Pink Sheet is part of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC’s registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

This copy is for your personal, non-commercial use. For high-quality copies or electronic reprints for distribution to colleagues or customers, please call +44 (0) 20 3377 3183

Printed By

UsernamePublicRestriction
UsernamePublicRestriction

WARNER-LAMBERT WILL TAKE $327 MIL. RESTRUCTURING CHARGE

Executive Summary

WARNER-LAMBERT WILL TAKE $327 MIL. RESTRUCTURING CHARGE to fourth quarter 1993 after-tax earnings, or $468 mil. on a pretax basis, the company announced Nov. 23. The organizational restructuring and plant and employee downsizing actions will include a revamping of the worldwide pharmaceutical operations; a tighter focus on "key growth products"; the shutdown of seven manufacturing plants worldwide; "streamlining" sales forces; and "simplifying work processes," Warner-Lambert said. The actions will mean the loss of 2,800 positions, or 8.2% of the company's 34,000-person worldwide workforce, over the "coming years." Specifically, Warner-Lambert's actions will include the reorganization of the drug operations "to enhance speed of action and responsiveness to customers," the company said. Warner-Lambert will marshal its resources behind the Alzheimer's therapy Cognex, the ACE inhibitor Accupril and Neurontin (gabapentin), the anti- convulsant that is awaiting FDA approval. Cognex was launched in early November with a $15 mil. sell-in ("The Pink Sheet" Nov. 8, T&G-14). The hypertension drug Accupril got an expanded indication Oct. 29 as an adjunctive therapy for congestive heart failure and was thereafter reinstated to California Medi-Cal's ACE category ("The Pink Sheet" Nov. 8, T&G- 1). The seven plants to be shut down will come from across the company's core businesses. A decision has been made so far on only one plant: the Carolina, Puerto Rico confectionary facility will be closed. The Vega Baja, P.R. and two other P.R. plants will remain open. The company will lose approximately $150 mil. in sales this year due to good manufacturing compliance problems at its six U.S. mainland and Puerto Rico facilities. Those problems resulted in the company's entry into a consent decree with FDA on Aug. 16 ("The Pink Sheet" Aug. 23, p. 10). Included in the terms of the decree is the certification of facilities. In the November issue of the company's internal newsletter, VP-Compliance Task Force Jim Bourne said: "We already have formal acceptance of the Rochester [N.Y. facility] certification and expect responses from the FDA on the other submissions shortly." Warner-Lambert said Nov. 24 that it has resumed a normal manufacturing schedule and all medically- necessary products are progressing at the rate intended. The reduction in force of 2,800 employees will be across the board, including field sales reps, with over half the RIFs coming from the U.S. "About 1,500" employees will leave by the end of 1994, the company said. The plant closings and RIFs will take place over several years and will likely involve a combination of retirements and layoffs. Commenting on the restructuring, Chairman and CEO Melvin Goodes said: "Rapid and profound changes in the marketplace demand a like response. In pharmaceuticals, the pace of change is being accelerated by the growing impact of managed care and other cost- containment efforts in the U.S., cost control regulation in Europe and the partial loss of Section 936 tax credits" in Puerto Rico. "On the consumer side," Goodes said Warner-Lambert "must continue to strengthen our competitive position through productivity improvements." In its most recently reported sales and earnings for the third quarter, Warner-Lambert said worldwide sales in the consumer sector rose 9% to $945 mil. while global sales of pharmaceuticals and Capsugel gelatin capsules dropped 7% to $534 mil. Overall international sales increased by more than 9%, while sales fell 3% in the U.S. Earnings declined 5% to $155.9 mil. Other recent actions taken by Warner-Lambert include the strategic alliances announced July 28 with Glaxo and Wellcome plc for the development and marketing of consumer health products ("The Pink Sheet" Aug. 2, p. 9 and p. 10). Potential products include OTC Zantac and OTC Zovirax. Additionally, the company sold its chocolates/caramel business to Tootsie Roll Industries for an undisclosed price and acquired the French breath mints firm Cachou Lajaunie. Also this year, Warner-Lambert acquired the North American and European operations of the $190 mil. in sales Wilkinson Sword shaving products business; bought an equity stake in the French pharmaceutical firm Jouveinal S.A. in an R&D alliance ("The Pink Sheet" Feb. 1, T&G-2); and purchased the Fisons' consumer products business in Australia and New Zealand and Willinger aquarium products firm with $34 mil. in sales . Goodes said the company expects the restructuring, "combined with our recent global alliances and acquisitions, positions us well for future growth. Over the long term, our sights must remain set on continuing to contain costs, serving our customers more efficiently and enhancing shareholder value." The restructuring is the second in the 1990s for W-L. In late October 1991, Warner-Lambert announced that it would take a $524 mil. one-time charge to after-tax earnings, or $690 mil. on a pretax basis. Combined, the two reductions have cut almost $1.6 bil. from pretax earnings. The company reorganized its worldwide senior management into three operating groups, putting Joseph Smith in charge of the pharmaceuticals business, and creating a worldwide consumer product business (OTC products and confectionary) and a third sector to handle areas outside of the major "trading triad" of North America, Europe and Japan. The globalized management structure, along with other cost-cutting measures, including plant consolidations and a 2,700-person worldwide workforce reduction, were supposed to save the company a predicted $700 mil. in pre- tax savings over the first five years. To date, 60% of the 2,700 employees in the 1991 cutback have left the company and 12 of 20 targeted plants have been closed. Warner-Lambert's last previous major restructuring occurred in late June 1986, when the company phased out 800 positions and closed certain U.S. and European manufacturing facilities.
Advertisement
Advertisement
UsernamePublicRestriction

Register

PS023694

Ask The Analyst

Please Note: You can also Click below Link for Ask the Analyst
Ask The Analyst

Your question has been successfully sent to the email address below and we will get back as soon as possible. my@email.address.

All fields are required.

Please make sure all fields are completed.

Please make sure you have filled out all fields

Please make sure you have filled out all fields

Please enter a valid e-mail address

Please enter a valid Phone Number

Ask your question to our analysts

Cancel