Stung by a court decision late last year that invalidated its patents for its second best-selling drug, Allergan said it will eliminate 1400 jobs—1000 now-filled and 400 open positions—in a restructuring designed to cut costs.
Employees to be laid off, Allergan said in a regulatory filing yesterday, are in commercial positions that “primarily focus on products and categories subject to loss of exclusivity”—a category that includes Allergan’s number-two drug, the dry-eye treatment Restasis® (cyclosporine ophthalmic emulsion).
Allergan said it expects to incur approximately $125 million in costs related to its restructuring, primarily due to severance, with most of the expense to be recorded with the company’s fourth-quarter 2017 results. That expense does not include charges related to potential building closures, contract terminations, and unspecified other items.
“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,” Allergan stated in a Form 8-K filing.
The filing came three months after the U.S. District Court for the Eastern District of Texas invalidated four key Allergan patents for Restasis, ruling that they covered intellectual property that was unpatentable because it was obvious.
Allergan is appealing the decision, which included criticism by U.S. Circuit Judge William C. Bryson of the company for a September 2017 deal through which it sought to protect the patents—namely paying the Saint Regis Mohawk Tribe to take ownership of the patents, then leasing them back from the Native American tribe.
“Sovereign immunity should not be treated as a monetizable commodity that can be purchased by private entities as part of a scheme to evade their legal responsibilities,” Judge Bryson wrote in a 135-page opinion filed October 16.
Allergan responded in part by taking against third-quarter 2017 earnings a $3.2 billion impairment charge related to Restasis and a $164 million impairment charge related to other dry-eye in-process-R&D assets.
Warning of Cost Cuts
And in discussing Q3 results November 1 on the company’s quarterly conference call, Allergan chairman, president, and CEO Brenton L. (Brent) Saunders warned analysts that the company would respond to its loss-of-exclusivity challenges by swinging the proverbial axe.
“Those challenges are manageable, and we will deal with them head-on. We know how to take costs out of our company while maintaining the right level of investment to drive future growth. We’ve done this before,” Saunders said, according to published transcripts.
“This business will generate significant cash flow even if we were to lose Restasis, and we will deploy that cash flow to create value for our shareholders,” Saunders added.
Allergan Eliminating 1400 Jobs as Dry-Eye Drug Faces Generic Competition