Allergan Loses $125 Million in Third Quarter
Allergan Inc., a maker of eye and skin care products and pharmaceuticals, said Tuesday that it lost $125.2 million for the third quarter, attributing the loss primarily to a decision to reduce its involvement in the competitive contact lens manufacturing business.
The company reported a one-time, pretax charge against earnings of $164.5 million for the quarter ended Sept. 30. Company directors voted Tuesday to reduce future investment in the contact lens manufacturing business.
Allergan will continue to market its contact lens solutions and other eye-care products.
Allergan also said that William C. Shepherd, the company’s president, was named to the additional title of chief executive. He replaces Gavin Herbert, who founded the company and has served as its CEO since 1961. Herbert will retain his title as chairman.
Shel Holtz, a company spokesman, said the management change will allow Herbert to devote more time to identifying business opportunities for Allergan and working with the investment community.
Jim McCamant, editor of the Medical Technology Stock Letter in Berkeley, said the management change is probably a response to difficult times. “When you face a reality like this, you have to change your management,” he said.
McCamant said Allergan has been struggling for more than two years because of competitive pressures in its contact lens and intraocular lens businesses. Allergan will continue to make the latter, which are used in surgery.
McCamant predicted more problems ahead for Allergan when patents expire later this year for two of its most important drugs, both used to treat glaucoma.
Holtz, however, said the expiration of the patents will have “no immediate impact.”
Steven Gerber, an analyst at Oppenheimer & Co. in Los Angeles, said the board’s decision to reduce involvement in the contact lens manufacturing business is a positive move. “This is going to increase profitability and cash flow,” he said.
The large third-quarter loss contrasts with a $32.9-million profit for the same period in 1990. Revenue for the latest quarter rose 2.6% to $228 million.
For the first nine months, Allergan reported a loss of $74.1 million, contrasted with earnings of $79.9 million for the 1990 period. Revenue rose 4.2% to $665.6 million.
Allergan, which was owned by Smith-Kline Beacham until 1989, entered the contact lens market by acquiring Hydron International in New York in 1987. Holtz said the market has always been highly competitive.
Another sign that Allergan is refocusing was the sale earlier this month of its diagnostic-instrument subsidiary, Allergan Humphrey, for an undisclosed sum. Analysts estimated the sale at $50 million to $70 million. Allergan said sales at the subsidiary had been declining since 1988.
