Allergan, Inc. (AGN) Tops Q2 EPS by 7c; to Cut Workforce by 1,500

Allergan, Inc. (NYSE: AGN) reported Q2 EPS of $1.51, $0.07 better than the analyst estimate of $1.44. Revenue for the quarter came in at $1.83 billion versus the consensus estimate of $1.77 billion.

“With continuing strong momentum, Allergan recorded the strongest increase in absolute dollar sales in any quarter in our history, and again delivered sales and earnings per share growth above the high end of our expectations,” said David E.I. Pyott, Allergan’s Chairman of the Board and Chief Executive Officer. “Furthermore, we are pleased with the progression of key clinical programs into Phase 3 as well as the recent FDA approval of OZURDEX® for Diabetic Macular Edema.”

The company also said it restructure its operations and processes as follows:

• Allergan will execute a restructuring in the remainder of 2014 that it estimates will deliver annual pre-tax savings of approximately $475 million in calendar year 2015 as compared to previously communicated 2015 expectations. Such savings will come from efficiencies and reductions in spend across the commercial organization, general and administrative functions, manufacturing and the research and development organization.
• Allergan will achieve these synergies by focusing resources on the highest value opportunities, streamlining its organizational structure, simplifying processes and interfaces, optimizing site footprints, and enhancing strategic sourcing of goods and services.
• As part of the restructuring, Allergan will reduce its workforce by approximately 1,500 employees, or approximately 13 percent of its current global headcount, and eliminate an additional approximately 250 vacant positions.
• The restructuring will be conducted consistent with Allergan’s model of driving high quality earnings growth through a customer-centric focus on net sales growth and ensuring that Allergan maintains an innovation-focused research and development pipeline to deliver sustained long-term growth. Hence, approximately 94% of all customer-facing personnel are unaffected by the restructuring. All pharmaceutical research and development programs in the clinic will continue, and any reductions in discovery programs will not impact approvals within the strategic plan period.
• Additional strategic options are available including business development / acquisitions and capital return.
• Allergan reconfirms its aspiration of double digit sales growth across the strategic plan period (2014 through 2019), as the planned reductions in selling, general and administrative expenses and reduced focus on lower-value spend will have only a modest impact on the net sales growth.
• Allergan’s strategic plan (2014 through 2019) is expected to deliver a compounded annual growth rate of greater than 20% EPS growth.
  • Allergan estimates 2014 EPS between $5.74 and $5.80.
  • Allergan estimates 2015 EPS between $8.20 and $8.40.
  • Allergan estimates 2016 EPS at approximately $10.00.
• Allergan currently estimates that it will incur total non-recurring pre-tax charges of between $375 million and $425 million in connection with the restructuring and other costs, of which $65 million to $75 million will be a non-cash charge associated with the acceleration of previously unrecognized share-based compensation costs and certain other non-cash accounting adjustments. The restructuring charges and other costs will primarily consist of employee severance and other one-time termination benefits, facility lease and other contract terminations, accelerated depreciation and asset write-downs, accelerated equity-based compensation, temporary labor and duplicate operating expenses. These non-recurring charges will be incurred beginning in the third quarter of 2014 and are expected to continue through the second quarter of 2015.

For earnings history and earnings-related data on Allergan, Inc. (AGN) click here.

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