- Allergan plc said Wednesday it will cut 1,000 currently filled positions and eliminate another 400 open jobs as it looks to reduce costs ahead of anticipated hits to its bottom line from generic competition.
- The layoffs will primarily affect employees in commercial units that support products threatened by generic copies, Allergan disclosed in a regulatory filing.
- In total, the company expects the restructuring will cost $125 million and result in operational expense savings of between $300 million and $400 million compared to 2017.
Allergan signaled that cuts were on the agenda back in early November when it announced third quarter earnings.
"We will do what is needed to manage our business and shield our [profit and loss] from full impact of these headwinds," said company CEO Brent Saunders at the time, referring to expected loss of exclusivity for key drugs.
Wednesday's update revealed the extent of the impact on Allergan's workforce, which currently includes approximately 18,000 employees. About 9,000 of those staff are employed in sales, marketing and distribution functions — areas Allergan indicated would be most affected by the restructuring.
In the third quarter, loss of exclusivity for the gastrointestinal medicines Asacol (mesalamine) and Delzicol (mesalamine), as well as generic competition to a birth control drug, led to a decline of $107 million in sales compared to the same period last year.
Allergan will feel a bigger impact as demand for Namenda XR (memantine) falls, as well as if generics to Restasis (cyclosporine) launch in 2018. Together, the two drugs accounted for $481 million in sales during the three-month period from July to September.
Restasis, in particular, is a key product. Earlier this year, Allergan made a controversial attempt to shield the drug from certain legal challenges from generic companies by transferring its patents to the St. Regis Mohawk Tribe. Designed to take advantage of the tribe's sovereign immunity, the deal sparked widespread criticism of Allergan and Saunders.
But it appears it could all be for naught, as a federal district court judge subsequently invalidated four patents protecting Restasis. (Allergan's deal with the St. Regis Mohawk Tribe wouldn't have protected it from district court actions, but rather prevent a type of challenge known as an inter partes review.)
Generic competition could now come on line later in 2018 or in early 2019.
"Since the FDA has not approved a generic, we don't know the exact timing of a potential generic entry, but we won't wait to take action," Saunders said in November. "One scenario is for a mid-year 2018 entry of generic Restasis."
Allergan has already booked an impairment charge of $3.2 billion related to Restasis in the wake of the district court decision.
The company expects to earn between roughly $15.9 billion and $16 billion in 2017 net revenues and between $16.15 and $16.35 in non-GAAP earnings per share.
Shares in Allergan were little moved on the news, trading up Wednesday afternoon by a little under 1%.
Editor's note: This article has been updated to clarify the current number of Allergan employees.