Not too long ago, Allergan was one of the best performing stocks largely thanks to the rollup nature of its Carl Icahn-sponsored core “roll-up” vehicle of Forrest Labs/Actavis, and led by mercenary activist CEO Brent Saunders, at least until its ill-fated 2015 merger with Pfizer was unceremoniously blocked by the Obama administration in April 2016, when the pharmaceutical company suffered a breach in its upward trajectory and has since suffered a steep decline in the past two years. In fact, in 2017 AGN stock was one of the worst performers in the S&P.
And so, with rumors of disgruntled activists swirling (which is ironic as current CEO Saunders is an activist puppet himself), Allergan had no choice but to do something, and moments ago the pharmaceutical company said it plans to cut more than 1,000 jobs and eliminate an additional 400 currently open positions, as it works to cut costs in the face of new competition for its second most important drug, dry-eye treatment Restasis.
The cuts would predominantly come from parts of the business that are facing new competition, the drugmaker said in a filing.
As Bloomberg notes, in November, Chief Executive Officer Brent Saunders said the company was preparing as though a generic version of Restasis, a dry-eye drug, would launch in the beginning of 2018. Allergan had attempted to shield Restasis from one type of patent challenge with an unconventional deal with a Native American tribe but a judge later ruled the patents were invalid on scientific grounds.
And now, with all other hail mary’s having failed, the company hopes to halt the stock slide using the oldest-trick in the book: by firing 6% of its roughly 16,700 workers. If that fails to boost the stock, it may be time for Carl Icahn to find Brent Saunders a new job…
Full statement from Allergan below:
In the Company’s November 1, 2017 earnings release and conference call, the Company announced that it would undertake a cost cutting and restructuring program to enable it to achieve 2018 Non-GAAP Performance Net Income per Share levels outlined in that call. Today, the Company announced to its global workforce the specific employment reductions and other cost-cutting actions being taken, consistent with the November announcement. In response to the anticipated loss of exclusivity of several key revenue-generating products in 2018, the Company is optimizing and restructuring its operations in early 2018. As part of an internal restructuring plan, the Company intends to eliminate over 1,000 currently filled positions, impacting employees in commercial and other functions. Commercial reductions will primarily focus on products and categories subject to loss of exclusivity. In addition, the Company will eliminate approximately 400 open positions. The Company expects to incur related restructuring costs of approximately $125 million, primarily due to severance, the majority of which will be recorded in the fourth quarter ended December 31, 2017. These amounts do not include additional charges related to potential building closures, contract terminations, and other items. The Company will achieve additional cost reductions through non-headcount spending rationalization. Overall operating expense savings from this internal restructuring are expected to be in the range of $300 to $400 million as compared to the fiscal year 2017.
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