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Allergan Inc. (AGN) Layoffs: Employees Tell Their Side Of The Story

7/28/2014 1:08:53 AM

Allergan Layoffs:  Employees Tell Their Side Of The Story
Allergan Layoffs: Employees Tell Their Side Of The Story

July 28, 2014
By Linda R. Bernstein, Pharm.D., Exclusive Story

"Allergan employees around the world are literally going to be walking into work each day for the next six weeks waiting to be fired," reported an Allergan employee.

There are two sides to every story, and when it comes to pharmaceutical company layoffs, this is no exception. While we may understand the financial motivations behind management decisions that lead to job loss...whether it be to improve earnings per share, make a company more appealing or less appealing for a potential buyout or takeover, or to simply tighten the operating belt, the human side of layoffs is a hard pill to swallow. Allergan is a case in point.

Our sources tell us that on January 6, 2014, Allergan, Inc. (AGN) privately announced that there would be a workforce reduction in three waves.

The first job cuts were in March, the second cuts were around June and July, and now a third round of cuts will be enforced by November 28th of this year, if not sooner.

"Back in January, I had a very hard time believing that my position was safe," an Allergan employee laments. "Eventually, we would all be subject to a later reduction." The reduced workforce caused existing employees to work nights and weekends to cover for old positions.

Another source commented, "Even though Allergan announced 1,500 layoffs, there are actually more job cuts coming. There are more people who are going to be potentially impacted."

An internal company business update indicated that Allergan anticipates the restructure will not be completed until January 2015. (Note: They have approximately 11,600 employees worldwide according to their company website.)

“The essential elements of this plan are that we will reduce costs in 2015 relative to our earlier strategic plan by approximately $475 million and reduce our workforce by approximately 1,500 employees or 13 percent to drive a further major increase in EPS [earnings per share] relative to the last strategic plan that we presented to stockholders in May,” stated David Pyott, Chairman & CEO of Allergan, at the Q2 2014 Earnings Conference Call (July 21, 2014, 10:30 AM ET). The plan also includes eliminating 250 vacant positions.

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On the chopping block—key sites

Key Allergan sites to close include: Medford (Boston, MA), Santa Barbara (Central CA), and Carlsbad (Southern CA).

Medford is the production site where the SERI Surgical Scaffold is manufactured. It is a medical device used in open or laparoscopic procedures. All Medford employees will be let go.

Santa Barbara includes Research and Development, General and Administrative, Product Surveillance, Product Safety, Risk Management, Engineering, and Quality groups. A limited number of Quality positions transitioned to Irvine in June and July. The Santa Barbara location housed the call center for product complaints. Santa Barbara has 300 employees and all are being laid off.

In the announcement made in January 2014, there was an opportunity for some employees to move to Austin, Texas where the Complaint Center is housed with existing infrastructure. All staff in customer support have been transferred.

Carlsbad is the location of Allergan's SkinMedica business unit. Allergan acquired SkinMedica for about $350 million in December 2012. SkinMedica markets and sells prescription and nonprescription topical skin care products for physicians to dispense to patients. Carlsbad employs 200 employees and all are being let go.

Emotional Town Hall Meeting Allergan Layoffs:  Employees Tell Their Side Of The Story

Sources tell us that in a Town Hall Meeting for Santa Barbara employees, Allergan's site leader Bob Perry choked up when he made the layoff announcement. “He was sad, yet open and vulnerable. He explained what was happening and why. He was very gentle in his approach. He embodied Allergan's value of integrity, a company that prides itself in camaraderie and personal growth.” According to the source, Allergan is almost like the "Google of Biotech."

One of Allergan's values is "People + Passion." It states, "We succeed primarily through our people, whose talent brings quality to our work and whose passion brings commitment—not just from processes and structures alone."

The mood changed when Allergan's President, Douglas S. Ingram, came on the video broadcast during the Town Hall Meeting. According to the source, Mr. Ingram did not seem sorry for the Allergan employees being laid off, as he said repeatedly, "I am unabashedly unapologetic about this decision and here’s why...” as he pointed to the revenue blocks for 2014 in a presentation.

The President said, "This was a catalyst to drive cost."

Team Allergan

The whole Valeant (VRX) bid set this house of cards in motion. Had they been successful in their bid for Allergan, Valeant Chief Executive, J. Michael Pearson, predicted that about 20 percent of the new company's 28,000 employees would lose their jobs in a merger. This information sent Allergan employees into a panic.

To show solidarity against Valeant’s hostile bid, blue Allergan wrist bands were worn by Allergan employees. "Team Allergan" was printed on the bracelets to show that Allergan employees stuck together. In addition to the Team Allergan Blue wrist bands, there were Allergan 'Blue Food' bake-offs, Allergan Blue Mad Hatter contests, and Allergan Blue Fridays when everyone was encouraged to dress in blue.

While Allergan is looking to be acquired, the company is seeking another partner who will continue to develop their pipeline.

High anxiety

An Allergan employee at the headquarters in Irvine said “We're all freaking out. Tons of anxiety.” The employee also said that their meeting was “super confusing.” Many of these employees own homes in Orange County where home sales prices are prohibitive for the average buyer. This will impact Allergan staff from Irvine to possibly sell their homes.

The human side of layoffs cannot be ignored and should not be overshadowed by improved financial statements being touted by management. Whether it be job uncertainty and frustration, having to take on a fired employee’s responsibilities or needing to sell your house because you can’t make the payments, the impact of layoffs can be heart wrenching and tragic. They affect individuals at all levels, from the high school graduate to those who have advanced degrees; devoted employees who were counting on a successful and long future with the company, and most importantly families who become disrupted or destitute.

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