,402,000 = 52.97%
The international segment exhibited a period of sustained growth in both top-line revenue and segment contribution between 2015 and 2018, followed by a moderate contraction in 2019.
- Revenue and Contribution Growth
- Net revenues increased from 2,187,300 thousand US dollars in 2015 to a peak of 3,504,700 thousand US dollars in 2018. This expansion was mirrored by the segment contribution, which rose from 1,159,600 thousand US dollars to 1,897,200 thousand US dollars over the same period, representing a significant increase in the total financial contribution of the international operations.
- Profit Margin Stability
- The segment profit margin remained remarkably stable throughout the five-year period, fluctuating within a narrow range of approximately 1.4 percentage points. The margin trended upward from 53.02% in 2015 to a peak of 54.42% in 2017, demonstrating an ability to maintain pricing power and cost control during a phase of rapid revenue growth.
- Analysis of Recent Contraction
- A downturn occurred in 2019, characterized by a decrease in net revenues to 3,402,000 thousand US dollars and a corresponding decline in segment contribution to 1,802,000 thousand US dollars. This period also saw the segment profit margin retract to 52.97%, the lowest level since 2015, indicating that the decline in revenue was accompanied by a slight compression in operational profitability.
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Net revenues
Allergan PLC, net revenues by reportable segment
US$ in thousands
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | |
|---|---|---|---|---|---|
| US Specialized Therapeutics | 6,820,000) | 6,920,300) | 6,803,600) | 5,811,700) | 4,309,800) |
| US General Medicine | 5,834,900) | 5,322,900) | 5,796,200) | 5,923,900) | 6,338,400) |
| International | 3,402,000) | 3,504,700) | 3,319,500) | 2,881,300) | 2,187,300) |
| Total | 16,056,900) | 15,747,900) | 15,919,300) | 14,616,900) | 12,835,500) |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
Total net revenues exhibited a general upward trajectory between 2015 and 2019, increasing from 12.8 billion to 16.1 billion. Growth was most significant during the 2015–2017 period, followed by a phase of stabilization and marginal fluctuation in 2018 and 2019.
- US Specialized Therapeutics
- This segment demonstrated the most robust growth early in the period, rising from 4.3 billion in 2015 to a peak of 6.9 billion in 2018. This represents a substantial increase in the segment's contribution to total revenue. However, a slight decline was observed in 2019, with revenues retreating to 6.8 billion.
- US General Medicine
- A consistent downward trend was observed from 2015 through 2018, with revenues decreasing from 6.3 billion to a low of 5.3 billion. This negative trajectory was reversed in 2019, as revenues recovered to 5.8 billion, although this remains below the 2015 baseline.
- International Segment
- International revenues showed steady expansion from 2015 to 2018, growing from 2.2 billion to 3.5 billion. Similar to the US Specialized Therapeutics segment, the International segment experienced a modest contraction in 2019, ending the period at 3.4 billion.
The composition of total revenue shifted notably over the five-year period. While US General Medicine was the largest contributor in 2015, US Specialized Therapeutics became the primary revenue driver by 2017 and maintained that position through 2019. The International segment also increased its relative share of total revenues over the analyzed timeframe.
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Segment contribution
Allergan PLC, segment contribution by reportable segment
US$ in thousands
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | |
|---|---|---|---|---|---|
| US Specialized Therapeutics | 4,561,300) | 4,801,500) | 4,730,500) | 4,209,600) | 3,232,900) |
| US General Medicine | 3,741,200) | 3,442,800) | 3,690,900) | 3,683,500) | 4,128,900) |
| International | 1,802,000) | 1,897,200) | 1,806,400) | 1,557,700) | 1,159,600) |
| Total | 10,104,500) | 10,141,500) | 10,227,800) | 9,450,800) | 8,521,400) |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
Total revenue exhibited a growth trajectory from 2015 to 2017, increasing from $8,521.4 million to a peak of $10,227.8 million. Following this peak, the total revenue plateaued, experiencing a marginal decline through 2018 and 2019, ending the period at $10,104.5 million.
- US Specialized Therapeutics
- This segment demonstrated strong growth between 2015 and 2018, rising from $3,232.9 million to a peak of $4,801.5 million. By 2016, it became the largest contributing segment to total revenue. However, a downward trend emerged in 2019, with revenue decreasing to $4,561.3 million.
- US General Medicine
- A general contraction was observed in this segment from 2015 to 2018, with revenue falling from $4,128.9 million to $3,442.8 million. While this segment was the primary revenue driver in 2015, its relative importance diminished over time, despite a moderate recovery to $3,741.2 million in 2019.
- International
- The international segment showed steady expansion from 2015 to 2018, increasing from $1,159.6 million to $1,897.2 million. This growth trend reversed slightly in 2019, with revenue contracting to $1,802.0 million.
The revenue mix underwent a significant structural shift over the five-year period. The dominance of US General Medicine was replaced by US Specialized Therapeutics as the primary source of income. Additionally, the International segment increased its proportional contribution to the overall revenue base, despite the slight decline observed in the final year of the analysis.
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