Botox maker Allergan will cut about 13 per cent of its workforce as part of a push to become more efficient while it fights a hostile takeover bid from Valeant Pharmaceuticals.
The Irvine, California, company said Monday it plans to trim about 1,500 employees and around 250 vacant positions as it restructures to focus on its “highest value opportunities.”
Allergan said its restructuring will yield annual pretax savings of about $475 million in 2015. It announced the cuts the same day it said second-quarter results trumped analyst expectations, as earnings grew 16 per cent to $417.2 million.
“Today’s results demonstrate that we’re clearly on the right path,” Chairman and CEO David Pyott told analysts during a conference call. “The actions announced today will only accelerate our trajectory.”
Allergan Inc. has rejected several takeover attempts from Valeant Pharmaceuticals International Inc. and activist investor Bill Ackman’s Pershing Square Capital Management. The latest amounts to about $53 billion in cash and stock.
Valeant has promised cost-cutting and savings of its own if the two companies combine. Ackman, whose company owns a 9.7 per cent stake in Allergan, told CNBC that shareholders had been asking for Allergan cost-cutting for some time. He said the reductions that the company announced Monday amounted to “cutting out fat you should have cut out a long time ago.”
“Allergan can only achieve so much as a stand-alone company,” he said.
Ackman has lined up nominees for Allergan’s board, and Pershing Square wants to hold a special meeting where Allergan shareholders can have a say in the buyout bid and on the company’s direction.
Allergan, which also makes the dry-eye treatment Restasis, has adopted a “poison pill” measure to block a takeover. Pyott said Monday that Valeant’s offer was “so far away from the intrinsic value of this company” that there was no reason for the drugmakers to have substantive talks.
Allergan and Valeant have feuded publicly over the possible takeover since April. In the latest twist, Valeant said Monday it has complained to both the Securities and Exchange Commission and authorities in the Canadian province of Quebec, where it is based, that Allergan has been making false statements about its business even though Valeant has publicly corrected it.
Valeant said the latest example of these statements involves the performance of contact lens maker Bausch + Lomb, which Valeant acquired last year.
“We can no longer tolerate unjustified attacks on Valeant’s business and strongly believe we are obligated to take action to protect Valeant shareholders from Allergan’s apparent attempts to mislead investors and manipulate the market for Valeant stock,” Valeant Chairman and CEO J. Michael Pearson said in a statement from the company.
An Allergan spokesman responded by email that the company stood by its comments.
“We call on Valeant to report complete and transparent details on its business on an ongoing basis,” the spokesman said. “At the end of the day, investors will make their own decisions.”
The drugmaker also said on Monday that it raised its forecast for adjusted 2014 earnings to between $5.74 and $5.80 per share from a range of $5.64 to $5.73 that it predicted in May. It expects Botox to deliver net sales ranging from $2.2 billion to $2.28 billion.
Botox is known best for its ability to smooth frown lines on aging foreheads, but it also is approved to treat neck spasms, eye muscle disorders, migraines and other conditions.
Shares of Allergan climbed 2.3 per cent, or $3.90, to $171.30 Monday afternoon, while U.S.-traded shares of Valeant also were up 3 per cent, or $3.69, to $125.66.