Innovation
`B O T O X R E S TA S I S
`for
`J U V É D E R M
` the
`TAZORAC OZURDEX
`NATRELLE ACZONE
`future
`L A T I S S E
`LUMIGAN
`
`BOTOX COSMETIC
`
`2012 annual report
`
`APOTEX 1056, pg. 1
`
`

`

`1 2
`
`
`6
`8
`10
`12
`14
`16
`18
`20
`22
`24
`
`Introduction
`Letter To Our Investors
`Financial Summary
`Condensed Consolidated Statements of Earnings
`2012 Accolades
`Innovation in R&D
`Innovation in World-Class Manufacturing
`Innovation in Corporate Social Responsibility
`Innovation for Patients
`Board of Directors
`Executive Committee
`Corporate Overview and Stockholders’ Information
`
`APOTEX 1056, pg. 2
`
`

`

`At Allergan, innovation is more than coming up
`with new ideas or developing new products. It’s
`about innovating for the future – understanding
`the needs of our patients, consumers and
`physicians, adapting to the evolving changes of
`the health care industry and advancing our
`business in the face of challenging economic times.
`
`Innovation is the foundation of Allergan; it defines who we are as a
`company and is the key to how we will continue striving to satisfy
`the unmet needs of our customers worldwide. In 2012, we invested
`nearly $1 billion, a rate above industry standard, in one of the most
`robust product pipelines in the specialty pharmaceutical market.
`We’re expanding and improving our Research & Development
`(R&D) facilities to enhance clinical development programs so we
`can continue to rapidly bring products to market across the world.
`We’re committed to improving, with a goal of further strengthening,
`our presence in the industry, whether that be via internal discovery and
`development, acquiring products, in-licensing compounds, partnering
`with other companies or acquiring other companies to grow our
`product portfolio or bring a new product to market. At Allergan, we
`are constantly improving, striving to build a better tomorrow – we’re
`innovating for the future.
`
`a l l e r g a n s u m m a r y r e p o r t 2 0 1 2
`
`1
`
`APOTEX 1056, pg. 3
`
`

`

`To Our Investors
`
`Delivering Value
`Consistent with our historical, long-term performance, we
`were able to deliver very good results in 2012, in line with
`our ongoing aspiration of growing revenues in local currencies
`around 10% per annum and growing annual adjusted Earnings
`per Share in the mid-teen percentages. For 2012, we reported
`strong 9.1% revenue growth in local currencies and 6.8%
`in U.S. Dollars, as sales were impacted by the weakness of
`some important foreign currencies such as the Euro and the
`Brazilian Real. Adjusted Diluted Earnings per Share increased
`15.1%1 in 2012 over 2011, even as we continued to invest
`vigorously into R&D, increasing those expenditures to
`$927 million and by 8% versus 2011 on an adjusted basis.
`Our operating performance should be judged in the context
`of the squeeze to contain health care costs being applied by
`governments primarily in the United States and Europe. In
`2012, Allergan absorbed $114 million (on a pre-tax equivalent
`basis) of contributions to U.S. Health care Reform and
`$36 million in price reductions mandated by various European
`governments and South Korea, representing an incremental
`$20 million increase over 2011. Given the mixed state of
`the world economy, we are pleased that our consumer-facing
`businesses in the field of medical aesthetics grew around
`double digits.
`Thanks to a streamlined and modern network of manufacturing
`facilities – our main pharmaceutical plants being in Ireland,
`Texas and Brazil, and medical device manufacturing being
`concentrated in Costa Rica and France – along with rising
`volumes, capacity utilization and targeted investments in
`efficiency, we were able to reduce our manufacturing costs by
`approximately 5% versus 2011. This contributed to a record
`gross margin for the company at over 86% of sales in 2012.
`We are pleased that our strong revenue growth is built on a
`platform of diverse products and countries. In fact, almost all
`of our operating regions – U.S. pharmaceuticals and Canada;
`Europe, Africa and Middle East; Latin America; and Asia
`Pacific – grew revenues at close to or above double digits in local
`currencies. The only unit with low sales growth was our Allergan
`Medical business unit in the United States, which was affected by
`
`1 Calculated by adding to reported 2012 adjusted net earnings the benefit of the R&D tax credit for 2012 of
`approximately $17.3 million, or $0.06 diluted earnings per share, that was signed into law in January 2013.
`
`a 27% decline in the obesity intervention business as well as the
`entry of a competitor to BOTOX® Cosmetic early in the year.
`Dynamic Portfolio Management
`A key long-term strategy to maintain Allergan’s strength is to
`regularly and dispassionately reevaluate the contribution of each
`business to our overall value-creation goals and dynamically
`rebalance our portfolio. This was the case when, in 2002, we
`executed a spin-off of our lower growth legacy businesses, contact
`lens solutions and cataract surgery products, into a new company,
`Advanced Medical Optics (AMO). Now, following a review
`of strategic options, our Board of Directors in February 2013,
`formally committed to pursue the sale of our obesity intervention
`business, and we currently expect to execute a signed agreement
`during the first half of 2013. In 2012, sales of the LAP-BAND®
`System and ORBERA® overseas declined 20% in local currencies
`versus 2011, driven by the drastic decline of the patient self-paid
`market in the United States during the economic downturn, as
`well as by high co-pays demanded by insurance companies for those
`patients with coverage. In Europe, we have been affected by similar
`governmental austerity pricing pressures.
`Whilst the LAP-BAND® System and ORBERA® enjoy strong
`profitability and very high market shares, the business does not
`offer scale to leverage. In each of our other medical specialties –
`ophthalmology, medical aesthetics, medical dermatology,
`neurosciences and urology – our particular strategic strength is not
`only high market share, but also breadth in our product range.
`Given our strong and record operating cash flow in 2012 –
`we generated almost $1.5 billion in cash on a pre-dividend
`basis – we are constantly evaluating the acquisition and
`in-licensing of new assets, focusing on differentiated products
`and technologies in growing market segments and areas
`where we have particular knowledge.
`To this end, we were delighted to acquire SkinMedica, Inc.
`in December 2012. SkinMedica has been the fastest growing
`company in the U.S. physician dispensed skin care category, with
`annual sales of approximately $70 million. SkinMedica’s products
`are only sold through the physician channel and enjoy a strong
`reputation by doctors and their patients. We believe that we can
`
`Major Product Approvals
`
`PROdUCT
`
`INdICATION 1
`
`BOTOX® (onabotulinumtoxinA)2
`
`AIPHAGAN® P (brimonidine tartrate
`ophthalmic solution) 0.1%
`
`Treatment of overactive bladder with symptoms of urinary incontinence,
`urgency and frequency in adults who have had an inadequate response
`to or are intolerant of an anticholinergic medication
`Reduction of intraocular pressure (IOP) in patients with ocular
`hypertension and/or glaucoma
`
`NATRELLE® (silicone gel-filled breast
`implants and Style 133 tissue expanders)
`
`Women undergoing breast augmentation, revision or
`reconstructive surgery
`
`NATRELLE® 410 3 Highly Cohesive Anatomically
`Shaped Silicone-Filled Breast Implants
`
`Women undergoing breast augmentation, revision or
`reconstructive surgery
`
`LUMIGAN® (bimatoprost ophthalmic
`solution) 0.03% in single dose containers,
`preservative-free formulation
`
`Reduction of elevated intraocular pressure (IOP) in adults with
`chronic open-angle glaucoma and ocular hypertension, for
`patients who require a preservative-free treatment
`
`In 2012, Allergan secured 150+ approvals for a variety of products and indications in dozens of countries worldwide.
`
`1 Specific indication verbiage
` varies by country.
`2 Approved January 18, 2013.
`3 Approved February 20, 2013.
`
`COUNTRy
`
`United States, Ireland,
`Germany, Austria, Finland
`and Estonia
`Japan
`
`Japan
`
`United States
`
`European Union
`
`2
`
`a l l e r g a n s u m m a r y r e p o r t 2 0 1 2
`
`APOTEX 1056, pg. 4
`
`

`

`David E.I. Pyott, CBE
`Chairman of the Board, President & Chief Executive Officer
`
`a l l e r g a n s u m m a r y r e p o r t 2 0 1 2
`
`3
`
`APOTEX 1056, pg. 5
`
`

`

`add considerable value by integrating SkinMedica into Allergan’s
`broad based medical aesthetics portfolio.
`In January 2013, we announced that we had entered into a
`definitive merger agreement to acquire MAP Pharmaceuticals
`(MAP) for approximately $958 million, along with its key asset,
`Levadex®, an orally inhaled dihydroergotamine product, currently
`under review by the U.S. Food and Drug Administration (FDA)
`for the acute treatment of migraine. This acquisition builds on
`our collaboration agreement with MAP, established in early 2011,
`to co-promote Levadex® in the neurology specialty market in the
`United States and Canada where we shared the economics in
`this channel. We expect the MAP acquisition will yield us the
`full economics of the neurology specialty in the United States
`and Canada, as well as worldwide rights to Levadex®. Whilst the
`product profile is both complementary to, and different from,
`BOTOX® for chronic migraine, the physician groups are the
`same and there is a strong patient overlap. With a combined
`portfolio of the two products, we are in a strong position to service
`not only neurologists and pain specialists, but in the future also
`prescribers of migraine medications who are not board-certified
`neurologists, further enhancing sales not only of Levadex® but
`our key franchise of BOTOX® for chronic migraine.
`Focus on Driving Sales Growth
`Operating in dynamic, growing global markets, Allergan is driven
`by innovative products and solutions that improve patient care
`today and well into the future. Indeed, that is the theme of this
`Annual Report. We are number one or number two in each of
`our world markets ,2 as is often the case with high performing
`companies. After our planned obesity intervention divestiture,
`we will be focused on only five medical specialties. Allergan has
`a history of creating new market segments, drawing on our deep
`understanding of the needs of medical communities, including
`physicians and patients. Examples of this include BOTOX®
`Cosmetic for the treatment of moderate to severe glabellar lines,
`LATISSE® for the growth of eyelashes, and RESTASIS® for the
`treatment of chronic dry eye.
`In 2012, we were able to drive growth, thanks to the many
`regulatory approvals from the FDA and foreign regulatory
`authorities secured since 2010. Unlike most pharmaceutical
`companies, the only significant generics exposure we faced in 2012
`
`was in our urology segment, where SANCTURA XR®, our
`anticholinergic, declined over 50% with residual 2012 sales of
`$28 million. Equipped with a strong patent portfolio with long
`lives, Allergan does not expect significant generics issues in the
`coming years, although we are unable to predict the outcome of
`present and future challenges to our product patents.
`We continue to realize major growth in the BOTOX® franchise.
`With the most recent FDA approval for over-active bladder in
`January 2013, BOTOX® now has seven approved therapeutic
`indications in the United States along with the well-known
`aesthetic, moderate to severe glabellar lines indication for
`BOTOX® Cosmetic. Worldwide, BOTOX® enjoys 26 different
`indications across approximately 85 countries. Therapeutic sales in
`2012 accounted for approximately 52% of BOTOX® global sales
`and increased approximately 13% in U.S. Dollars, with accelerating
`demand stemming from indications for chronic migraine, upper
`limb spasticity as well as other movement disorders, and neurogenic
`or spastic bladder, the first of the urology regulatory approvals.
`Aesthetic global sales accounted for approximately 48% of
`BOTOX® global sales in 2012 and grew approximately 8% in U.S.
`Dollars. Local currency growth for both franchises was greater by
`approximately 2 percentage points. Our other consumer-facing
`franchises also performed well in 2012, with dermal fillers
`growing at 9.9% in local currencies and breast aesthetics at 10.5%
`in local currencies. Internationally, JUVÉDERM VOLUMA™, our
`volumizing filler used mainly in the mid-face area, has expanded
`the overall market and led to market share gains for Allergan.
`We are awaiting FDA action on JUVÉDERM VOLUMA™ in
`the United States and are hopeful of an approval before year
`end in 2013. In breast aesthetics, a quality issue at a French
`manufacturer led surgeons across the world (outside North
`America) to choose the high quality products offered by Allergan,
`which was already the leader in this category in most markets. 2
`Within the skin care segment, ACZONE® became the number one
`non-retinoid, topical acne treatment prescribed by dermatologists
`in the United States. 3
`Representing almost half of our business worldwide, ophthalmic
`pharmaceuticals grew 9.7% in local currencies in 2012, with
`several notable achievements. RESTASIS®, a pioneer in the
`therapeutic chronic dry eye market since its introduction in
`
`2 Mixture of public information (earnings releases, earnings calls, 10Ks, 10Qs), AGN internal data, syndicated
`marketing research reports, analyst reports, Internet searches, competitive intelligence, market trackers, etc.
`for U.S. Dollar sales at actual rates for four quarters ending September 2012.
`
`3 IMS Health, Inc. Vector One®: National (VONA). Plymouth Meeting, PA: IMS Health, Inc.; August 2012.
`
`Worldwide Sales - Broad and Balanced Portfolio
`FY 2012 – $5.7 Billion (+9%*)
`
`47% Ophthalmology
`Reimbursed 39%, Cash 8%
`
`62% Reimbursed
`38% Cash Pay
`
`*Growth in local currency.
`
`16% BOTOX® Therapeutic
`Reimbursed 16%
`
`15% BOTOX® Cosmetic
`Cash 15%
`
`7% Facial Aesthetics
`Cash 7%
`
`7% Breast Aesthetics
`Reimbursed 2%, Cash 5%
`
`2% LATISSE®
`Cash 2%
`
`3% Skin Care
`Reimbursed 3%
`
`3% Obesity Intervention
`Reimbursed 2%, Cash 1%
`
`4
`
`a l l e r g a n s u m m a r y r e p o r t 2 0 1 2
`
`APOTEX 1056, pg. 6
`
`

`

`2001, is now the largest single ophthalmic product by value
`in the United States and enjoyed 13.9% growth worldwide
`in local currencies. In glaucoma, one of the two largest global
`eye care market segments,4 Allergan is the fastest growing5
`global company with a 7% sales increase in local currencies.
`ALPHAGAN® P and COMBIGAN®, the fixed dose combination
`of ALPHAGAN® and the beta blocker timolol, grew 10.6%
`in local currencies in 2012, as these products are favored by
`ophthalmologists worldwide when prostaglandin products
`alone are insufficient in lowering intraocular pressure.
`Our first line prostamide products, LUMIGAN® and
`GANFORT™, achieved only 4.9% growth in local currencies
`in 2012, due primarily to the impact of generic competition in
`the United States with the former market leader. In the artificial
`tears market, which is growing worldwide at approximately
`7% in local currencies,4 Allergan is gaining share thanks to the
`REFRESH OPTIVE® line and the most recent introduction of
`REFRESH OPTIVE® Advanced, a triple action formulation.
`In the retina segment, OZURDEX®, a steroid delivered in a
`bioerodable implant to the back of the eye and indicated for
`retinal vein occlusion and uveitis, experienced good growth
`in Europe and in the United States. Allergan’s ophthalmic sales
`increased in 2012 by double digits in local currencies in all major
`regions of the world, with the United States growing in the high
`single digits due to generics pressure on LUMIGAN® and our
`decision to discontinue the original LUMIGAN® 0.03%, thus
`reducing trade inventory. In 2012, in the global ophthalmic
`market, Allergan was the fastest growing global company.6
`We continue to build out our presence in fast growing emerging
`markets. Already, Brazil is one of our largest foreign markets;
`in India7 and Turkey8 we are the largest local ophthalmic
`pharmaceutical company; we are also investing heavily in China.
`Of note, in 2012, we also launched our ophthalmology business
`in Russia and expanded our medical aesthetics franchise after we
`established direct operations in that country.
`Constantly Refueling Our R&D Pipeline
`Allergan’s R&D strategy – focused on locally administered
`pharmaceuticals in our areas of deep clinical expertise, as well
`as the targeted delivery of BOTOX® to individual muscles,
`
`coupled with the expansion of the clinical indications for
`BOTOX® – has been enormously productive in terms of
`regulatory approvals. Furthermore, we combine this strength
`with our skills in medical devices to not only successfully
`innovate in our product lines but also to develop drugs with
`novel delivery technologies. All of this has led to a rate of success
`in clinical development that exceeds industry performance.9
`Whilst we continue to build out our existing areas of competency,
`we also expect to move deeper into biologics; into the
`DARPin® platform, which was in-licensed from Molecular
`Partners in Zurich, Switzerland, with programs underway
`for age-related macular degeneration; into next-generation
`BOTOX® technologies; as well as senrebotase, a first in class
`targeted exocytosis modulator with applications in pain.
`Continuing our resolve to invest heavily in R&D, we expect to
`spend approximately $1 billion in R&D in 2013. As our R&D
`operations become larger and more complex, we are determined
`to realize efficiencies in our clinical operations and also, at the
`margin, adapt and evolve our organization and model. Although
`we have historically been a largely California-based R&D
`organization, in 2012, we opened a new R&D facility in New
`Jersey, the location of much talent in the pharmaceutical industry.
`In determining which programs to select for our R&D portfolio,
`we are applying the rigor of a model we have utilized for a decade,
`and making tough choices where required.
`Finally, on behalf of our management and Board of Directors,
`I wish to recognize and thank our employees around the world
`for their dedication to excellence, and for their efforts to deliver
`strong operating results and most importantly to help patients
`fulfill their life’s potential.
`
`Sincerely,
`
`David E.I. Pyott, CBE
`Chairman of the Board, President
`& Chief Executive Officer
`
`4 IMS MAT Q3-2012 worldwide (53-country rollup) US$ sales estimates at Q3-12 constant exchange rates.
`5 IMS MAT Q3-2012 worldwide (53-country rollup) US$ growth estimates at Q3-12 constant exchange
`rates (among top five companies).
`6 IMS YTD Q3-2012 worldwide (53-country rollup) US$ growth estimates at Q3-12 constant exchange rates
`(among top three companies).
`
`7 IMS MAT Q3-2012 India Pharmacy (sell-out) US$ sales estimates at Q3-12 constant exchange rates.
`8 IMS MAT Q3-2012 Turkey Pharmacy US$ sales estimates at Q3-12 constant exchange rates.
`9 2000-2010 Data provided by CMR (Thomson Reuters).
`
`Leading Market Share Position
`in Growing Markets
`
`Sources: Ophthalmics – IMS Global (53 countries) at Q3-12 constant
`exchange rates. Neuromodulator/Filler/Breast/Banding – Mixture of
`public information (earnings releases, earnings calls, 10Ks, 10Qs), AGN
`internal data, syndicated marketing research reports, analyst reports,
`internet searches, competitive intelligence, market trackers, etc.
`
`WORLdWIdE
`MARKET
`SIZE ($M)
`
`WORLdWIdE
`MARKET
`GROWTH (%)
`
`ALLERGAN
`MARKET
`POSITION
`
`ALLERGAN
`MARKET
`SHARE
`
`Ophthalmics
`
`Neuromodulators
`
`dermal Fillers
`
`Breast Aesthetics
`
`$18,613
`
`$2,385
`
`$1,032
`
`$887
`
`+6%
`
`+13%
`
`+7%
`
`+6%
`
`#2
`
`#1
`
`#1
`
`#1
`
`16%
`
`76%
`
`36%
`
`42%
`
`a l l e r g a n s u m m a r y r e p o r t 2 0 1 2
`
`5
`
`APOTEX 1056, pg. 7
`
`

`

`Financial Summary
`
`In millions, except per share data
`
`STATEMENT OF OPERATIONS HIGHLIGHTS
`(As reported under U.S. GAAP)
`
`
`
`
`Product net sales
`
`
`Total revenues
`
`Research and development
`
`Net earnings
`
`Net earnings attributable to noncontrolling interest
`Net earnings attributable to Allergan, Inc.
`
`
`
`
`
`
`Net basic earnings per share attributable to
`Allergan, Inc. stockholders
`
`Net diluted earnings per share attributable to
`Allergan, Inc. stockholders
`
`
`
`
`
`
`Dividends per share
`
`Year Ended December 31,
`
`2012
`
`2011
`
`2010
`
`2009
`
`2008
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`$ 5,708.8
`5,806.1
`989.6
`1,102.5
` 3.7
`$ 1,098.8
`
`$ 5, 347.1
`5,419.1
`902.8
`938.1
` 3.6
`$ 934.5
`
`$ 4,819.6
`4,919.4
`804.6
`4.9
` 4.3
`$ 0.6
`
`$ 4,447.6
`4,503.6
`706.0
`623.8
` 2.5
`$ 621.3
`
`$ 4,339.7
` 4,403.4
`797.9
`564.7
` 1.6
`$ 563.1
`
`$ 3.64
`
`$ 3.07
`
`$ 0.00
`
`$ 2.05
`
`$ 1.85
`
`$ 3.58
`
`$ 3.01
`
`$ 0.00
`
`$ 2.03
`
`$ 1.84
`
`$ 0.20
`
`$ 0.20
`
`$ 0.20
`
`$ 0.20
`
`$ 0.20
`
`$ 1,272.3
`
`$ 1,131.8
`
`$ 973.9
`
`$ 849.8
`
`$ 786.5
`
`
`
`$
`
` 3.72
`
`$ 2.59
`
`AdjUSTEd AMOUNTS (a)
`Adjusted net earnings attributable to Allergan, Inc.
`Adjusted net basic earnings per share attributable to
`Allergan, Inc. stockholders
`
`
`Adjusted net diluted earnings per share attributable to
`Allergan, Inc. stockholders
`
`
`
`NET SALES By PROdUCT LINE
`Specialty Pharmaceuticals:
`Eye Care Pharmaceuticals
`BOTOX®/Neuromodulator
`Skin Care
`
`
`Urologics
`Total specialty pharmaceuticals
`
`Medical Devices:
`Breast Aesthetics
`Obesity Intervention
`Facial Aesthetics
`Total medical devices
`
`Total product net sales
`
`PROdUCT SOLd By LOCATION
`Domestic
`
`International
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`$
`
` 4.22
`
`$
`
`3.21
`
`$ 2.80
`
`$
`
` 4.14
`
`$
`
` 3.65
`
`$
`
`3.16
`
`$ 2.78
`
`$ 2.57
`
`$ 2,692.2
`1,766.3
`298.4
`
`27.7
`4,784.6
`
`$ 2,520.2
`1,594.9
`260.1
`56.8
`4,432.0
`
`$ 2,262.0
`1,419.4
`229.5
`62.5
`3,973.4
`
`$ 2,100.6
`1,309.6
`208.0
`65.6
`3,683.8
`
`$ 2,009.1
`1,310.9
`113.7
`68.6
` 3,502.3
`
`377.1
`159.5
`387.6
`924.2
`
`349.3
`203.1
`362.7
`915.1
`
`319.1
`243.3
`283.8
`846.2
`
`287.5
`258.2
`218.1
`763.8
`
`310.0
` 296.0
`231.4
`837.4
`
`$ 5,708.8
`
`$ 5,347.1
`
`$ 4,819.6
`
`$ 4,447.6
`
`$ 4,339.7
`
`
`60.9%
`39.1%
`
`60.2%
`39.8%
`
`62.6%
`37.4%
`
`65.4%
`34.6%
`
`64.6%
` 35.4%
`
`
`
`
`
`
`
`
`(a) The adjusted amounts represent certain non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to GAAP financial measures, please refer to pages
`8 and 9 of this Annual Report.
`
`6
`
`a l l e r g a n s u m m a r y r e p o r t 2 0 1 2
`
`APOTEX 1056, pg. 8
`
`

`

`$160
`
`$140
`
`$120
`
`$100
`
`$80
`
`$60
`
`$40
`
`$20
`
`$0
`
`Comparison of 5-year Cumulative Total Return*
`Among Allergan, Inc., the S&P 500 Index, the NYSE Arca Pharmaceutical Index, and a Peer Group
`
`*$100 invested on 12/31/07 in stock or index, including reinvestment of dividends.
`Fiscal year ending December 31. The 13 companies comprising the peer group
`include: Abbott Laboratories, Amgen Inc., Biogen Idec Inc., Bristol-Myers Squibb
`Company, Celgene Corporation, ELI Lilly and Company, Endo Health Solutions
`Inc., Forest Laboratories, Inc., Gilead Sciences, Inc., Johnson & Johnson, St. Jude
`Medical, Inc., Stryker Corporation and Valeant Pharmaceuticals International, Inc.
`
`12/31/07 12/31/08 12/31/09 12/31/ 10 12/31/11 12/31/12
`
`Allergan, Inc.
`S&P 500
`NYSE Arca Pharmaceutical
`Peer Group
`
`Total Sales Growth
`(in millions of dollars)
`
`$4,339.7
`
`$4,447.6
`
`$4,819.6
`
`$5,347.1
`
`$5,708.8
`
`R&d Spend (1)
`(in millions of dollars)
`
`$728.9
`
`$674.9
`
`$761.6
`
`$926.8
`
`$857.6
`
`12%
`
`08
`
`2%
`
`09
`
`8%
`
`10
`
`11%
`
`11
`
`7%
`
`12
`
`13%
`
`08
`
`-7%
`
`09
`
`13%
`
`10
`
`13%
`
`11
`
`8%
`
`12
`
`(1) Adjusted for non-GAAP items.
`For a reconciliation of these
`non-GAAP financial measures
`to GAAP financial measures,
`please refer to pages 8 and 9
`of this Annual Report.
`
`a l l e r g a n s u m m a r y r e p o r t 2 0 1 2
`
`7
`
`APOTEX 1056, pg. 9
`
`

`

`Condensed Consolidated Statements of Earnings and Reconciliation of Non-GAAP Adjustments
`
`In millions, except per share data
`
`Year Ended December 31, 2012
`
`Year Ended December 31, 2011
`
`GAAP
`
`Non-GAAP
`Adjustments
`
`Adjusted
`
`GAAP
`
`Non-GAAP
`Adjustments
`
`REvENUES
`Specialty pharmaceuticals product net sales
`Medical devices product net sales
`Product net sales
`Other revenues
`Total
`
`
`
`
`
`$ 4,784.6
`
`924.2
`5,708.8
`97.3
`5,806.1
`
`$
`
`—
`—
`—
`—
`—
`
`$ 4,784.6
`924.2
`5,708.8
`97.3
`5,806.1
`
`$ 4,432.0
`915.1
`5,347.1
`72.0
`5,419.1
`
`$
`
`—
`—
`—
`—
`—
`
`Adjusted
`
`$ 4,432.0
`915.1
`5,347.1
`72.0
`5,419.1
`
`748.3
`2,153.9
`857.6
`23.6
`
`———
`
`(l)
`
`(m)(n)(o)(p)(q)(r)
`
`(o)(s)
`
`(f)
`
`(p)(t)(u)
`
`(h)
`
`(v)
`
`(w)(x)(y)
`
`
`(0.4 )
`(92.7
`(45.2
`(104.0
`—
`(23.7
`(4.6
`
`))
`
`) ))
`
`
`
`748.7
`2,246.6
`902.8
`127.6
`—
`23.7
`4.6
`
`775.1
`2,248.9
`926.8
`23.5
`
`———
`
`
`( 0.4 )
`(a)(b)
`(19.5
`(b)(c)(d)(e)
`(62.8
`
`(d)(e)
`(107.8
`(f)
`—
`(22.3
`(5.7
`
`(g)
`
`(h)
`
`))
`
`) ))
`
`270.6
`
` —
`
`(i)
`
`(j)
`
`218.5
`
` —
`
`OPERATING COSTS ANd EXPENSES
`Cost of sales (excludes amortization of
`intangible assets)
`Selling, general and administrative
`Research and development
`Amortization of intangible assets
`Legal settlement
`Impairment of intangible assets and related costs
`Restructuring charges
`
`Operating income
`
`Interest income
`Interest expense
`Gain on investments, net
`Other, net
`
`775.5
`2,268.4
`989.6
`131.3
`—
`22.3
`5.7
`
`1,635.7
`
`6.9
`(64.5
`—
`(10.3
`(67.9
`
`) ) )
`
`1,567.8
`432.4
`
`1,135.4
` 3.6
`
`) )
`
`7.3
` —
`(9.8
`(2.5
`
`268.1
`70.8
`
`(z)
`
`197.3
` —
`
`1,365.1
`
`6.9
`(71.8
`—
`(0.5
`(65.4
`
`) ) )
`
`1,299.7
`361.6
`
`938.1
` 3.6
`
`1,831.8
`
`6.7
`(62.7
`—
`(7.8
`(63.8
`
`) ) )
`
`1,768.0
`492.0
`
`1,276.0
` 3.7
`
`0.9
` —
`15.3
`16.2
`
`234.7
`61.2
`
`(k)
`
`173.5
` —
`
`1,613.3
`
`6.7
`(63.6
`—
`(23.1
`(80.0
`
`) ) )
`
`1,533.3
`430.8
`
`1,102.5
` 3.7
`
`$ 1,098.8
`
`$ 173.5
`
`$ 1,272.3
`
`$ 934.5
`
`$ 197.3
`
`$ 1,131.8
`
`$ 3.64
` $ 3.58
`
`$ 0.58
`$ 0.56
`
`$ 4.22
`$ 4.14
`
`$ 3.07
` $ 3.01
`
`$ 0.65
`$ 0.64
`
`$ 3.72
`$ 3.65
`
`Earnings before income taxes
`Provision for income taxes
`
`Net earnings
`Net earnings attributable to noncontrolling interest
`
`Net earnings attributable to Allergan, Inc.
`Net earnings per share attributable to
`Allergan, Inc. stockholders
`Basic
`Diluted
`
`Total product net sales
`
`$ 5,708.8
`
`$ 126.6
`
`(bj)
`
`$ 5,835.4
`
`$ 5,347.1
`
`$ (82.6
`
`)
`
`(bj)
`
`$ 5,264.5
`
`“GAAP” refers to financial information presented in accordance with generally accepted accounting
`principles in the United States.
`In this Annual Report, Allergan included historical non-GAAP financial measures, as defined in Regulation
`G promulgated by the Securities and Exchange Commission, with respect to the year ended December 31,
`2012, as well as the corresponding periods for 2011 through 2008. Allergan believes that its presentation
`of historical non-GAAP financial measures provides useful supplementary information to investors
`regarding its operational performance because it enhances an investor’s overall understanding of the
`financial performance and prospects for the future of Allergan’s core business activities by providing a
`basis for the comparison of results of core business operations between current, past and future periods.
`The presentation of historical non-GAAP financial measures is not meant to be considered in isolation
`from or as a substitute for results as reported under GAAP.
`In this Annual Report, Allergan reported the non-GAAP financial measures “non-GAAP earnings attributable
`to Allergan, Inc.” and all of its subcomponents and related “non-GAAP basic and diluted earnings per
`share attributable to Allergan, Inc. stockholders.” Allergan uses non-GAAP earnings to enhance the
`investor’s overall understanding of the financial performance and prospects for the future of Allergan’s core
`business activities. Non-GAAP earnings is one of the primary indicators management uses for planning
`and forecasting in future periods, including trending and analyzing the core operating performance of
`Allergan’s business from period to period without the effect of the non-core business items indicated.
`Management uses non-GAAP earnings to prepare operating budgets and forecasts and to measure
`Allergan’s performance against those budgets and forecasts on a corporate and segment level. Allergan
`also uses non-GAAP earnings for evaluating management performance for compensation purposes.
`Despite the importance of non-GAAP earnings in analyzing Allergan’s underlying business, the budgeting
`and forecasting process and designing incentive compensation, non-GAAP earnings has no standardized
`meaning defined by GAAP. Therefore, non-GAAP earnings has limitations as an analytical tool, and should
`not be considered in isolation, or as a substitute for analysis of Allergan’s results as reported under GAAP.
`Some of these limitations are:
`• it does not reflect cash expenditures, or future requirements, for expenditures relating to restructurings,
`legal settlements, and certain acquisitions, including severance and facility transition costs associated
`with acquisitions;
`• it does not reflect asset impairment charges or gains or losses on the disposition of assets associated
`with restructuring and business exit activities;
`• it does not reflect the tax benefit or tax expense associated with the items indicated;
`• it does not reflect the impact on earnings of charges or income resulting from certain matters Allergan
`considers not to be indicative of its on-going operations; and
`• other companies in Allergan’s industry may calculate non-GAAP earnings differently than it does, which
`may limit its usefulness as a comparative measure.
`Allergan compensates for these limitations by using non-GAAP earnings only to supplement net earnings
`on a basis prepared in conformance with GAAP in order to provide a more complete understanding of
`the factors and trends affecting its business. Allergan strongly encourages investors to consider both net
`earnings and cash flows determined under GAAP as compared to non-GAAP earnings, and to perform their
`own analysis, as appropriate.
`In this Annual Report, Allergan also reported sales performance using the non-GAAP financial measure
`of constant currency sales. Constant currency sales represent current year reported sales adjusted for the
`translation effect of changes in average foreign currency exchange rates between the current year and
`the corresponding prior year. Allergan calculates the currency effect by comparing adjusted current year
`
`reported amounts, calculated using the monthly average foreign exchange rates for the corresponding prior
`year, to the actual current year reported amounts. Management refers to growth rates at constant currency
`so that sales results can be viewed without the impact of changing foreign currency exchange rates, thereby
`facilitating period-to-period comparisons of Allergan’s sales. Generally, when the dollar either strengthens or
`weakens against other currencies, the growth at constant currency rates will be higher or lower, respectively,
`than growth reported at actual exchange rates.
`Reporting sales performance using constant currency sales has the limitation of excluding currency
`effects from the comparison of sales results over various periods, even though the effect of changing foreign
`currency exchange rates has an actual effect on Allergan’s operating results. Investors should consider
`these effects in their overall analysis of Allergan’s operating results.
`(a) Fair market value inventory adjustment rollout of $0.3 million associated with the purchase of a
`distributor’s business in Russia related to Allergan’s products.
`(b) Expenses from changes in fair value of contingent consideration of $5.4 million and integration and
`transaction costs of $2.1 million associated with business combinations, consisting of cost of sales of
`$0.1 million and selling, general and administrative expenses of $2.0 million.
`(c) Aggregate charges of $9.7 million for external costs for stockholder derivative and tax litigation associated
`with the DOJ settlement announced in September 2010 and other legal contingency expenses.
`(d) Expenses related to the realignment of various business functions and the restructuring of the obesity
`intervention business of $2.4 million, consisting of selling, general and administrative expenses of $2.1
`million and research and development expenses of $0.3 million.
`(e) Upfront licensing fees of $62.5 million included in research and development expenses associated
`with the license and collaboration agreements with Molecular Partners AG for technology that has not
`achieved regulatory approval and related transaction costs of $0.3 million included in selling, general
`and adm