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Allergan to Spin Off Eye-Care Unit by Midyear

California

January 23, 2002|MARC BALLON | TIMES STAFF WRITER

Allergan Inc. said Tuesday that it will spin off the eye-care business that built the company and allowed it to develop popular skin-care and drug products, which now will become the core of the Irvine company's business.

The maker of Botox, a muscle relaxant that baby boomers are using to remove wrinkles, said the new public company will be called Advanced Medical Optics Inc. and will sell contact lens cleaning solutions and eye-surgery devices. It will be based in Irvine and should be spun off by midyear.

Allergan's eye-care business brought in $551million last year, or nearly one-third of the company's total revenue of about $1.7billion.

Shares of 52-year-old Allergan rose $2.94, or 4%, to close at $74.26 on the New York Stock Exchange. The number of shares traded was nearly three times the average daily volume for the last three months.

"I think this is a step in the right direction," said Tim Chiang, an analyst with Banc of America Securities in New York. "Allergan can now focus on its most profitable and exciting business and no longer be dragged down by the medical-device side."

Allergan, which under Chief Executive David E.I. Pyott has emphasized drugs, said the split would boost next year's earnings per share to 22% to 25%. The company previously expected a 20% growth.

Advanced Medical also would benefit from the split because it would have its own management team and would probably have more to spend on research and development, said David Buck, an analyst at Buckingham Research.

Allergan shareholders will receive one share of Advanced Medical for every three or four shares of Allergan, Pyott said. After the split, Allergan will have 5,200 employees and Advanced Medical will employ 2,100.

James V. Mazzo, an Allergan vice president and head of its eye-surgery product line, will become president and chief executive of Advanced Medical. During his 22 years with Allergan, he also has had global responsibility for the firm's contact lens-care operations.

Pyott, who also serves as Allergan's chairman, will serve on Advanced Medical's board for one year after the split, he said.

In related news, Allergan on Tuesday reported fourth-quarter net income of $84 million, or 63 cents a share, versus $65 million, or 48 cents a share, a year earlier. Revenue grew 13% to $453.1 million.

Other California companies reporting earnings, excluding one-time gains or charges unless noted:

Avery Dennison Corp. said net income fell to $58.1 million, or 59 cents a share, from $67.5 million, or 69 cents, a year earlier. Sales at the Pasadena maker of Hi-Liter markers and sticky labels slipped 2.2% to $912.6 million from $933.1 million.

Emulex Corp., a Costa Mesa maker of data storage networking equipment, reported a net loss of $28.3 million, or 35 cents a share, for its second fiscal quarter, which included $39.1 million in costs primarily associated with the acquisition of Giganet Inc. a year ago.

Net income for its fiscal second quarter of the previous year totaled $19.4 million. Revenue was down 13% to $62.2 million.

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