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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
COMMISSION FILE NO. 1-10269
ALLERGAN, INC.
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(Exact name of Registrant as Specified in its Charter)
DELAWARE 95-1622442
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(State of Incorporation) (I.R.S. Employer
Identification No.)
2525 DUPONT DRIVE
IRVINE, CALIFORNIA 92612
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (714) 246-4500
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which each class registered
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Common Stock, $0.01 par value New York Stock Exchange
Preferred Share Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The aggregate market value of the registrant's voting stock held by
non-affiliates was approximately $7,256,000,000 on January 28, 2000, based upon
the closing price on the New York Stock Exchange on such date.
Common Stock outstanding as of January 28, 2000 - 134,254,772 shares
(including 4,606,555 shares held in treasury).
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II, III and IV incorporate certain information by reference
from the registrant's proxy statement for the annual meeting of stockholders to
be held on April 26, 2000, which proxy statement was filed with the Securities
and Exchange Commission on March 16, 2000.
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TABLE OF CONTENTS
<TABLE>
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PART I PAGE
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Item 1. Business...........................................................1
Item 2. Properties........................................................15
Item 3. Legal Proceedings.................................................15
Item 4. Submission of Matters to a Vote of Security Holders...............15
Item I-A. Executive Officers of Allergan, Inc...............................16
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters...............................................19
Item 6. Selected Financial Data...........................................19
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............................19
Item 7A. Quantitative and Qualitative Disclosures About Market Risk........19
Item 8. Financial Statements and Supplementary Data.......................19
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...............................19
PART III
Item 10. Directors and Executive Officers of Allergan, Inc.................20
Item 11. Executive Compensation ...........................................20
Item 12. Security Ownership of Certain Beneficial Owners and Management....20
Item 13. Certain Relationships and Related Transactions....................20
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...21
SIGNATURES .................................................................S-1
INDEX OF EXHIBITS ..........................................................S-3
SCHEDULE .................................................................S-8
EXHIBITS ..............................(Attached to this Report on Form 10-K)
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Allergan, Inc. ("Allergan" or the "Company") is a leading provider of
eye care and specialty pharmaceutical products throughout the world with
products in the eye care pharmaceutical, ophthalmic surgical device,
over-the-counter contact lens care, movement disorder, and dermatological
markets. Its worldwide consolidated revenues are principally generated by
prescription and non-prescription pharmaceutical products in the areas of
ophthalmology and skin care, neurotoxins, intraocular lenses and other
ophthalmic surgical products, and contact lens care products.
Allergan was originally incorporated in California in 1948, became
known as Allergan Corporation in 1950, and reincorporated in Delaware in 1977.
In 1980, the Company was acquired by SmithKline Beecham plc (then known as
"SmithKline Corporation" and herein "SmithKline"). The Company operated as a
wholly-owned subsidiary of SmithKline from 1980 until 1989 when Allergan again
became a stand-alone public company through a spin-off distribution by
SmithKline.
In November 1992, the Company sold its contact lens business in North
and South America. In August 1993, the Company sold its contact lens business
outside of the Americas.
During 1994, the Company acquired the Ioptex Research worldwide
intraocular lens product line. During 1995, the Company completed four
acquisitions. In January 1995, the Company acquired Optical Micro Systems, Inc.,
a U.S.-based developer and manufacturer of phacoemulsification surgical
equipment. In June 1995, the Company acquired Laboratorios Frumtost, S.A., a
manufacturer of ophthalmic and other pharmaceutical products in Brazil. In
August 1995, the Company purchased the assets of Herald Pharmacal, Inc., a
U.S.-based developer and manufacturer of glycolic acid-based, aesthetic skin
care products. In November 1995, the Company purchased the worldwide contact
lens care product business of Pilkington Barnes Hind. Also in 1995, Allergan
acquired 100% ownership interest in Santen-Allergan, its Japanese contact lens
care joint venture.
On December 9, 1999 the Company implemented a two-for-one stock split
effected as a dividend to stockholders of record on November 18, 1999. All
historical information contained in this report has been adjusted to reflect the
1999 stock split.
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ALLERGAN BUSINESSES
The following table sets forth, for the periods indicated, the net
sales from continuing operations for each of the Company's specialty
therapeutics businesses and product lines:
<TABLE>
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YEAR ENDED DECEMBER 31
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1999 1998 1997
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(IN MILLIONS)
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Specialty Pharmaceuticals:
Eye Care Pharmaceuticals $ 571.2 $ 505.3 $ 408.5
Skin Care 76.6 80.6 80.6
Botox(R)/Neuromuscular 175.8 125.3 90.1
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Total 823.6 711.2 579.2
Medical Devices and OTC Product Lines:
Ophthalmic Surgical 222.9 193.6 182.2
Contact Lens Care 359.7 356.9 376.6
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Total 582.6 550.5 558.8
Total Product Net Sales $1,406.2 $1,261.7 $1,138.0
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Domestic 48.1% 46.2% 42.8%
International 51.9% 53.8% 57.2%
</TABLE>
See Note 13 of Notes to Consolidated Financial Statements on pages A-39 to A-41
of the Company's Proxy Statement filed on March 16, 2000 for further information
concerning foreign and domestic operations.
SPECIALTY PHARMACEUTICAL BUSINESS
Eye Care Pharmaceutical Product Line
Allergan develops, manufactures and markets a broad range of
prescription and non-prescription products designed to treat diseases and
disorders of the eye, including glaucoma, inflammation, infection and allergy.
In addition, the specialty over-the-counter product line consists of products
designed to treat ocular surface disease, including artificial tears and ocular
decongestants.
The largest segment of the market for ophthalmic prescription drugs is
for the treatment of glaucoma, a sight-threatening disease characterized by
elevated intraocular pressure. Allergan's largest selling eye care
pharmaceutical product is Alphagan(R) ophthalmic solution, which was approved by
the United States Food and Drug Administration ("FDA") in September 1996 for the
treatment of open-angle glaucoma and ocular hypertension. Sales of Alphagan(R)
ophthalmic solution represented 4%, 9% and 12% of total Company sales in 1997,
1998 and 1999, respectively. The period of new chemical entity exclusivity in
the United States for Alphagan(R) ophthalmic solution extends for five years
from the date of approval. In March 1997, Alphagan(R) was also approved in the
United Kingdom, and in October 1997, the Company received approval to market
Alphagan(R) ophthalmic solution in 14 of the 15 member states of the European
Union through the mutual recognition filing process. At the end of 1999,
Alphagan(R) was approved in over 50 countries worldwide. In July 1998, the
Company entered into an agreement with Santen Pharmaceutical Co., Ltd., granting
Santen exclusive distribution rights for brimonidine (the compound marketed by
Allergan under the Alphagan(R) brand name) in Japan. Under this agreement,
Santen agreed to assume responsibility for future product development of
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brimonidine and for obtaining Ministry of Health approval in Japan. Allergan
retained the option to co-promote or co-market brimonidine in Japan with Santen.
The Company also markets Betagan(R) ophthalmic solution, a topical beta
blocker used in the treatment of glaucoma, and Propine(R) ophthalmic solution,
which is used alone or in combination with other drugs when initial drug therapy
for glaucoma becomes inadequate. Patent protection for both products expired in
the United States in 1991 and they both face generic competition from several
companies including Bausch & Lomb and Alcon Laboratories, Inc. (a division of
Nestle). In addition, the Company markets its own generic version of these two
products.
In December 1999, the FDA approved the marketing of Alocril(TM)
ophthalmic solution for the treatment of itch associated with allergic
conjunctivitis. In February 2000, the Company entered into an agreement with
Dura Pharmaceuticals, Inc. to commercialize Alocril(TM) ophthalmic solution,
with Allergan promoting to ophthalmologists and Dura promoting primarily to
primary care practitioners and respiratory specialists. Allergan launched the
product in March 2000.
The Company also markets several leading ophthalmic products to treat
ocular inflammation and infection. Pred Forte(R) and FML(R) Liquifilm(R)
ophthalmic suspensions are leading products in the ocular corticosteroid
inflammation market. Allergan's Acular(R)1 ophthalmic solution is indicated for
the relief of itch associated with seasonal allergic conjunctivitis and for the
treatment of postoperative inflammation in patients who have undergone cataract
extraction. In November 1997, the Company received approval from the FDA to
market Acular(R) PF, the first unit-dose, preservative-free topical nonsteroidal
anti-inflammatory drug (NSAID) in the United States, for the reduction of ocular
pain and photophobia following incisional refractive surgery.
Allergan's major products in the anti-infective market are
Ocuflox(R)/Oflox(R)/Exocin(R) ophthalmic solution, a fluroquinolone which treats
bacterial conjunctivitis and corneal ulcers, Blephamide(R) ophthalmic
suspension, a topical anti-inflammatory and anti-infective, and Polytrim(R)
ophthalmic solution, a synthetic antimicrobial which treats surface ocular
bacterial infections. Blephamide(R), Pred Forte(R) and Polytrim(R) ophthalmic
solutions no longer have patent protection and face generic competition. In
September 1999 Allergan entered into a multi-year agreement with McNeil Consumer
Healthcare, a subsidiary of Johnson & Johnson, to commercialize Ocuflox(R)
ophthalmic solution in the U.S. pediatric and selected general practitioner
markets.
Allergan has filed a new drug application with the FDA for Restasis(TM)
ophthalmic emulsion for the treatment of chronic dry eye disease. An advisory
committee to the FDA voted against recommending approval of the drug in July
1999, a decision that is not binding on the FDA. In August 1999, the FDA issued
an "approvable letter" to the Company, indicating several points the Company
must address before the application will be approved. The Company submitted a
formal response to the FDA in the fourth quarter of 1999 and awaits the FDA's
final determination. Also during the fourth quarter of 1999, the Company filed a
Marketing Authorization Application for Restasis(TM) through the Mutual
Recognition Process in Europe.
In addition to its eye care pharmaceuticals, Allergan markets a variety
of artificial tear products for various needs, under a range of brand names
worldwide, led by the Refresh(R) brand. In the United States, the Refresh(R)
brand includes Refresh Plus(R), the category unit dose leader, Refresh Tears(R),
the leading multi-dose product, and Refresh P.M.(R), for overnight relief of dry
eye. Allergan also markets Celluvisc(R) in the United States
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(1) Acular(R) is a registered trademark of and is licensed from its
developer Syntex (U.S.A.) Inc.
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for severe dry eye. Other Allergan brands marketed around the world include the
Lerin(R), Liquifilm Tears(R) and Lacri-Lube(R) S.O.P.(R) products.
Skin Care Product Line
Building upon its strength in marketing to medical specialties and
taking advantage of synergies in research and development, Allergan's skin care
business develops, manufactures and markets therapeutic as well as cosmetic skin
care products, primarily in the United States. In June 1997, the Company
received approval from the FDA to market Tazorac(R) (tazarotene topical gel)
0.05% and 0.1% (the trade name for Zorac(R) topical gel in the United States and
Canada) for the treatment of plaque psoriasis and acne. In November 1999, the
Company entered into an agreement with 3M Pharmaceuticals to co-promote
Tazorac(R) gel in the U.S. dermatology market.
Outside of the U.S., the Company entered into an agreement in February
1999 with Pierre Fabre Dermatologie, an affiliate of the private French company,
Pierre Fabre, to commercialize tazarotene (Zorac(R)) in continental Europe and
nearby territories. And, in April 1999 Allergan formed a marketing, sales and
development partnership with Bioglan Pharma Plc to commercialize Zorac(R) gel in
the United Kingdom, Ireland, Denmark, Sweden, Finland and other international
markets, including certain countries in the Middle East and Africa.
Azelex(R) cream for the topical treatment of mild to moderate
inflammatory acne vulgaris was launched in the U.S. in December 1995 and has
been well received in the market. The therapeutic product line also includes
Elimite(R) cream for the treatment of scabies, and Gris-Peg(R) tablets, a
systemic anti-fungal product. Patent protection for Elimite(R) cream in the
United States has expired, and the product now faces generic competition. In
1999 the Company divested three older pharmaceutical products which were not
being actively promoted: Naftin(R) gel, Erygel(R) topical gel and Erymax(R)
topical solution. The Company also develops, manufactures and markets glycolic
acid-based skin care products. In 1999 the Company divested its aesthetician
salon and retail-based alpha hydroxy acid products as part of an initiative to
focus on the M.D. Forte(R) line of products marketed to and dispensed by
physicians.
Botox(R)/Neuromuscular
Allergan's Botox(R) (Botulinum Toxin Type A) Purified Neurotoxin
Complex is used in the treatment of certain neuromuscular disorders which are
characterized by involuntary muscle contractions or spasms. Sales of Botox(R)
Purified Neurotoxin Complex represented 8%, 9.9% and 13% of total Company sales
in 1997, 1998 and 1999, respectively. The Company markets Botox(R) Purified
Neurotoxin Complex in the United States and in 66 other countries. The approved
indications for Botox(R) in the United States are for the treatment of
blepharospasm (the uncontrollable contraction of the eyelid muscles which can
force the eye closed and result in functional blindness) and strabismus
(misalignment of the eyes) in people 12 years of age and over.
The Company is working to expand the approved indications for Botox(R)
Purified Neurotoxin Complex in the United States. In 1998, the Company exercised
its option to acquire the exclusive worldwide rights to U.S. and foreign patents
for the use of botulinum toxin to treat migraine headaches, and the Company has
filed an investigational new drug application with the FDA for the migraine
headache indication for Botox(R). Clinical development for the migraine and
tension headache indications are currently in Phase 2. In addition, the Company
has orphan drug designations from the FDA for two indicated uses for Botox(R)
Purified Neurotoxin Complex: cervical dystonia and juvenile cerebral palsy. The
Company initiated Phase 3 clinical trials in 1999 in the United States for the
juvenile cerebral palsy indication, and the Company sought supplemental approval
for the cervical
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dystonia indication during 1999. If the Company gains approval for one or both
uses before any other manufacturer of the same designated botulinum toxin
serotype, the Company will be entitled to seven years of exclusive marketing
rights in the United States for those uses. Botox(R) is also in Phase 3 clinical
development in the United States for hyperfunctional facial lines (cosmetic brow
furrows) and Phase 3 in the United States and Europe for low back pain
associated with muscle spasm. The Company started Phase 3 clinical development
for adult spasticity post-stroke in 1999.
Outside of the United States, the Company is marketing Botox(R)
Purified Neurotoxin Complex in 66 countries around the world. The Company
continues to pursue expanded indications for Botox(R) outside of the U.S.
Botox(R) Purified Neurotoxin Complex has been approved in 39 countries outside
of the U.S. for the treatment of cervical dystonia and hemifacial spasm and in
31 countries outside of the U.S. for the treatment of lower limb spasticity in
pediatric cerebral palsy patients, two years of age or older. In 1999, the
Company received approval in Switzerland to market Botox(R) Purified Neurotoxin
Complex for the treatment of upper limb spasticity associated with debilities
occurring after a stroke. Subsequent filings throughout Europe for this
indication are expected in 2000. In addition, in January 2000 the Company
received regulatory approval in Japan for the hemifacial spasm indication. And,
the Company has initiated a Phase 3 program in Europe for the treatment of
axillary hyperhidrosis (excessive sweating).
There are intrinsic uncertainties associated with Research &
Development efforts and the regulatory process. There is no assurance that any
of the research projects or pending drug marketing approval applications
mentioned above will result in new approved indications for Botox(R) Purified
Neurotoxin Complex. Delays or failures in one or more significant research
projects and pending drug marketing approval applications could have a material
adverse impact on the future results of the Company's Botox(R) business.
The Company manufactures its own bulk toxin raw material necessary to
produce Botox(R) Purified Neurotoxin Complex. The process to create bulk toxin
is technically complicated and difficult. Any failure of the Company to maintain
an adequate supply of bulk toxin could result in an interruption in the supply
of Botox(R) Purified Neurotoxin Complex with a resulting decrease in sales of
the product.
MEDICAL DEVICES AND OTC PRODUCT LINES
Ophthalmic Surgical Product Line
Allergan's ophthalmic surgical business develops, manufactures and
markets intraocular lenses ("IOLs"), surgically related pharmaceuticals,
phacoemulsification equipment and other ophthalmic refractive surgical products.
The largest segment of the surgical market is for the treatment of
cataracts. Cataracts are a condition, usually age related, in which the natural
lens of the eye becomes progressively clouded. This clouding obstructs the
passage of light and can eventually lead to blindness. Most patients affected by
cataracts can be surgically treated by removing the clouded lens and replacing
it with an IOL. The Company currently offers a full line of products used in the
performance of cataract surgery, including PMMA, silicone monofocal and
multi-focal and an acrylic IOL.
Sales of all models of the Company's IOLs represented 11%, 10% and 10%
of total Company sales in 1997, 1998 and 1999, respectively. Intraocular lenses
marketed by Allergan for small incision cataract surgery include the
PhacoflexII(R)SI-30NB(R) foldable small incision IOL, introduced in April 1993,
the SI-40NB(R) foldable small incision IOL, introduced in 1995, the
PhacoflexII(R)SI-55NB(R), introduced in 1997, and the Sensar(R) IOL, which was
introduced in Europe in 1998 and was approved for marketing in the United States
in
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February 2000. Along with foldable IOLs, the Company also markets a series of
insertion systems for each of its foldable lens models, referred to as The
UnFolder(R) implantation systems. The systems assist the surgeon in achieving
controlled release of the IOL in the smallest incisions. Small incision surgery
is a less invasive procedure, and generally, smaller incisions lead to less
induced astigmatism and faster visual recovery for the patient. The Array(R)
multifocal IOL was approved for marketing in the United States in September
1997. It is also available in Brazil and several European countries including
Germany, France and Italy. The Company believes that the Array(R) multifocal IOL
will be viewed by ophthalmic surgeons and cataract patients as a significant
improvement in IOL design, providing improved quality of life due to enhanced
near vision.
Small incision IOLs continue to grow in popularity along with
increasing use of phacoemulsification, a method of cataract extraction that uses
ultrasound waves to break the natural lens into small fragments that can be
removed through a hollow needle. Phacoemulsification requires only a three to
four millimeter incision, compared to incisions of up to 12 millimeters for
other techniques. According to a 1997 survey of members of the American Society
of Cataract and Refractive Surgery, phacoemulsification is currently utilized in
more than 90% of cataract procedures in the United States. In 1993 Allergan
introduced the Prestige(R) phacoemulsification machine. Prestige(R) makes
small-incision cataract surgery easier than other phacoemulsification machines
by using a sophisticated microprocessor that monitors vacuum and fluid in the
eye. In January 1995, Allergan acquired Optical Micro Systems, Inc. ("OMS").
This acquisition, along with the acquisition of the Ioptex business in 1994,
provided the Company with additional IOL and phacoemulsification equipment
product offerings and proprietary technologies. The AMO(R)Diplomax(R)
phacoemulsification machine, launched in the U.S. by the Company in November
1995, is the first OMS phaco-technology system introduced since the acquisition.
In 1999, the Company launched the Sovereign(TM) phacoemulsification system,
which offers advanced fluidics technology and enhanced power modulations.
Allergan also markets AMO(R)Vitrax(R), a viscoelastic used to maintain the
anterior chamber and protect endothelial cells during cataract surgery. And, in
1998, the Company became a distributor of BioLon(TM)2 viscoelastic in the United
States under an agreement with Akorn, Inc. The Company has partnered with
Allegiance Healthcare Corporation to provide custom surgical procedure packs to
its U.S. customers and intends to offer this service in Europe in 2000.
Contact Lens Care Product Line
The Company has been doing business in the contact lens care market
since 1960. On a worldwide basis, it develops, manufactures and markets a broad
range of products for use with every available type of contact lens. These
products include disinfecting solutions to destroy harmful microorganisms in and
on the surface of contact lenses; daily cleaners to remove undesirable film and
deposits from contact lenses; and enzymatic cleaners to remove protein deposits
from contact lenses. In the area of disinfecting products, the Company offers
products that can be used in both the hydrogen peroxide and convenient chemical
systems. Allergan's leading hydrogen peroxide system products are the Oxysept
1Step(R)/UltraCare(R) hydrogen peroxide neutralizer/disinfection system, with a
color indicator which turns the solution pink to indicate the disinfectant
tablet has dissolved. Complete(R) brand Multi-Purpose solution is the Company's
convenient, one-bottle chemical disinfection system for soft contact lenses. The
Company currently markets Complete(R) brand Multi-Purpose solution worldwide,
including Japan as of 1999. Complete(R) brand ComfortPLUS(TM) Multi-Purpose
solution, the Company's latest product upgrade, contains a proprietary comfort
formulation for longer, more comfortable contact lens wear. One-bottle systems,
including the Company's product, continue to gain popularity with consumers.
- ------------------
(2) BioLon(TM) is a trademark owned and licensed from Bio-Technology
General Corporation.
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In November 1995, the Company acquired the worldwide contact lens care
business of Pilkington Barnes Hind. Included in the acquisition was the Consept
F(R) Cleaning and Disinfecting System, the first approved non-heat disinfection
system for soft contact lenses in Japan. This acquisition significantly
increased the Company's contact lens care product business in Japan.
Sales of the Company's hydrogen peroxide disinfection systems
represented 11%, 10% and 7% of total Company sales in 1997, 1998 and 1999,
respectively. The Company's Contact Lens Care business continues to be impacted
by trends in the contact lens and lens care marketplace, including technological
and medical advances in surgical techniques for the correction of vision
impairment. Cheaper one-bottle chemical disinfection systems have gained
popularity among soft contact lens wearers instead of peroxide-based lens care
products which have historically been Allergan's strongest family of lens care
products. Also, the growing use and acceptance of daily contact lenses, along
with the other factors above, could have the effect of reducing demand for lens
care products generally. While the Company believes it has established
appropriate marketing and sales plans to mitigate the impact of these trends
upon its Contact Lens Care business, no assurance can be given in this regard.
In 2000 Allergan is launching a new eye drop for contact lens wearers
called Refresh Contacts(R) to help provide comfort and protection from dryness
and irritation.
EMPLOYEE RELATIONS
At December 31, 1999, the Company employed 5,969 persons throughout the
world, including 2,296 in the United States. None of the Company's U.S.-based
employees are represented by unions. The Company considers that its relations
with its employees are, in general, very good.
INTERNATIONAL OPERATIONS
The Company believes that international markets represent a significant
opportunity for continued growth. International sales have represented
approximately 57.2%, 53.8% and 51.9% of total sales for the years ended December
31, 1997, 1998, and 1999 respectively. Allergan believes that its
well-established international market presence provides it with an advantage,
enabling the Company to maximize the return on its investment in research,
product development and manufacturing.
Allergan established its first foreign subsidiary in 1964 and currently
sells products in approximately 100 countries. Marketing activities are
coordinated on a worldwide basis and resident management teams provide
leadership and infrastructure for customer focused rapid introduction of new
products in the local markets.
SALES AND MARKETING
Allergan maintains global marketing and regional sales organizations.
Supplementing the sales efforts and promotional activities aimed at eye care
professionals, as well as neurologists outside the U.S., who use, prescribe and
recommend its products, Allergan has been focusing increasingly on managed care
providers. In addition, Allergan advertises in professional journals and has an
extensive direct mail program of descriptive product literature and scientific
information to specialists in the ophthalmic, dermatological and movement
disorder fields. The Company's specialty therapeutic products are sold to drug
wholesalers, independent and chain drug stores, commercial optical chains, mass
merchandisers, food stores, hospitals, ambulatory surgery centers and medical
practitioners, including neurologists. At December 31, 1999, the Company
employed approximately 1,400 sales representatives throughout the world.
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RESEARCH AND DEVELOPMENT
The Company's global research and development efforts focus on eye
care, skin care and neuromuscular products that are safe, effective, convenient
and have an economic benefit. The Company's own research and development
activities are supplemented by a commitment to identifying and obtaining new
technologies through in-licensing, technological collaborations, joint ventures
and acquisition efforts, including the establishment of research relationships
with academic institutions and individual researchers.
At December 31, 1999, there were, in the aggregate, over 930 people
involved in the Company's research and development efforts. The Company's
research and development expenditures for 1997, 1998, and 1999 were $131.2
million, $125.4 million, and $168.4 million respectively, excluding amounts
spent by the Company on behalf of Allergan Ligand Retinoid Therapeutics, Inc.
and Allergan Specialty Therapeutics, Inc. In April 1999, the Company announced
plans for a $70 million expansion of its research and development facilities in
Irvine, California, enabling the Company to hire approximately 300 new research
scientists and other professionals by 2003.
Research and development efforts for the ophthalmic pharmaceuticals
business focus primarily on new therapeutic products for glaucoma, inflammation,
dry eye and allergy and on new anti-infective pharmaceuticals for eye care. The
Company is conducting research on new compounds that control intraocular
pressure by either reducing the inflow or production, or improving the outflow,
of aqueous humor. The Company is also conducting research and clinical trials on
a class of compounds called hypotensive lipids. Unlike beta-blockers that
decrease the inflow or production of aqueous humor, hypotensive lipids reduce
intraocular pressure by improving its outflow. The Company is also developing
Restatis(TM) cyclosporine ophthalmic emulsion for the treatment of moderate to
severe dry eye.
Research and development activities for the surgical business
concentrate on improved cataract surgical systems, implantation instruments and
methods, and new IOL materials and designs.
Research and development efforts for neuromuscular disorders focus on
expanding the uses for Botox(R) (Botulinum Toxin Type A) Purified Neurotoxin
Complex to include treatment for cervical dystonia, juvenile cerebral palsy,
spasticity, migraine and tension headache pain, back pain, brow furrow and
hyperhidrosis.
Research and development in the contact lens care business is aimed at
systems that are effective and more convenient for patients to use, and thus
lead to a higher rate of compliance with recommended lens care procedures.
Improved compliance can enhance safety and extend the time a patient will be a
contact lens wearer. The Company believes that continued development and
commercialization of disinfection systems that are both easy-to-use and
efficacious will be important for the future success of this part of the
Company's business.
From 1992 to 1994, the Company and Ligand Pharmaceuticals Incorporated
("Ligand") operated a joint venture for the purpose of performing certain
research and development activities. In December 1994, Allergan and Ligand
formed a new research and development company, Allergan Ligand Retinoid
Therapeutics, Inc. ("ALRT") to function as the successor to the joint venture.
In November 1997, pursuant to the exercise of its stock purchase option, Ligand
acquired all of the stock of ALRT. At the same time, pursuant to the exercise of
its asset purchase option, Allergan acquired an interest in one-half of all
technologies, cash and other assets of ALRT. The initial agreements between
Allergan and Ligand provided for a joint research, development and
commercialization arrangement following such option exercises. In connection
with the option exercises,
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Allergan and Ligand amended their agreements so that, among other things, ALRT
compounds and development programs were divided between Allergan and Ligand, and
each party received exclusive rights to ALRT technology for use with their
respective compounds and programs, subject to certain royalty and milestone
payment obligations.
In 1997 the Company formed a new subsidiary, Allergan Specialty
Therapeutics, Inc. ("ASTI"), to conduct research and development of potential
pharmaceutical products based on the Company's retinoid and neuroprotective
technologies. In March 1998, the Company distributed all ASTI Class A Common
Stock to the Company's stockholders, who received one share of ASTI Class A
Common Stock for each 20 shares of Allergan common stock held as of the record
date.
As the sole holder of ASTI's outstanding Class B Common Stock following
the distribution and under the terms of ASTI's Restated Certificate of
Incorporation, the Company has the option to repurchase all of the outstanding
shares of ASTI Class A Common Stock under specified conditions. Under the terms
of a technology license agreement and a license option agreement between the
Company and ASTI, the Company has also granted certain technology licenses and
agreed to make specified payments on sales of certain products in exchange for
the payment by ASTI of a technology fee and the option to independently develop
certain compounds funded by ASTI prior to the filing of an Investigational New
Drug application with the FDA with respect thereto and to license any products
and technology developed by ASTI. The Company will recognize the technology fee
as revenue as it is earned and received.
ASTI's technology and product research and development activities take
place under a research and development agreement with the Company. The Company
will recognize revenues and related costs as services are performed under such
contracts. It is currently expected that substantially all of ASTI's funds will
be directed toward continuing the research and development of products based on
retinoid and neuroprotective technologies. In addition, ASTI may fund the
research and development of pharmaceutical products in therapeutic categories of
interest to the Company other than those based on retinoid and neuroprotective
technologies, but that complement the Company's product pipeline or otherwise
are believed to provide a potential commercialization opportunity for the
Company.
The Company has also entered into a series of collaboration agreements
to further its research and development efforts:
o In November 1996, the Company entered into a collaboration agreement
with Cambridge NeuroScience, Inc. ("CNSI") to develop new treatments
for glaucoma and other serious ophthalmic diseases. CNSI specializes in
glutamate ion channel-blocker and sodium channel technology. In 1999,
the Company extended this agreement to November 2000.
o In September 1997, the Company entered into an exclusive collaboration
agreement with ACADIA Pharmaceuticals Inc. (formerly Receptor
Technologies) to identify receptor-selective compounds with respect to
certain targets, develop receptor arrays and probes specific for
G-protein coupled and other receptors and facilitate the establishment
of drug discovery programs.
o In July 1998, the Company entered into a multi-year research and
development collaboration with the Parke-Davis Pharmaceutical Research
Division of Warner-Lambert Company to identify, develop and
commercialize up to two RXR subtype selective retinoid compounds for
the treatment of metabolic diseases, including adult onset diabetes,
insulin resistant syndromes and dyslipidemias.
9
<PAGE> 12
o In July 1998, the Company entered into an agreement with Santen
Pharmaceutical Co., Ltd., whereby Santen assumed responsibility for
future product development of brimonidine and for obtaining Japanese
marketing approval in exchange for distribution rights in Japan.
Brimonidine is a compound marketed by Allergan under the brand name
Alphagan(R).
o In June 1999, Allergan entered into a license agreement with XOMA Ltd.
under which Allergan obtained exclusive rights to globally develop and
commercialize XOMA's recombinant, bactericidal/permeability increasing
protein in combination with other anti-infectives in products to treat
ophthalmic infections.
o In July 1999, the Company entered into a license and research
collaboration agreement with ACADIA Pharmaceuticals Inc. to discover,
develop and commercialize compounds for glaucoma based on receptor
subtype-selective muscarinic lead compounds.
o In October 1999, the Company announced an agreement with AXYS Advanced
Technologies, Inc. to provide Allergan with a diverse compound
screening library consisting of small molecule compounds and with
technologies for reproducing and expanding the library chemistries.
o In December 1999, the Company and Boehringer Ingelheim entered into a
license for Allergan to develop and commercialize epinastine for the
treatment of ocular allergies.
The continuing introduction of new products supplied by the Company's
research and development efforts and in-licensing opportunities is critical to
the success of the Company. There is no assurance that any of the research
projects or pending drug marketing approval applications will result in new
products that the Company can commercialize. Delays or failures in one or more
significant research projects and pending drug marketing approval applications
could have a material adverse impact on the future operations of the Company.
COMPETITION
Allergan faces strong competition in all of its markets worldwide.
Numerous companies are engaged in the development, manufacture and marketing of
health care products competitive with those manufactured by Allergan. Major eye
care competitors include Alcon Laboratories, Inc. (a subsidiary of Nestle),
Bausch & Lomb and its acquired businesses, Chiron Vision and Storz Ophthalmics,
CIBA Vision Ophthalmics (a division of Novartis), Merck & Co., Inc. and
Pharmacia Ophthalmics (a subsidiary of Pharmacia & Upjohn). These competitors
have equivalent or, in most cases, greater resources than Allergan. The
Company's skin care business competes against a number of companies, including,
among others, Bristol-Myers Squibb, Schering-Plough Corporation, Johnson &
Johnson and Hoffman-La Roche Inc., which all have greater resources than
Allergan. In the market for neurotoxins, the Company has one competitor in
Europe, Asia and New Zealand, Beaufour Ipsen, and anticipates competition in the
United States and Europe in 2000 from Athena Neurosciences, Inc., a subsidiary
of Elan Corporation, PLC. In marketing its products to health care
professionals, pharmacy benefits management companies, health care maintenance
organizations, and various other national and regional health care providers and
managed care entities, the Company competes primarily on the basis of product
technology, value-added services and price. The Company believes that it
competes favorably in its product markets.
10
<PAGE> 13
GOVERNMENT REGULATION
Drugs, biologics and medical devices, including intraocular lenses
(IOLs) and contact lens care products, are subject to regulation by the FDA,
state agencies and, in varying degrees, by foreign health agencies. Government
regulation of most of the Company's products generally requires extensive
testing of new products and filing applications for approval by the FDA prior to
sale in the United States and by some foreign health agencies prior to sale as
well. The FDA and foreign health agencies review these applications and
determine whether the product is safe and effective. The process of developing
data to support a premarket application and governmental review is costly and
takes many years to complete.
In general, manufacturers of drugs, medical devices and biologicals are
operating in an increasingly more rigorous regulatory environment than has been
the case in previous years. The total cost of providing health care services has
been and will continue to be subject to review by governmental agencies and
legislative bodies in the major world markets, including the United States,
which are faced with significant pressure to lower health care costs.
In 1996, Congress examined the regulatory burdens imposed on drug and
medical device manufacturers by the FDA in its product approval processes. In
1997, Congress enacted legislation intended to ameliorate those burdens. Among
other things, the Food and Drug Administration Modernization Act of 1997
("FDAMA") extends the Prescription Drug User Fee Act for another five years;
expands access to investigational drugs; authorizes FDA to approve a new drug
application on the basis of the results of one clinical trial, if the results
are sufficient to establish effectiveness; provides incentives in the form of
extended market exclusivity for companies who conduct qualified pediatric
clinical studies; otherwise seeks to streamline and facilitate the drug approval
process; permits the dissemination of scientific and medical information
regarding a product's unapproved uses under specific circumstances; and expands
FDAMA inspectional authority over non-prescription drugs. FDAMA also seeks to
improve the regulation of medical devices. Much of FDAMA became effective in
1998, with implementation regulations effective in late 1998 and early 1999. The
Company has not experienced material effects of FDAMA to date.
Internationally, the regulation of drugs and medical devices is
likewise becoming increasingly complex. In Europe, the Company's products are
subject to extensive regulatory requirements. As in the United States, the
marketing of medicinal products has for many years been subject to the granting
of marketing authorizations by medicine agencies. Particular emphasis is also
being placed on more sophisticated and faster procedures for reporting of
adverse events to the competent authorities. Additionally, new rules have been
introduced or are under discussion in several areas such as the recognition by
the authorities in one Member State of the European Union ("EU") of the
assessment and approval to market provided in another Member State and the
harmonization of clinical research laws and labeling and patient package
information, which collectively are expected to assist companies such as
Allergan to bring products to market quickly once the first European approval is
received.
A new EU regulatory regime has been installed to cover medical devices.
This regulatory process became mandatory in June 1998. It requires that medical
devices may only be placed on the market if they do not compromise safety and
health when properly installed, maintained and used in accordance with their
intended purpose. National laws conforming to this EU legislation regulate the
Company's IOLs and contact lens care products under the medical devices
regulatory system rather than the more extensive system for medicinal products
under which they were formerly regulated. The EU regulatory system for
cosmetics, which covers many of the Company's skin care products,
11
<PAGE> 14
has been extended to include, among other aspects, formal maintenance of a
technical file, a safety assessment, data on undesirable effects, good
manufacturing practice and extended labeling requirements.
In the United States, a significant percentage of the patients who
receive the Company's IOLs are covered by the federal Medicare program. When a
cataract extraction with IOL implantation is performed in an ambulatory surgery
center ("ASC"), Medicare provides the ASC with a fixed facility fee which
includes a $150 allowance to cover the cost of the IOL. When the procedure is
performed in a hospital outpatient department, the hospital's reimbursement is
determined using a complex formula that blends the hospital's costs with the
$150 allowance paid to ASCs. In its effort to reduce Medicare expenditures,
Congress may lower the IOL allowance below $150. The Medicare Technical
Corrections Bill of 1994 directed the U.S. Health Care Financing Administration
("HCFA") to establish a system through which the agency would pay ASCs and
hospitals a rate above $150 for "new technology IOLs." HCFA has issued final
rules which implement this mandate. Allergan has filed for "new technology"
status for the Array (R) multifocal IOL and the SI-40NB(R) and SI-55NB(R)
monofocal IOLs.
The Company's pharmaceutical products are not currently covered by
Medicare, but proposals to amend Medicare coverage to include pharmaceuticals
are currently in debate in the United States. Such coverage could impose price
controls on the Company's products. If implemented, price controls could
materially and adversely affect the Company's revenues and financial condition.
The Company cannot predict the likelihood or pace of any significant
legislative action in these areas, nor can it predict whether or in what form
health care legislation being formulated by various governments will be passed.
The Company also cannot predict exactly what effect such governmental measures
would have if they were ultimately enacted into law. However, in general, the
Company believes that such legislative activity will likely continue, and the
adoption of such measures can be expected to have some impact on the Company's
business.
PATENTS, TRADEMARKS AND LICENSES
Allergan owns, or is licensed under, numerous patents relating to its
products, product uses and manufacturing processes. It has numerous patents
issued in the United States and corresponding foreign patents issued in many of
the major countries in which it does business. Allergan believes that its
patents and licenses are important to its business, but that with the exception
of those relating to Alphagan(R) ophthalmic solution and to hydrogen peroxide
disinfection systems, no one patent or license is currently of material
importance in relation to its overall sales. Allergan markets its products under
various trademarks and considers these trademarks to be valuable because of
their contribution to the market identification of the various products.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state, local and foreign
environmental laws and regulations. The Company believes that its operations
comply in all material respects with applicable environmental laws and
regulations in each country where the Company has a business presence. Although
Allergan continues to make capital expenditures for environmental protection, it
does not anticipate any significant expenditures in order to comply with such
laws and regulations which would have a material impact on the Company's capital
expenditures, earnings or competitive position. The Company is not aware of any
pending litigation or significant financial obligations arising from current or
past environmental practices that are likely to have a material adverse impact
on the Company's financial position. There can be no assurance, however, that
environmental
12
<PAGE> 15
problems relating to properties owned or operated by the Company will not
develop in the future, and the Company cannot predict whether any such problems,
if they were to develop, could require significant expenditures on the part of
the Company. In addition, the Company is unable to predict what legislation or
regulations may be adopted or enacted in the future with respect to
environmental protection and waste disposal.
CERTAIN FACTORS AND TRENDS AFFECTING ALLERGAN AND ITS BUSINESSES
The Company believes that certain statements made by the Company in
this report and in other reports and statements released by the Company
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, such as comments which express the
Company's opinions about trends and factors which may impact future operating
results. Disclosures which use words such as the Company "believes,"
"anticipates," "expects" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks and
uncertainties which could cause actual results to differ materially from
expectations. Any such forward-looking statements, whether made in this report
or elsewhere, should be considered in context with the various disclosures made
by the Company about its businesses including, without limitation, the factors
discussed below.
o The pharmaceutical industry and other health care-related industries
continue to experience consolidation, resulting in larger, more diversified
companies with greater resources than the Company. Among other things,
these larger companies can spread their research and development costs over
much broader revenue bases than Allergan and can influence customer and
distributor buying decisions.
o Two of the Company's ophthalmic pharmaceutical products, Betagan(R) and
Propine(R), are off patent in the U.S. and continue to face competition
from generic versions of these compounds as well as from recently
introduced new technology glaucoma products. Other significant products
such as Elimite(R) cream, Blephamide(R) ophthalmic suspension and
Pred-Forte(R) ophthalmic suspension are also off patent and may face
similar generic competition.
o The Company is currently the only manufacturer of an FDA-approved
neurotoxin. The Company is aware, however, of another company seeking FDA
approval of a neurotoxin. If such approval is granted, the Company's sales
of Botox(R) Purified Neurotoxin Complex could be materially and negatively
impacted.
o The manufacturing process to create bulk toxin raw material necessary to
produce Botox(R) Purified Neurotoxin Complex is technically complicated.
Any failure of the Company to maintain an adequate supply of bulk toxin and
finished product could result in an interruption in the supply of Botox(R)
Purified Neurotoxin Complex with a resulting decrease in sales of the
product.
o The Company's Contact Lens Care business continues to be impacted by trends
in the contact lens and lens care marketplace, including technological and
medical advances in surgical techniques for the correction of vision
impairment. Cheaper one-bottle chemical disinfection systems have gained
popularity among soft contact lens wearers instead of peroxide-based lens
care products which historically have been Allergan's strongest family of
lens care products. Also, the growing use and acceptance of daily contact
lenses, along with the other factors above, could have the effect of
reducing demand for lens care products generally. While the Company
believes it has established appropriate marketing and sales plans to
mitigate the impact of these trends upon its Contact Lens Care business, no
assurance can be given in this regard.
13
<PAGE> 16
o The Company has in the past been, and continues to be, subject to product
liability claims. In addition, the Company has in the past and may in the
future recall or issue field corrections related to its products due to
manufacturing deficiencies, labeling errors or other safety or regulatory
reasons. There can be no assurance that the Company will not experience
material losses due to product liability claims or product recalls or
corrections.
o Sales of the Company's surgical and pharmaceutical products have been and
are expected to continue to be impacted by continuing pricing pressures
resulting from various government initiatives as well as from the
purchasing and operational decisions made by managed care organizations.
Failure of the Array(R) multifocal IOL to be designated as a "new
technology IOL" by HCFA will adversely affect the Company's profit margin
for the product.
o A current political issue of debate in the United States is the propriety
of expanding Medicare coverage to include pharmaceutical products. If
measures to accomplish that coverage become law, and if these measures
impose price controls on the Company's products, the Company's revenues and
financial condition are likely to be materially and adversely affected.
o The Company collects and pays a substantial portion of its sales and
expenditures in currencies other than the U.S. dollar. Therefore,
fluctuations in foreign currency exchange rates affect the Company's
operating results. The Company can provide no assurance that future
exchange rate movements will not have a material adverse effect on the
Company's sales, gross profit or operating expenses.
o The Company's business is also subject to other risks generally associated
with doing business abroad, such as political unrest and changing economic
conditions with countries where the Company's products are sold or
manufactured. Management cannot provide assurances that it can successfully
manage these risks or avoid their effects.
o The Company sells its pharmaceutical products primarily through
wholesalers. Wholesaler purchases may exceed customer demand, resulting in
reduced wholesaler purchases in later quarters. The Company can give no
assurances that wholesaler purchases will not decline as a result of this
potential excess buying.
o In past years, the Company has taken steps designed to improve its gross
profit margin, including continued emphasis on new products as well as the
closure of certain plants and other cost-cutting measures. In particular,
the Company announced comprehensive plans in the third quarter of 1998 to
streamline operations and reduce costs through global G&A restructuring and
manufacturing consolidation. Whether these steps will succeed in improving
gross profit margin depends in part on whether sales of new products will
result in a more favorable mix of products, and on whether the anticipated
cost savings can be achieved and sustained.
o Future performance will be affected by the introduction of new products.
The Company has allocated significant resources to the development and
introduction of new products. The successful development, regulatory
approval and market acceptance of the products cannot be assured.
o There are intrinsic uncertainties associated with Research & Development
efforts and the regulatory process both of which are discussed in greater
details in the "Research and Development" and the "Government Regulation"
sections, respectively, which are incorporated herein by reference.
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<PAGE> 17
o In February 1999, the Financial Accounting Standards Board ("FASB")
released a revised Exposure Draft of a Proposed Statement of Financial
Accounting Standards - Consolidated Financial Statements: Purpose and
Policy. If adopted as a SFAS, the terms of this Exposure Draft could
require the Company to include the financial position and results of
operation of Allergan Specialty Therapeutics, Inc. in its consolidated
results. The Company continues to evaluate the effect of implementation of
this proposed statement. By including the results of operations of ASTI,
the Company's consolidated results of operations could be adversely
affected. In addition, in 1999 the Emerging Issues Task Force ("EITF") of
the FASB began deliberating Issue No. 99-16 relating to the appropriate
methods of accounting for entities similar to ASTI. Certain alternatives
under consideration by the EITF would require the Company to account for
the activities of ASTI in the Company's Consolidated Financial Statements.
ITEM 2. PROPERTIES
Allergan's operations are conducted in owned and leased facilities
located throughout the world. The Company believes its present facilities are
adequate for its current needs. Its headquarters and primary administrative and
research facilities are located in Irvine, California. The Company has three
additional facilities in California, two for raw material support (one leased
and one owned) and one leased administrative facility. The Company owns one
facility in Texas for manufacturing and warehousing, and the Company operates
two facilities in Puerto Rico for manufacturing and warehousing. One of the
Puerto Rico facilities is leased and the other is owned. As previously
announced, the Company intends to close the facility that it owns in 2001.
Outside of the United States and Puerto Rico, the Company owns and
operates three manufacturing and warehousing facilities located in Brazil,
Ireland and China. Other material facilities include one owned facility for
administration and warehousing in Argentina; leased warehouse facilities in
Mexico and Japan; leased administrative facilities in Australia, Brazil, Canada,
France, Germany, Hong Kong, Ireland, Italy, Japan, Spain and the United Kingdom;
and one leased facility in Japan used for administration and research and
development.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in various litigation and
claims arising in the ordinary course of business which Allergan considers to be
normal in view of the size and nature of its business.
Although the ultimate outcome of any pending litigation and claims
cannot be precisely ascertained at this time, Allergan believes that any
liability resulting from the aggregate amount of uninsured damages for
outstanding lawsuits, investigations and claims will not have a material adverse
effect on its consolidated financial position and results of operation. However,
in view of the unpredictable nature of such matters, no assurances can be given
in this regard.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matter during the fourth quarter of the
fiscal year covered by this report to a vote of security holders, through the
solicitation of proxies or otherwise.
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<PAGE> 18
ITEM I-A. EXECUTIVE OFFICERS OF ALLERGAN, INC.
The executive officers of the Company and their ages as of March 1,
2000 are as follows:
<TABLE>
<S> <C> <C>
David E.I. Pyott 46 President and Chief Executive Officer
F. Michael Ball 44 Corporate Vice President and President, North
America Region and Global Eye Rx Business
Eric K. Brandt 37 Corporate Vice President and Chief Financial
Officer (Principal Financial Officer)
David A. Fellows 43 Corporate Vice President and President,
Asia Pacific Region
James M. Hindman, CPA 39 Senior Vice President and Controller
Lester J. Kaplan, Ph.D. 49 Corporate Vice President and President, Research
and Development and Global BOTOX(R)
George M. Lasezkay, Pharm.D., J.D. 48 Corporate Vice President, Corporate Development
Nelson R. A. Marques 48 Corporate Vice President and President, Latin
America Region
James V. Mazzo 42 Corporate Vice President and President,
Europe/Africa/Middle East Region and Global Lens
Care Products
Jacqueline Schiavo 51 Corporate Vice President, Worldwide Operations
Francis R. Tunney, Jr. 52 Corporate Vice President - Administration, General
Counsel and Secretary
Dwight J. Yoder, CPA 54 Senior Vice President (Principal Accounting Officer)
</TABLE>
Officers are appointed by and hold office at the pleasure of the Board
of Directors.
Mr. Pyott became President and Chief Executive Officer in January 1998.
Previously, he was head of the Nutrition Division and a member of the executive
committee of Novartis AG from 1995 until December 1997. From 1992 to 1995 Mr.
Pyott was President and Chief Executive Officer of Sandoz Nutrition Corp.,
Minneapolis, Minnesota and General Manager of Sandoz Nutrition, Barcelona, Spain
from 1990 to 1992. Prior to that Mr. Pyott held various positions within Sandoz
Nutrition group from 1980.
Mr. Ball has been Corporate Vice President and President, North America
Region and Global Eye Rx Business since May 1998 and prior to that was Corporate
Vice President and President, North America Region since April 1996. He joined
the Company in 1995 as Senior Vice President, U.S. Eye Care after 12 years with
Syntex Corporation,
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<PAGE> 19
where he held a variety of positions including President, Syntex Inc. Canada and
Senior Vice President, Syntex Laboratories.
Mr. Brandt has been Corporate Vice President and Chief Financial
Officer since May 1999. Prior to joining the Company, Mr. Brandt held various
positions with the Boston Consulting Group ("BCG") from 1989, culminating in
Vice President and Partner, and a senior member of the BCG Health Care practice.
While at BCG, Mr. Brandt was involved in high level consulting engagements with
top global pharmaceutical, managed care and medical device companies, focusing
on corporate finance, shareholder value and post-merger integration. Mr. Brandt
joined the Company in 1999.
Mr. Fellows has been Corporate Vice President and President of the Asia
Pacific Region since June 1997 and prior thereto, was Senior Vice President,
U.S. Eye Care Marketing since June 1996. From 1993 to 1996, he was Senior Vice
President, Therapeutics Strategic Marketing, and from 1991 until 1993, he was
Vice President, Pharmaceuticals Strategic Marketing. Mr. Fellows joined the
Company in 1980.
Mr. Hindman has been Senior Vice President and Controller since January
2000 and prior thereto was Vice President, Financial Planning & Analysis since
February 1997. Prior to that he served 12 years in a variety of positions at the
Company, including Plant Controller, Director of Manufacturing Planning and
Reporting, Director of Finance (Northwest Europe), and Assistant Corporate
Controller. Mr. Hindman first joined the Company in 1984.
Dr. Kaplan has been Corporate Vice President and President, Research
and Development and Global BOTOX(R) since May 1998 and had been Corporate Vice
President, Science and Technology since July 1996. From 1992 until 1996, he was
Corporate Vice President, Research and Development. He had been Senior Vice
President, Pharmaceutical Research and Development since 1991 and Senior Vice
President, Research and Development since 1989. Dr. Kaplan first joined the
Company in 1983.
Dr. Lasezkay has been Corporate Vice President, Corporate Development
since October 1998 and had been Vice President, Corporate Development since July
1996. He had been Assistant General Counsel of the Company since 1995 and Senior
Counsel to the Company since 1989 when he first joined the Company.
Mr. Marques has been Corporate Vice President and President, Latin
America since October 1998. Prior to that he served 18 years with Alcon, where
he held a variety of positions, including President, Alcon Laboratories do
Brasil Ltda. from 1994 until 1998. Mr. Marques joined the Company in 1998.
Mr. Mazzo has been Corporate Vice President and President,
Europe/Africa/Middle East Region since April 1998 and in May 1998 he also
assumed the duties of President of Global Lens Care Products. He had been Senior
Vice President Eyecare/Rx Sales and Marketing, U.S. since June 1997 during which
time he served as acting President Europe/Africa/Middle East Region from October
- - December 1997. Prior to that he served 11 years in a variety of positions at
the Company, including Director, Marketing (Canada), Vice President and Managing
Director (Italy) and Senior Vice President Northern Europe. Mr. Mazzo first
joined the Company in 1980.
Ms. Schiavo has been Corporate Vice President, Worldwide Operations
since 1992. She was Senior Vice President, Operations from 1991 and Vice
President, Operations from 1989. Ms. Schiavo first joined the Company in 1980.
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<PAGE> 20
Mr. Tunney is Corporate Vice President - Administration, General
Counsel and Secretary of the Company. From 1991 through 1998 he was Corporate
Vice President, General Counsel and Secretary and prior thereto was Senior Vice
President, General Counsel and Secretary from 1989 through 1991. Mr. Tunney
first joined SmithKline Beckman Corporation, the Company's former parent, in
1979.
Mr. Yoder has been Senior Vice President from January 2000, prior to
which he had been Senior Vice President and Controller from July 1996 and Vice
President and Controller since joining the Company in 1990. Mr. Yoder will
retire in June 2000. He is also the Chief Financial Officer of Allergan
Specialty Therapeutics, Inc.
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<PAGE> 21
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The section entitled "Market Prices of Common Stock and Dividends" on
page A-47 of the Proxy Statement is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The table entitled "Selected Financial Data" on page A-47 of the
Proxy Statement is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations for the Three-Year Period Ended
December 31, 1999" on pages A-2 to A-17 of the Proxy Statement is incorporated
herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The section entitled "Quantitative and Qualitative Disclosures About
Market Risk" on pages A-13 to A-16 of the Proxy Statement is incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, including the notes thereto, included on
pages A-18 to A-43 of the Proxy Statement, together with the sections entitled
"Independent Auditors' Report" and "Quarterly Results (Unaudited)" of the Proxy
Statement included on pages A-45 and A-46, respectively, are incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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<PAGE> 22
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF ALLERGAN, INC.
Information under this Item is included on pages 2-4 of the Proxy
Statement in the section entitled "Election of Directors" and is incorporated
herein by reference. Information with respect to executive officers is included
on pages 16-18 of this Form 10-K.
The information required by Item 405 of Regulation S-K is included on
page 8 of the Proxy Statement under the section entitled "Section 16(a)
Beneficial Ownership Reporting Compliance" and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation," and the subsection
entitled "Director Compensation" included in the Proxy Statement on pages 15-24
and pages 6-7, respectively, are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The common stock information in the section entitled "Security
Ownership of Certain Beneficial Owners and Management" on pages 13-14 of the
Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The sections entitled "Other Matters" and "Compensation Committee
Interlocks and Insider Participation" on pages 7-8 and page 23, respectively, of
the Proxy Statement are incorporated herein by reference.
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<PAGE> 23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Index to Financial Statements*
<TABLE>
<CAPTION>
PAGE(S) IN
PROXY STATEMENT
---------------
<S> <C>
1. Financial Statements included in Part II of this report:
Independent Auditors' Report ............................................... A-45
Consolidated Balance Sheets at December 31, 1999 and December 31, 1998...... A-18
Consolidated Statements of Operations for Each of the Years
in the Three Year Period Ended December 31, 1999 ........................... A-19
Consolidated Statements of Stockholders' Equity for Each of the Years
in the Three Year Period Ended December 31, 1999............................ A-20
Consolidated Statements of Cash Flows for Each of the Years
in the Three Year Period Ended December 31, 1999 ........................... A-21
Notes to Consolidated Financial Statements .................................A-22 to A-43
- ------------------
* Incorporated by reference from the indicated pages of the Company's Proxy Statement
filed with the Securities and Exchange Commission on March 16, 2000.
2. Schedules Supporting the Consolidated Financial Statements:
<CAPTION>
PAGE IN
THIS REPORT
-----------
<S> <C>
Schedule numbered in accordance with Rule 5-04 of Regulation S-X:
II Valuation and Qualifying Accounts....................................... S-8
</TABLE>
All other schedules have been omitted for the reason that the
required information is presented in financial statements or notes
thereto, the amounts involved are not significant or the schedules
are not applicable.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the last
quarter of 1999.
(c) Item 601 Exhibits
Reference is made to the Index of Exhibits beginning at page S-3 of
this report.
(d) Other Financial Statements
There are no financial statements required to be filed by Regulation
S-X which are excluded from the Proxy Statement by Rule 14 a-3(b)(1).
21
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 16, 2000 ALLERGAN, INC.
By: /s/ DAVID E.I. PYOTT
----------------------------------
David E.I. Pyott
President, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Date: March 16, 2000 By: /s/ DAVID E.I. PYOTT
----------------------------------
David E.I. Pyott
President, Chief Executive Officer
Date: February 17, 2000 By: /s/ ERIC K. BRANDT
----------------------------------
Eric K. Brandt
Corporate Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: March 16, 2000 By: /s/ DWIGHT J. YODER
----------------------------------
Dwight J. Yoder
Senior Vice President
(Principal Accounting Officer)
Date: February 18, 2000 By: /s/ HERBERT W. BOYER
----------------------------------
Herbert W. Boyer, Ph.D.,
Chairman of the Board
Date: March 16, 2000 By: /s/ RONALD M. CRESSWELL
----------------------------------
Ronald M. Cresswell, Director
Date: February 28, 2000 By: /s/ HANDEL E. EVANS
----------------------------------
Handel E. Evans, Director
Date: March 16, 2000 By: /s/ MICHAEL R. GALLAGHER
----------------------------------
Michael R. Gallagher, Director
Date: March 16, 2000 By: /s/ WILLIAM R. GRANT
----------------------------------
William R. Grant, Director
S-1
<PAGE> 25
Date: March 16, 2000 By: /s/ GAVIN S. HERBERT
----------------------------------
Gavin S. Herbert, Director and
Chairman Emeritus
Date: March 16, 2000 By: /s/ LESTER J. KAPLAN
----------------------------------
Lester J. Kaplan, Ph.D., Director
Date: March 16, 2000 By: /s/ KAREN R. OSAR
----------------------------------
Karen R. Osar, Director
Date: March 16, 2000 By: /s/ LOUIS T. ROSSO
----------------------------------
Louis T. Rosso, Director
Date: March 16, 2000 By: /s/ LEONARD D. SCHAEFFER
----------------------------------
Leonard D. Schaeffer, Director
Date: March 16, 2000 By: /s/ HENRY WENDT
----------------------------------
Henry Wendt, Director
S-2
<PAGE> 26
INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
3.1 Restated Certificate of Incorporation of the Company as filed
with the State of Delaware on May 22, 1989 (incorporated by
reference to Exhibit 3.1 to Registration Statement on Form S-1
No. 33-28855, filed May 24, 1989)
3.2 Bylaws of the Company (incorporated by reference to Exhibit 3 to
the Company's Report on Form 10-Q for the Quarter ended June 30,
1995)
3.3 First Amendment to Allergan, Inc. Bylaws (incorporated by
reference to Exhibit 3.1 to the Company's Report on Form 10-Q for
the Quarter ended September 24, 1999)
4.1 Certificate of Designations of Series A Junior Participating
Preferred Stock as filed with the State of Delaware on February
1, 2000
4.2 Rights Agreement, dated January 25, 2000, between Allergan, Inc.
and First Chicago Trust Company of New York (incorporated by
reference to Exhibit 4 to the Company's Current Report on Form
8-K filed on January 28, 2000)
10.1 Form of director and executive officer Indemnity Agreement
(incorporated by reference to Exhibit 10.4 to the Company's
Report on Form 10-K for the Fiscal Year ended December 31, 1992)*
10.2 Allergan, Inc. 1989 Nonemployee Director Stock Plan, as amended
and restated (incorporated by reference to Exhibit 10.1 to the
Company's Report on Form 10-Q for the Quarter ended March 27,
1998)*
10.3 First Amendment to Allergan, Inc. 1989 Nonemployee Director Stock
Plan, as amended and restated (incorporated by reference to
Exhibit 10.9 to the Company's Current Report on Form 8-K filed on
January 28, 2000)*
10.4 Allergan, Inc. Deferred Directors' Fee Program amended and
restated as of November 15, 1999 (incorporated by reference to
Exhibit 4 to Registration Statement on Form S-8 No. 333-94155,
filed January 6, 2000)*
S-3
<PAGE> 27
INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.5 Allergan, Inc. 1989 Incentive Compensation Plan, as amended and
restated (incorporated by reference to Exhibit 10.4 to the
Company's Current Report on Form 8-K filed on January 28, 2000)*
10.6 Restated Allergan, Inc. Employee Stock Ownership Plan
(incorporated by reference to Exhibit 10.1 to the Company's
Report on Form 10-Q for the Quarter ended March 31, 1996)
10.7 First Amendment to Restated Allergan, Inc. Employee Stock
Ownership Plan (incorporated by reference to Exhibit 10.3 to the
Company's Report on Form 10-Q for the Quarter ended June 30,
1996)
10.8 Second Amendment to Restated Allergan, Inc. Employee Stock
Ownership Plan (incorporated by reference to Exhibit 10.7 to the
Company's Report on Form 10-K for the Fiscal Year ended December
31, 1997)
10.9 Third Amendment to the Restated Allergan, Inc. Employee Stock
Ownership Plan (incorporated by reference to Exhibit 10.4 to the
Company's Report on Form 10-Q for the Quarter ended June 26,
1998)
10.10 Fourth Amendment to Restated Allergan, Inc. Employee Stock
Ownership Plan (incorporated by reference to Exhibit 10.6 to the
Company's Report on Form 10-Q for the Quarter ended September 24,
1999)
10.11 Fifth Amendment to Restated Allergan, Inc. Employee Stock
Ownership Plan (incorporated by reference to Exhibit 10.3 to the
Company's Current Report on Form 8-K filed on January 28, 2000)
10.12 Restated Allergan, Inc. Savings and Investment Plan (incorporated
by reference to Exhibit 10.6 to the Company's Current Report on
Form 8-K filed January 28, 2000)
10.13 First Amendment to the Allergan, Inc. Savings and Investment Plan
(incorporated by reference to Exhibit 10.5 to the Company's
Report on Form 10-Q for the Quarter ended September 24, 1999)
10.14 Second Amendment to the Allergan, Inc. Savings and Investment
Plan (incorporated by reference to Exhibit 10.5 to the Company's
Current Report on Form 8-K filed on January 28, 2000)
10.15 Form of Allergan change in control severance agreement
(incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed on January 28, 2000)*
S-4
<PAGE> 28
INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.16 $250,000,000 Credit Agreement dated as of December 22, 1993 and
amended and restated as of May 10, 1996 among the Company, as
Borrower and Guarantor, the Eligible Subsidiaries Referred to
Therein, the Banks Listed Therein, Morgan Guaranty Trust Company
of New York, as Agent and Bank of America National Trust and
Savings Association, as Co-Agent (the "Credit Agreement")
(incorporated by reference to Exhibit 10.7 to the Company's
Report on Form 10-Q for the Quarter ended March 31, 1996)
10.17 Amendment No. 1 to the Credit Agreement (incorporated by
reference to Exhibit 10.1 to the Company's Report on Form 10-Q
for the Quarter ended June 26, 1998)
10.18 Restated Allergan, Inc. Pension Plan (incorporated by reference
to Exhibit 10.3 to the Company's Report on Form 10-Q for the
Quarter ended March 31, 1996)
10.19 First Amendment to the Allergan, Inc. Pension Plan (incorporated
by reference to Exhibit 10.14 to the Company's Report on Form
10-K for the Fiscal Year ended December 31, 1997)
10.20 Second Amendment to the Allergan, Inc. Pension Plan (incorporated
by reference to Exhibit 10.2 to the Company's Report on Form 10-Q
for the Quarter ended June 26, 1998)
10.21 Third Amendment to the Allergan, Inc. Pension Plan (incorporated
by reference to Exhibit 10.2 to the Company's Report on Form 10-Q
for the Quarter ended September 24, 1999)
10.22 Fourth Amendment to the Allergan, Inc. Pension Plan (incorporated
by reference to Exhibit 10.10 to the Company's Current Report on
Form 8-K filed on January 28, 2000)
10.23 Restated Allergan, Inc. Supplemental Retirement Income Plan
(incorporated by reference to Exhibit 10.5 to the Company's
Report on Form 10-Q for the Quarter ended March 31, 1996)*
10.24 First Amendment to Allergan, Inc. Supplemental Retirement Income
Plan (incorporated by reference to Exhibit 10.4 to the Company's
Report on Form 10-Q for the Quarter ended September 24, 1999)*
10.25 Second Amendment to Allergan, Inc. Supplemental Retirement Income
Plan (incorporated by reference to Exhibit 10.12 to the Company's
Current Report on Form 8-K filed on January 28, 2000)*
10.26 Restated Allergan, Inc. Supplemental Executive Benefit Plan
(incorporated by reference to Exhibit 10.6 to the Company's
Report on Form 10-Q for the Quarter ended March 31, 1996)*
S-5
<PAGE> 29
INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.27 First Amendment to Allergan, Inc. Supplemental Executive Benefit
Plan (incorporated by reference to Exhibit 10.3 to the Company's
Report on Form 10-Q for the Quarter ended September 24, 1999)*
10.28 Second Amendment to Allergan, Inc. Supplemental Executive Benefit
Plan (incorporated by reference to Exhibit 10.11 to the Company's
Current Report on Form 8-K filed on January 28, 2000)*
10.29 Allergan, Inc. Executive Bonus Plan (incorporated by reference to
Exhibit C to the Company's Proxy Statement dated March 23, 1999,
filed in definitive form on March 22, 1999) *
10.30 First Amendment to Allergan, Inc. Executive Bonus Plan
(incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K filed on January 28, 2000)*
10.31 Allergan, Inc. 2000 Management Bonus Plan (incorporated by
reference to Exhibit 10.8 to the Company's Current Report on Form
8-K filed on January 28, 2000)*
10.32 Distribution Agreement dated March 4, 1994 between Allergan, Inc.
and Merrill Lynch & Co. and J.P. Morgan Securities Inc.
(incorporated by reference to Exhibit 10.14 to the Company's
Report on Form 10-K for the fiscal year ended December 31, 1993)
10.33 Allergan, Inc. Executive Deferred Compensation Plan amended and
restated, effective January 1, 2000 (incorporated by reference to
Exhibit 4 to Registration Statement on Form S-8 No. 333-94157,
filed January 6, 2000)*
10.34 Allergan, Inc. Stock Price Incentive Plan (incorporated by
reference to Exhibit 10.21 to the Company's Report on Form 10-K
for the Fiscal Year ended December 31, 1997)*
10.35 Letter Agreement between Allergan, Inc. and William C. Shepherd
dated September 27, 1997 (incorporated by reference to Exhibit
10.22 to the Company's Report on Form 10-K for the Fiscal Year
ended December 31, 1997)*
10.36 Technology License Agreement dated as of March 6, 1998 among
Allergan, Inc. and certain of its affiliates and Allergan
Specialty Therapeutics, Inc. ("ASTI") (incorporated by reference
to Exhibit 10.23 to the Company's Report on Form 10-K for the
Fiscal Year ended December 31, 1997)
10.37 Research and Development Agreement dated as of March 6, 1998
between Allergan, Inc. and ASTI (incorporated by reference to
Exhibit 10.2 to the Company's Report on Form 10-Q for the Quarter
ended March 27, 1998)
S-6
<PAGE> 30
INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.38 License Option Agreement dated as of March 6, 1998 between
Allergan, Inc. and ASTI (incorporated by reference to Exhibit
10.25 to the Company's Report on Form 10-K for the Fiscal Year
ended December 31, 1997)
10.39 Distribution Agreement dated as of March 6, 1998 between
Allergan, Inc. and ASTI (incorporated by reference to Exhibit
10.26 to the Company's Report on Form 10-K for the Fiscal Year
ended December 31, 1997)
21 List of Subsidiaries of the Company
23 Report and consent of KPMG LLP to the incorporation of their
reports herein to Registration Statements Nos. 33-29527,
33-29528, 33-44770, 33-48908, 33-66874, 333-09091, 333-04859,
333-25891, 33-55061, 33-69746, 333-64559, and 333-70407,
333-94155 and 333-94157.
27 Financial Data Schedule
- ----------
* Management contract or compensatory plan, contract or arrangement required to
be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
S-7
<PAGE> 31
SCHEDULE II
ALLERGAN, INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE
BEGINNING AT END
OF YEAR ADDITIONS DEDUCTIONS OF YEAR
---------- --------- ---------- -------
<S> <C> <C> <C> <C>
1999 $6.7 $0.3(a) $1.6(b) $5.4
---- ---- ---- ----
1998 $6.8 $1.1(a) $1.2(b) $6.7
---- ---- ---- ----
1997 $7.5 $1.8(a) $2.5(b) $6.8
---- ---- ---- ----
</TABLE>
- ----------
(a) Provision charged to earnings.
(b) Accounts written off.
S-8
<PAGE> 1
EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
ALLERGAN, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
-----------------------------
Allergan, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the "Corporation"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Corporation as required by Section 151 of the General
Corporation Law at a meeting duly called and held on January 25, 2000.
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Certificate
of Incorporation of this Corporation, the Board of Directors hereby creates a
series of Preferred Stock, par value $.01 per share (the "Preferred Stock"), of
the Corporation and hereby states the designation and number of shares, and
fixes the relative rights, powers and preferences, and qualifications,
limitations and restrictions thereof as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be 1,500,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; PROVIDED, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any class or series of stock of this Corporation ranking prior and
superior to the Series A Preferred Stock with respect to dividends, the holders
of shares of Series A Preferred Stock, in preference to the holders of Common
Stock, par value $.01 per share (the "Common Stock"), of the Corporation, and of
any other stock ranking junior to the Series A Preferred Stock, shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash on
the first day of March, June, September and December in each year (each such
date being referred to herein as
<PAGE> 2
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision, combination or consolidation of
the outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section 2
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the
Series A Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro
2
<PAGE> 3
rata on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the stockholders of the Corporation. In
the event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series A Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on
any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock;
3
<PAGE> 4
(ii) declare or pay dividends, or make any other distributions, on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A Preferred Stock
and all such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (both as to
dividends and upon dissolution, liquidation or winding up) to the
Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation, dissolution or winding up of the Corporation,
voluntary or otherwise no distribution shall be made (1) to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock unless, prior
thereto, the holders of shares of Series A Preferred Stock shall have received
an amount per share (the "Series A Liquidation Preference") equal to $100 per
4
<PAGE> 5
share, plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, provided that the
holders of shares of Series A Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount to be distributed per share
to holders of shares of Common Stock, or (2) to the holders of shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except distributions made ratably
on the Series A Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision, combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that are
outstanding immediately prior to such event.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other classes and series of stock of the
Corporation, if any, that rank on a parity with the Series A Preferred Stock in
respect thereof, then the assets available for such distribution shall be
distributed ratably to the holders of the Series A Preferred Stock and the
holders of such parity shares in proportion to their respective liquidation
preferences.
(C) Neither the merger or consolidation of the Corporation into or with
another corporation nor the merger or consolidation of any other corporation
into or with the Corporation shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 6.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
5
<PAGE> 6
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable by the Company.
Section 9. Rank. The Series A Preferred Stock shall rank, with respect
to the payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up, junior to all series of any other class of the
Corporation's Preferred Stock, except to the extent that any such other series
specifically provides that it shall rank on a parity with or junior to the
Series A Preferred Stock.
Section 10. Amendment. At any time any shares of Series A Preferred
Stock are outstanding, the Certificate of Incorporation of the Corporation shall
not be amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
separately as a single class.
Section 11. Fractional Shares. Series A Preferred Stock may be issued
in fractions of a share that shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its Corporate Vice President - Administration,
General Counsel and Secretary, this 28th day of January, 2000.
/s/ Francis R. Tunney, Jr.
----------------------------------------------
Francis R. Tunney, Jr.,
Corporate Vice President - Administration,
General Counsel and Secretary
6
<PAGE> 1
EXHIBIT 21
ENTITIES OF ALLERGAN, INC.
PLACE OF
INCORPORATION
NAME OF SUBSIDIARY OR ORGANIZATION
- ------------------ ---------------
Allergan-Loa S.A. Argentina
Allergan S.A.I.C. y F. Argentina
Allergan Australia Pty Limited Australia
Amawind Pty Limited Australia
Pacific Eyecare Pty Limited Australia
Allergan N.V. Belgium
Allergan Produtos Farmaceuticos Ltda. Brazil
Allergan Inc. Canada
CrownPharma Canada Inc. Canada
Allergan Laboratorios Limitada Chile
Allergan (Hangzhou) Pharmaceutical Co., Ltd. China
Allergan de Colombia S.A. Colombia
Allergan A/S Denmark
Allergan France S.A. France
Pharm-Allergan GmbH Germany
Allergan Asia Limited Hong Kong
Allergan Botox Limited Ireland
Allergan Sales, Limited Ireland
Allergan Services International, Limited Ireland
Allergan Trading International, Limited Ireland
CrownPharma Limited Ireland
Allergan S.p.A. Italy
Allergan K.K. Japan
Allergan Korea Ltd. Korea
Allergan Afrasia Limited Malta
Allergan, S.A. de C.V. Mexico
Pharmac, S.A.M. Monaco
Allergan B.V. Netherlands
Allergan New Zealand Limited New Zealand
Allergan AS Norway
Allergan Pakistan (Private) Limited Pakistan
Allergan Pharmaceuticals (Ireland) Ltd., Inc. Panama
Allergan Pte. Ltd. Singapore
Allergan, S.A. Spain
Allergan Norden AB Sweden
Allergan AG Switzerland
Allergan Optik Mamulleri Sanayi Ve Ticaret Limited Turkey
Allergan Farnborough Limited United Kingdom
Allergan Holdings Limited United Kingdom
Allergan Limited United Kingdom
Allergan Optical Irvine, Inc. United States/CA
Allergan Sales, Inc.(formerly Allergan Medical Optics) United States/CA
AMO Puerto Rico, Inc. (formerly Allergan America) United States/CA
Herbert Laboratories United States/CA
Allergan America, Inc. (formerly Allergan Caribe, Inc.) United States/DE
Allergan Holdings, Inc. United States/DE
AMO Holdings, Inc. United States/DE
Pacific Pharma, Inc. (formerly Pacific I Limited, Inc.) United States/DE
Allergan de Venezuela, S.A. Venezuela
Allergan India Limited (Joint Venture) India
<PAGE> 1
EXHIBIT 23
ACCOUNTANTS' CONSENT AND REPORT
ON CONSOLIDATED SCHEDULE
To the Board of Directors and Stockholders
Allergan, Inc.:
Under date of January 24, 2000, we reported on the consolidated balance
sheets of Allergan, Inc. and subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1999,
included in Exhibit A to the Allergan, Inc. Notice of Annual Meeting and Proxy
Statement. These consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for the year 1999.
In connection with our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedule as listed in the index of exhibits to the annual report on Form 10-K
for the fiscal year 1999. The financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on the
financial statement schedule based on our audits. In our opinion, such schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly, in all material respects, the information set forth
herein.
We consent to the incorporation by reference of our report dated
January 24, 2000, in the Company's Registration Statements on Form S-8 (Nos.
33-29527, 33-29528, 33-44770, 33-48908, 33-66874, 333-09091, 333-04859,
333-25891, 333-64559, 333-70407, 333-94155 and 333-94157) and Registration
Statements on Form S-3 (Nos. 33-55061 and 33-69746).
/s/ KPMG LLP
Costa Mesa, California
March 15, 2000
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
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0
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