Happy New Year From Allergan: You're Fired
Drug giant Allergan PLC (NYSE: AGN) announced its intention Wednesday to fire more than 1,000 employees and eliminate another 400 job openings as it continues to cut costs ahead of the possible loss of exclusivity on its Restasis dry-eye treatment.
Restasis generated about $1.5 billion in revenues for Allergan last year, but the company took an impairment charge of $3.2 billion related to the drug in the third quarter. For the first three quarters of the the 2017 fiscal year the drug has generated sales of $1.08 billion.
In connection with the firings, Allergan will take a restructuring charge of around $125 in the fourth quarter.
Allergan recently lost exclusivity on Estrace, its treatment for menopause. Mylan and Teva have both received approval to sell generic versions of the drug that contributed about $276 million to Allergan sales in the first three quarters of 2017.
The revenue declines associated with the exclusivity losses led the company’s CEO Brenton Saunders to take action to reduce costs rapidly. The layoffs announced Wednesday are part of his efforts to reduce operating expenses by $300 to $400 million in 2018.
The restructuring costs do not include charges related to possible building closures, contract terminations, and other items.
Allergan employs about 18,000 people so the cuts will cut its workforce by about 5.5% in “commercial and other functions” according to a filing with the U.S. Securities and Exchange Commission. The company also said it “will achieve additional cost reductions through non-headcount spending rationalization.”
Maybe that means the remaining 17,000 employees won’t have to worry about losing their jobs this year. Then again, who wouldn’t worry?
Allergan stock traded up about 0.7% following the announcement at $171.49 in a 52-week range of $160.07 to $256.80. The 12-month consensus price target on the stock is $224.95.