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Allergan to Cut Jobs Amid Loss of Exclusivity for Key Drugs

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Allergan plc AGN, in a regulatory filing, announced that it is laying off over 1,000 employees as part of a cost-saving and restructuring program to protect it from potential revenue declines.

Allergan said the job cuts will impact employees in commercial functions that revolve around products and categories already facing or will face loss of exclusivity. Allergan also said that it plans to eliminate an additional 400 open positions.

While the company estimates to incur costs of approximately $125 million, the job cuts and other cost-savings measures are expected to save operating costs between $300 and $400 this year. Also, the majority of the costs, primarily due to severance, will be recorded in the fourth quarter.

Allergan currently employs more than 18,000 people.


The job cuts come at a time when Allergan is facing potential loss of exclusivity for several of its key products in 2018 including Alzheimer’s treatment, Namenda XR and blockbuster dry-eye drug, Restasis, which is expected to hurt sales.

Allergan is adopting different ways of protecting Restasis, its second best-selling drug, from generic competition. Restasis recorded sales of $1.06 billion in the first nine months of 2017.

Allergan came under fire for entering into an agreement with the Saint Regis Mohawk Tribe under which the latter obtained the rights to six patents covering Restasis and Allergan was granted exclusive licenses to Restasis products. Lawmakers questioned the unconventional move adopted by the company to protect Restasis from generic competition. The deal with the Tribe has raised concerns that it will curb generic competition in the pharmaceutical industry and discourage generic drug makers from making cheaper versions of expensive drugs.

However, in October 2017, a Texas federal district court invalidated four of the six patents covering Restasis, potentially opening doors for early generic competition. Though Restasis patents are scheduled to expire in August 2024, a generic version may be launched as early as mid-2018.

Also, this year, Allergan faces loss of patent exclusivity for Estrace vaginal cream and ulcerative colitis drug Delzicol. Last week, Mylan MYL launched the first generic version for Estrace cream.

Also, new competition for key growth drivers, Restasis and Linzess, is an investor concern. Shire’s SHPG dry eye disease drug Xiidra, launched last year, is posing strong competition for Restasis. Meanwhile, Synergy Pharmaceuticals Inc.’s SGYP Trulance (plecanatide) was launched last yearfor chronic idiopathic constipation, which could pose competition to Allergan’s Linzess.

In the past year, Allergan’s shares have declined 22.9% compared with the industry’s decline of 26.8%.

The job cuts are aimed to save some dollars at a time when Allergan is facing competitive and generic pressure related to some of its highest revenue generating products.

Allergan carries a Zacks Rank #4 (Sell).

You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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