IRVINE — Cosmetic drug and device maker Allergan Inc. reported better-than-expected earnings Wednesday and announced it is selling its Lap-Band gastric bypass business.
Apollo Endosurgery will give Allergan an upfront payment of $75 million in cash plus a $15 million stake in the company in return for rights to the device, which is a stomach-restricting band used to treat obesity. The deal, which is expected to close this year, also includes up to $20 million in additional payments to Allergan based on various business milestones.
Analysts had high hopes for Allergan’s Lap-Band business, in part because more than a third of American adults are obese. In 2011, Allergan won regulatory approval to expand marketing for Lap-Band to a much wider group of obese patients in the U.S., but demand for the device never met expectations. The stomach-restricting band limits food intake, but can also cause irritation of the esophagus, infection, nausea and vomiting in some cases.
Allergan said its net income rose to $299.8 million, or $1 per share, up from $249.4 million, or 82 cents per share, in the prior year period. When adjusted for one-time events and charges the company would have earned $1.23 per share.
Sales increased 13 percent to $1.56 billion in the quarter. Sales of Botox increased 12.5 percent to $486 million. Last month Allergan won U.S. approval to market the botulin-based injection for a new use to treat crow’s feet, or wrinkles that form on the outside edge of the eyes. The drug is approved for a half-dozen other uses, most famously forehead wrinkles, but also migraines and overactive bladder.
Sales of medical devices, including breast implants, increased 13.4 percent to $198.6 million.
Analysts polled by FactSet expected earnings per share of $1.21 on sales of $1.53 billion.
For the fourth quarter Allergan said it expects earnings per share between $1.31 and $1.33. That’s slightly below the most recent estimate by analysts for $1.35 per share.
Shares of Allergan Inc. fell $1.10, or 1.2 percent, to $92.28 in midday trading. Its shares are up 1 percent from the start of the year.