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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
COMMISSION FILE NO. 1-10269
ALLERGAN, INC.
(Exact name of Registrant as Specified in its Charter)
DELAWARE 95-1622442
(State of Incorporation) (I.R.S. Employer
Identification No.)
2525 DUPONT DRIVE
IRVINE, CALIFORNIA 92612
(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
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
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The aggregate market value of the registrant's voting stock held by
non-affiliates was approximately $10,977,000,000 on January 26, 2001, based upon
the closing price on the New York Stock Exchange on such date.
Common Stock outstanding as of January 26, 2001 - 134,254,772 shares
(including 2,486,079 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 25, 2001, which proxy statement was filed with the Securities
and Exchange Commission on March 23, 2001.
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TABLE OF CONTENTS
PAGE
PART I
Item 1. Business....................................................1
Item 2. Properties.................................................13
Item 3. Legal Proceedings..........................................13
Item 4. Submission of Matters to a Vote of Security Holders........14
Item I-A. Executive Officers of Allergan, Inc........................14
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters........................................17
Item 6. Selected Financial Data....................................17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................17
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.17
Item 8. Financial Statements and Supplementary Data................17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................17
PART III
Item 10. Directors and Executive Officers of Allergan, Inc..........18
Item 11. Executive Compensation ....................................18
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................18
Item 13. Certain Relationships and Related Transactions.............18
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K................................................19
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 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.
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.
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:
YEAR ENDED DECEMBER 31
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2000 1999 1998
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(IN MILLIONS)
Specialty Pharmaceuticals:
Eye Care Pharmaceuticals $ 675.3 $ 571.2 $ 505.3
Skin Care 68.7 76.6 80.6
Botox(R)/Neuromuscular 239.5 175.8 125.3
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Total 983.5 823.6 711.2
Medical Devices and OTC Product Lines:
Ophthalmic Surgical 250.4 222.9 193.6
Contact Lens Care 328.7 359.7 356.9
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Total 579.1 582.6 550.5
Total Product Net Sales $1,562.6 $1,406.2 $1,261.7
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Domestic 51.7% 48.1% 46.2%
International 48.3% 51.9% 53.8%
See Note 14 of Notes to Consolidated Financial Statements on pages A-36 to A-37
of the Company's Proxy Statement filed on March 23, 2001 for further information
concerning foreign and domestic operations.
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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.
GLAUCOMA
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 leading to optic nerve damage. 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 15%, 12% and 9% of total
Company sales in 2000, 1999 and 1998, 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. Allergan sells Alphagan(R)
ophthalmic solution in 69 countries worldwide.
Allergan filed two new drug applications ("NDAs") with the FDA in 2000
for glaucoma products. In the third quarter of 2000, Allergan filed an NDA in
the U.S. and in the fourth quarter of 2000 filed a Marketing Authorization
Application ("MAA") in Europe for Lumigan(TM), a topical treatment for elevated
intraocular pressure in patients with glaucoma or ocular hypertension. The FDA
approved Lumigan(TM) in March 2001 for the reduction of elevated intraocular
pressure ("IOP") in patients with open-angle glaucoma or ocular hypertension who
are intolerant of other IOP lowering medications or insufficiently responsive
(failed to achieve target IOP determined after multiple measurements over time)
to another IOP-lowering medication. The second NDA was for Alphagan(R) P, a
reformulation containing brimonodine, the active ingredient in Alphagan(R)
ophthalmic solution, preserved with Purite(R). The FDA also approved Alphagan(R)
P in March 2001 for the lowering of IOP in patients with open-angle glaucoma and
ocular hypertension. Alphagan(R) P ophthalmic solution lowers IOP by reducing
aqueous humor production and increasing uveoscleral outflow, while data suggests
that Lumigan(TM) ophthalmic solution lowers IOP by increasing the outflow of
aqueous humor through trabecular meshwork and uveoscleral routes. The Company
intends to launch both products in 2001.
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.
INFLAMMATION
Allergan's leading ophthalmic anti-inflammatory product is Acular(R)(1)
ophthalmic solution. It 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. Acular(R) PF
was the first unit-dose, preservative-free topical nonsteroidal
anti-
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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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inflammatory drug (NSAID) in the United States, and is indicated for the
reduction of ocular pain and photophobia following incisional refractive
surgery. Pred Forte(R) and FML(R) Liquifilm(R) ophthalmic suspensions are
Allergan's products in the ocular corticosteroid inflammation market.
INFECTION
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. McNeil
Consumer Healthcare, a subsidiary of Johnson & Johnson, is Allergan's marketing
partner for Ocuflox(R) ophthalmic solution in the U.S. pediatric and selected
general practitioner markets.
ALLERGY
Allergan launched Alocril(R) ophthalmic solution in early 2000.
Alocril(R) is indicated for the treatment of itch associated with allergic
conjunctivitis. The allergy market, is by its nature, a seasonal market, peaking
during the Spring months.
OCULAR SURFACE DISEASE
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), Refresh Tears(R), and Refresh P.M.(R) Allergan
also markets Celluvisc(R) in the United States for severe dry eye. Other
Allergan brands marketed around the world include the, Liquifilm Tears(R) and
Lacri-Lube(R) S.O.P.(R) products as well as Lerin(R), a decongestant.
Allergan has filed an NDA and an MAA for Restasis(TM), a prescription
ophthalmic emulsion product for the treatment of chronic dry eye disease. In
2001, Allergan plans to initiate a six-month confirmatory study to support these
applications.
Skin Care Product Line
Allergan's skin care business is currently comprised of three main
product lines: tazarotene products in cream and gel formulations marketed under
Tazorac(R) in the United States and Canada and as Zorac(R) elsewhere; Azelex(R),
an acne product; and the M.D. Forte(R) line of alpha hydroxy acid products.
Allergan promotes its skin care products primarily in the United States.
In June 1997, the Company received approval from the FDA to market
Tazorac(R) gel for the treatment of plaque psoriasis and acne. The FDA approved
the cream formulation of Tazorac(R) in October 2000 for the treatment of
psoriasis. Allergan filed a Supplemental NDA in December 2000 for the acne
indication of Tazorac(R) cream. Allergan promotes Tazorac(R) in the United
States, along with its co-promotion partner, 3M Pharmaceuticals. Outside of the
U.S., Allergan has engaged Pierre Fabre Dermatologie and Bioglan Pharma PLC as
its promotion partners for Zorac(R) in Europe, the Middle East and Africa.
Azelex(R)cream is approved for the topical treatment of mild to moderate
inflammatory acne vulgaris. Allergan launched Azelex(R)cream in the U.S. in
December 1995.
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The Company also develops 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 alpha hydroxy acid products. M.D. Forte(R) products are
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 15%, 13% and 10% of total Company sales
in 2000, 1999 and 1998, 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); strabismus
(misalignment of the eyes) in people 12 years of age and over; and cervical
dystonia in adults (along with the associated pain). Outside of the U.S.,
Botox(R) Purified Neurotoxin Complex is also approved for hemifacial spasm,
pediatric cerebral palsy and upper limb spasticity associated with debilities
occurring after a stroke.
The Company is pursuing new approved indications for Botox(R) Purified
Neurotoxin Complex, including brow furrow, pediatric cerebral palsy, headache,
hyperhidrosis (excessive sweating), back spasm, spasticity, anal fissure and
temporal mandibular joint disease.
The Company manufactures 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 line of products used in the
performance of cataract surgery, including silicone monofocal and multi-focal
IOLs, an acrylic IOL and PMMA IOLs.
Sales of all models of the Company's IOLs represented 11% of total
Company sales in each of 2000 and 1999 and 10% of total Company sales in 1998.
Foldable IOLs marketed by Allergan for small incision cataract surgery include
the Array(R) multifocal silicone IOL; its line of monofocal silicone IOLs
(PhacoflexII(R)SI-30NB(R), SI-40NB(R), and PhacoflexII(R)SI-55NB(R)); and the
Sensar(R) acrylic IOL, which was introduced in Europe in 1998 and was approved
for marketing in the United States in February 2000. Along with foldable IOLs,
the Company also markets a series of insertion systems for each of its foldable
lens models,
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referred to as The UnFolder(R) implantation systems. The systems assist the
surgeon in achieving controlled release of the IOL in incisions as small as 2.8
mm.
Phacoemulsification is 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. Allergan currently markets the Prestige(R),
AMO(R)Diplomax(R) and Sovereign(TM) phacoemulsification systems. 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. and European
customers.
In 2000, Allergan entered the refractive surgery market with the
Amadeus(R) microkeratome. Surgeons use microkeratomes in LASIK procedures to cut
a flap of corneal tissue that is folded back during the laser procedure and then
folded back to its original position. Allergan is the exclusive worldwide
distributor of the Amadeus(R) microkeratome and SurePass(R) microkeratome
blades, which are manufactured by SIS AG, Surgical Instrument Systems in
Switzerland. Allergan also has a U.S. co-marketing agreement with VISX
Incorporated, which sells excimer laser systems for vision correction.
Contact Lens Care Product Line
The Company has been active 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; enzymatic cleaners to remove protein deposits from
contact lenses; and lens rewetting drops to provide added wearing comfort.
In the area of disinfecting products for soft contact lenses, 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.
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.
In 2000 Allergan launched a new eye drop for contact lens wearers called
Refresh Contacts(R) to help provide comfort and protection from dryness and
irritation.
Also in 2000, Allergan entered into a strategic global alliance with the
Vistakon Division of Johnson & Johnson Vision Care, Inc., makers of the
Acuvue(R) brand contact lenses. This alliance includes research, educational,
marketing, and co-detailing initiatives.
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Sales of the Company's hydrogen peroxide disinfection systems
represented 5%, 7% and 10% of total Company sales in 2000, 1999 and 1998,
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. The Company's primary strategy is to focus its sales and marketing
resources on aggressive growth of Complete(R) brand Multi-Purpose solution which
grew faster than its segment on a worldwide basis in 2000. 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.
EMPLOYEE RELATIONS
At December 31, 2000, the Company employed 6,181 persons throughout the
world, including 2,308 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
Allergan's international sales have represented approximately 48.3%,
51.9% and 53.8% of total sales for the years ended December 31, 2000, 1999 and
1998, respectively. Allergan established its first foreign subsidiary in 1964
and the Company's products are sold in approximately 120 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 a global marketing team, as well as regional sales
and marketing organizations. Allergan's sales efforts and promotional activities
are primarily aimed at eye care professionals, as well as neurologists and
dermatologists, who use, prescribe and recommend its products. 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 has also developed training modules and seminars to update physicians
regarding evolving technology. Allergan has also utilized direct-to-consumer
advertising of its contact lens care products, Refresh(R) products and Array(R)
multifocal silicone IOL.
The Company's products are sold to drug wholesalers, independent and
chain drug stores, pharmacies, commercial optical chains, opticians, mass
merchandisers, food stores, hospitals, ambulatory surgery centers and medical
practitioners, including neurologists, dermatologists and plastic surgeons. At
December 31, 2000, the Company employed approximately 1,600 sales
representatives throughout the world. The Company also utilizes distributors for
its products in the smaller international markets.
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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, 2000, there were, in the aggregate, approximately 1,000
people involved in the Company's research and development efforts. The Company's
research and development expenditures for 2000, 1999 and 1998 were $195.6
million, $168.4 million and $125.4 million, respectively, excluding amounts
spent by the Company on behalf of Allergan Specialty Therapeutics, Inc.
Research and development efforts for the ophthalmic pharmaceuticals
business focus primarily on new therapeutic products for glaucoma, inflammation,
retinal diseases, dry eye, allergy and new anti-infective pharmaceuticals for
eye care. Below is a summary of major research and development projects in the
ophthalmic pharmaceutical segment:
- In its glaucoma research, the Company is pursuing two approaches. The first
is to improve upon agents for lowering intraocular pressure, and the second
is to develop drugs that directly protect the optic nerve.
- In the retinal disease area, Allergan is continuing programs to treat
age-related macular degeneration.
- Allergan continues to pursue ocular allergy, anti-inflammatory and
anti-infective products.
Research and development activities for the surgical business
concentrate on improved cataract surgical systems, implantation instruments and
methods, and new IOL materials and designs.
For the skin care business, Allergan's research and development team is
working on expanded indications and formulations for tazarotene. The team is
also working on an anti-acne approach based on enzyme inhibitors.
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 pediatric cerebral palsy, spasticity, headache,
lower back pain, anal fissure, brow furrow, hyperhidrosis and temporal
mandibular joint disease. Allergan is also pursuing new toxin based products.
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.
Allergan is also working to leverage its technologies in therapeutic
areas outside of its current specialites, such as the use of its
receptor-selective retinoid technology in therapeutic areas such as cancer,
diabetes, dyslipidermia and bone disease and alpha agonists in the treatment of
neuropathic pain.
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
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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 most 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 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 are intrinsic uncertainties associated with
the research and development efforts and the regulatory process. 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,
Novartis Ophthalmics, Merck & Co., Inc. and Pharmacia Ophthalmics. 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 Dermik, a division of Aventis, Galderma, a joint venture
between Nestle and L'Oreal, 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 two competitors:
Beaufour Ipsen, which sells in Europe, Latin America, Asia and New Zealand, and
Athena Neurosciences, Inc., a subsidiary of Elan Corporation, PLC, in the United
States and Europe. 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.
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GOVERNMENT REGULATION
Drugs, biologics and medical devices, including 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 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 a rigorous regulatory environment. 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.
Internationally, the regulation of drugs and medical devices is also
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. The European Union ("EU") procedures for the
authorization of medicinal products are currently being reviewed by the European
Commission and proposals for improving the efficiency of operation of both the
mutual recognition and centralized procedure are expected later this year.
Additionally, new rules have been introduced or are under discussion in several
areas such as the harmonization of clinical research laws and the law relating
to orphan drugs and orphan indications.
The EU regulatory regime for medical devices 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 medical
device laws require manufacturers to declare that their products conform to the
essential regulatory requirements after which the products may be placed on the
market bearing CE marking. The manufacturers' quality systems for products in
all but the lowest risk classification are also subject to certification and
audit by an independent notified body.
In Japan, where the Company currently sells surgical products, consumer
eye care products and Botox(R), the regulatory process is equally complex.
Premarketing approval and clinical studies are required, as is governmental
pricing approval for medical devices and pharmaceuticals. The regulatory regime
for pharmaceuticals in Japan has historically been so lengthy and costly that it
has been cost prohibitive for Allergan, primarily because Japan required the
repetition of all relevant clinical studies in Japan. In the future the process
in Japan may become more financially attractive as Japan is in the process of
implementing changes to comply with the International Conference on
Harmonization, an agreement among Japan, the U.S. and the E.U. to facilitate the
registration of drugs utilizing data collected outside of the country. The
timeline for completion of these changes and the rules during this period of
transition are not certain and in this period registration of pharmaceutical
products will remain unpredictable; however, the opportunity to realize value
from Allergan's newly developed products in Japan may increase as the
environment in Japan moves closer to that of the E.U. and U.S.
9
12
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 recommended $150 allowance to cover the cost of the IOL. The
reimbursement rate for Array(R) multifocal IOLs implanted in ASCs until May 2005
is $200 after HCFA awarded "new technology IOL" status to the Array(R)
multifocal IOL in 2000. 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 for IOLs
that are not "new technology IOLs." For the Array(R) multifocal IOL, Medicare
reimburses the hospital based on the actual acquisition cost of the IOL by the
hospital.
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.
Medicare reimbursement rates are subject to change at any time. The Company also
cannot predict with precision 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) and Lumigan(TM) ophthalmic solutions, 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.
10
13
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 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
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 that 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 that 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.
- 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.
- Until December 2000, the Company was the only manufacturer of an
FDA-approved neurotoxin. Another company has now received FDA approval of a
neurotoxin. The Company's sales of Botox(R) Purified Neurotoxin Complex
could be materially and negatively impacted by this new competition.
- 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 and a resulting decrease in sales of the
product.
- 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 continue to
gain 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. The Company's primary strategy is to focus its sales
and marketing resources on aggressive growth of Complete(R)brand
Multi-
11
14
Purpose solution which grew faster than its segment on a worldwide basis in
2000. Also, the growing use and acceptance of daily contact lenses and
laser-correction procedures, 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.
- 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.
- 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.
- A continuing 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.
- 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.
- 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.
- Patent protection is generally important in the pharmaceutical industry.
Therefore, Allergan's future financial success may depend in part on
obtaining patent protection for technologies incorporated into products. No
assurance can be given that patents will be issued covering any products, or
that any existing patents or patents issued in the future will be of
commercial benefit. In addition, it is impossible to anticipate the breadth
or degree of protection that any such patents will afford, and there can be
no assurance that any such patents will not be successfully challenged in
the future. If the Company is unsuccessful in obtaining or preserving patent
protection, or if any products rely on unpatented proprietary technology,
there can be no assurance that others will not commercialize products
substantially identical to such products. Furthermore, although Allergan has
a corporate policy not to infringe the valid and enforceable patents of
others, Allergan cannot provide assurances that its products will not
infringe patents held by third parties. In such event, licenses from such
third parties may not be available or may not be available on commercially
attractive terms. Please see Item 3 on page 13 for information on current
patent litigation.
- 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.
12
15
- Future performance of the Company will be affected by the introduction of
new products such as Lumigan(TM) and FDA approval of new indications for
current products such as Botox(R) Purified Neurotoxin Complex. The Company
has allocated significant resources to the development and introduction of
new products and indications. The successful development, regulatory
approval and market acceptance of the products and indications cannot be
assured.
- 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 of this report on Form 10-K, which are incorporated herein by
reference.
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.
On March 1, 2001, after concluding that Pharmacia Corporation planned to
file a patent infringement lawsuit against Allergan regarding the
investigational glaucoma drug, Lumigan(TM), Allergan filed a declaratory relief
lawsuit against Pharmacia (and related entities) in United States District Court
for the District of Delaware. In the lawsuit, Allergan asked the court to issue
a ruling that Lumigan(TM) does not infringe certain patents owned or controlled
by Pharmacia and also that such patents are not valid. On March 21, 2001,
Pharmacia filed an answer to the complaint, denying Allergan's allegations.
Pharmacia and Columbia University also filed a counterclaim against Allergan,
alleging that Allergan infringes the same two patents that Allergan identified
in its complaint. See "Certain Factors and Trends Affecting Allergan and its
Businesses" for further information about the risks and uncertainties associated
with patents.
Although the ultimate outcome of any pending litigation and claims
cannot be precisely ascertained at this time, Allergan believes that the
liability, if any, resulting from the aggregate amount of uninsured damages for
outstanding lawsuits, investigations and asserted 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.
13
16
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.
ITEM I-A. EXECUTIVE OFFICERS OF ALLERGAN, INC.
The executive officers of the Company and their ages as of March 1, 2001
are as follows:
David E.I. Pyott 47 President and Chief Executive Officer
F. Michael Ball 45 Corporate Vice President and President,
North America Region and Global Eye Rx
Business
Eric K. Brandt 38 Corporate Vice President, Chief
Financial Officer and President, Global
Consumer Eye Care Business (Principal
Financial Officer)
David A. Fellows 44 Corporate Vice President and President,
Asia Pacific Region
James M. Hindman, CPA 40 Senior Vice President and Controller
(Principal Accounting Officer)
Lester J. Kaplan, Ph.D. 50 Corporate Vice President and President,
Research and Development and Global
BOTOX(R)
George M. Lasezkay, Pharm.D., J.D. 49 Corporate Vice President, Corporate
Development
Nelson R. A. Marques 50 Corporate Vice President and President,
Latin America Region
James V. Mazzo 43 Corporate Vice President and President,
Europe/Africa/Middle East Region and
Global Surgical Business
Jacqueline Schiavo 52 Corporate Vice President,
Worldwide Operations
Francis R. Tunney, Jr. 53 Corporate Vice President -
Administration and Secretary
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,
14
17
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, 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 and in January 2001 he also assumed the duties of President,
Global Consumer Eye Care Business. 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 Region 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 January 2001 he also
assumed the duties of President, Global Surgical Business. From May 1998 to
January 2001, Mr. Mazzo was also the 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
15
18
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.
Mr. Tunney has been Corporate Vice President - Administration, and
Secretary since January 2001. Prior thereto he served as Corporate Vice
President-Administration, General Counsel and Secretary of the Company since
1998. Since 1998 he has also served as the Company's Chief Ethics Officer. 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.
16
19
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-49 of the Proxy Statement is incorporated herein by reference.
On November 1, 2000, the Company issued and sold $657,451,000 aggregate
principal amount at maturity of Liquid Yield Option(TM) Notes due November 1,
2020 ("LYONs") at an initial offering price of $608.41 per $1,000 face amount.
The LYONs were sold by Merrill Lynch & Co. to qualified institutional buyers in
transactions exempt from the registration requirements of the Securities Act of
1933, as amended, pursuant to Rule 144A promulgated thereunder. The discount to
Merrill Lynch was $15.21 per $1,000 aggregate principal amount at maturity of
the LYONs. Holders may convert their LYONs at any time on or before the maturity
date, unless the LYONs have been previously redeemed or purchased, into 5.7615
shares of Allergan Common Stock per LYON.
Allergan subsequently registered the LYONs pursuant to Registration
Statement 333-50524, effective December 8, 2000.
ITEM 6. SELECTED FINANCIAL DATA
The table entitled "Selected Financial Data" on page A-48 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,
2000" on pages A-2 to A-12 of the Proxy Statement is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The section entitled "Quantitative and Qualitative Market Risk Factors"
on pages A-13 to A-17 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-44 of the Proxy Statement, together with the sections entitled
"Independent Auditors' Report" and "Quarterly Results (Unaudited)" of the Proxy
Statement included on pages A-46 and A-47, respectively, are incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
17
20
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 14-16 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 15-23
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 page 7 and page 24, respectively, of
the Proxy Statement are incorporated herein by reference.
18
21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Index to Financial Statements*
PAGE(S) IN
PROXY STATEMENT
---------------
1. Financial Statements included in Part II of this report:
Independent Auditors' Report .................................. A-46
Consolidated Balance Sheets at December 31, 2000 and
December 31, 1999 ............................................. A-18
Consolidated Statements of Operations for Each of the Years
in the Three Year Period Ended December 31, 2000 .............. A-19
Consolidated Statements of Stockholders' Equity for
Each of the Years in the Three Year Period
Ended December 31, 2000 ....................................... A-20
Consolidated Statements of Cash Flows for Each of the Years
in the Three Year Period Ended December 31, 2000 .............. A-21
Notes to Consolidated Financial Statements ....................A-22 to A-44
* Incorporated by reference from the indicated pages of the Company's Proxy
Statement filed with the Securities and Exchange Commission on March 23,
2001.
2. Schedules Supporting the Consolidated Financial Statements:
PAGE IN
THIS REPORT
-----------
Schedule numbered in accordance with Rule 5-04 of
Regulation S-X:
II Valuation and Qualifying Accounts.......................... S-8
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
On November 1, 2000, the Company filed a Current Report on Form 8-K
with the Securities and Exchange Commission. The filing related to
Allergan's issuance of $657,451,000 in aggregate principal amount at
maturity of Liquid Yield Option(TM) Notes due November 1, 2020 (Zero
Coupon -- Subordinated) at an initial offering price of $608.41 per
$1,000 face amount of LYONs.
(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).
19
22
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 23, 2001 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 23, 2001 By /S/ DAVID E.I. PYOTT
--------------------------------------
David E.I. Pyott
President, Chief Executive Officer
Date: February 26, 2001 By /S/ ERIC K. BRANDT
--------------------------------------
Eric K. Brandt
Corporate Vice President,
Chief Financial Officer and President,
Global Consumer Eye Care Business
(Principal Financial Officer)
Date: March 23, 2001 By /S/ JAMES M. HINDMAN
--------------------------------------
James M. Hindman
Senior Vice President and Controller
(Principal Accounting Officer)
Date: March 1, 2001 By /S/ HERBERT W. BOYER
--------------------------------------
Herbert W. Boyer, Ph.D.,
Chairman of the Board
Date: February 23, 2001 By /S/ RONALD M. CRESSWELL
--------------------------------------
Ronald M. Cresswell, Director
Date: March 5, 2001 By /S/ HANDEL E. EVANS
--------------------------------------
Handel E. Evans, Director
Date: March 23, 2001 By /S/ MICHAEL R. GALLAGHER
--------------------------------------
Michael R. Gallagher, Director
Date: March 23, 2001 By /S/ WILLIAM R. GRANT
--------------------------------------
William R. Grant, Director
S-1
23
Date: March 23, 2001 By /S/ GAVIN S. HERBERT
--------------------------------------
Gavin S. Herbert, Director and
Chairman Emeritus
Date: March 6, 2001 By /S/ LESTER J. KAPLAN
--------------------------------------
Lester J. Kaplan, Ph.D., Director
Date: March 23, 2001 By /S/ KAREN R. OSAR
--------------------------------------
Karen R. Osar, Director
Date: March 23, 2001 By /S/ LOUIS T. ROSSO
--------------------------------------
Louis T. Rosso, Director
Date: March 23, 2001 By /S/ LEONARD D. SCHAEFFER
--------------------------------------
Leonard D. Schaeffer, Director
Date: March 23, 2001 By /S/ ANTHONY H. WILD
--------------------------------------
Anthony H. Wild, Director
S-2
24
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 Certificate of Amendment of Certificate of Incorporation of
Allergan, Inc. (incorporated by reference to the Company's Report
on Form 10-Q for the Quarter ended June 30, 2000)
3.3 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)
3.4 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 (incorporated by reference to Exhibit 4.1 to the Company's
Report on Form 10-K for the Fiscal Year ended December 31, 1999)
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)
4.3 Indenture between the Company and BankAmerica National Trust
Company (incorporated by reference to Exhibit 4 filed with the
Company's Registration Statement 33-69746)
4.4 Indenture, dated as of November 1, 2000, between the Company and
U.S. Trust National Association (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K, filed on
November 1, 2000)
4.5 Registration Rights Agreement, dated November 1, 2000, between the
Company and Merrill Lynch & Co., Merrill Lynch, Pierce Fenner &
Smith Incorporated (incorporated by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K, filed on November 1, 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)
S-3
25
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.2 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)*
10.3 Allergan, Inc. 1989 Nonemployee Director Stock Plan, as amended and
restated (incorporated by reference to Exhibit B to the Company's
Proxy Statement filed on March 16, 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)*
10.5 Allergan, Inc. 1989 Incentive Compensation Plan, as amended and
restated
10.6 Allergan, Inc. Employee Stock Ownership Plan (restated 2000)
(incorporated by reference to Exhibit 10.1 to the Company's Report
on Form 10-Q for the Quarter ended June 30, 2000)
10.7 First Amendment to Allergan, Inc. Employee Stock Ownership Plan
(restated 2000)
10.8 Allergan, Inc. Savings and Investment Plan (restated 2000)
(incorporated by reference to Exhibit 10.3 to the Company's Report
on Form 10-Q for the Quarter ended June 30, 2000)
10.9 First Amendment to Allergan, Inc. Savings and Investment Plan
(restated 2000)
10.10 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)
10.11 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)
10.12 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)
10.13 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)
10.14 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)
S-4
26
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.15 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)*
10.16 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)*
10.17 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)*
10.18 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)*
10.19 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)*
10.20 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)*
10.21 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) *
10.22 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)*
10.23 Allergan, Inc. 2001 Management Bonus Plan*
10.24 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)*
10.25 First Amendment to Allergan, Inc. Executive Deferred Compensation
Plan (restated 2000) (incorporated by reference to Exhibit 10.5 to
the Company's Report on 10-Q for the Quarter ended June 30, 2000) *
10.26 Allergan, Inc. Premium Priced Stock Option Plan (incorporated by
reference to Exhibit B to the Company's Proxy Statement filed on
March 23, 2001)*
S-5
27
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.27 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)
10.28 $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)
10.29 Amendment No. 1 to the Credit Agreement, dated March 5, 1998
(incorporated by reference to Exhibit 10.1 to the Company's Report
on Form 10-Q for the Quarter ended June 26, 1998)
10.30 Amended and Restated Credit Agreement, dated March 24, 1998
10.31 Amendment No. 1 to the Amended and Restated Credit Agreement, dated
December 8, 2000
10.32 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)*
10.33 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)
10.34 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)
10.35 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)
10.36 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)
S-6
28
EXHIBIT
NUMBER DESCRIPTION
------- -----------
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, 333-70407, 333-94155, 333-94157,
333-43580, 333-43584, and 333-50524.
* 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
29
SCHEDULE II
ALLERGAN, INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN MILLIONS)
BALANCE AT BALANCE
BEGINNING AT END
OF YEAR ADDITIONS DEDUCTIONS OF YEAR
------- --------- ---------- -------
2000 $5.4 $0.1(a) $1.5(b) $4.0
---- ------- ------- ----
1999 $6.7 $0.3(a) $1.6(b) $5.4
---- ------- ------- ----
1998 $6.8 $1.1(a) $1.2(b) $6.7
---- ------- ------- ----
---------------
(a) Provision charged to earnings.
(b) Accounts written off.
S-8
30
INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.5 Allergan, Inc. 1989 Incentive Compensation Plan, as amended and
restated
10.7 First Amendment to Allergan, Inc. Employee Stock Ownership Plan
(restated 2000)
10.9 First Amendment to Allergan, Inc. Savings and Investment Plan (restated
2000)
10.23 Allergan, Inc. 2001 Management Bonus Plan*
10.30 Amended and Restated Credit Agreement, dated March 24, 1998
10.31 Amendment No. 1 to the Amended and Restated Credit Agreement, dated
December 8, 2000
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, 333-70407, 333-94155, 333-94157, 333-43580,
333-43584, and 333-50524.
* Management contract or compensatory plan, contract or arrangement required to
be filed as an exhibit pursuant to Item 14(c) of Form 10-K.