Bringing Pharmaceutical Innovation to the World
`
`2001 Annual Report
`
`APOTEX 1048, pg. 1
`
`

`

`CONTENTS
`
`1 Mission Statement
`
`16 Ophthalmic Pharmaceuticals
`
`42
`
`Executive Committee
`
`4
`
`6
`
`Financial Overview
`
`22
`
`BOTOX / Neurotoxin
`
`44
`
`Board of Directors
`
`Letter to Investors
`
`28
`
`Skin Care
`
`46
`
`Financials
`
`10
`
`Research and Development
`
`32 Ophthalmic Surgical
`
`12
`
`Technology Pipeline
`
`38
`
`Contact Lens Care Products
`
`51
`
`Corporate Overview and
`Stockholders’ Information
`
`Safe Harbor Statement under the Private Securities Litigation Reform Act of
`1995: Any statements in this report that refer to Allergan’s estimated or anticipated
`future results, including, by way of example only, statements in the “Spin
`off of the Optical Medical Devices Businesses”, “Outlook” and “Technology
`Pipeline” segments; aspirations for sales, market share and EPS growth; top
`quartile value creation; intentions to drive efficiencies; discussions of the R&D
`pipeline, its funding, and its potential as a source of long-term financial growth;
`discussions of potential uses for the Company’s technology and products, future
`products, future product approvals, product launches or future approvals for
`indications regarding previously approved products; plans for clinical trials, market-
`share objectives and regulatory filings; and statements regarding the proposed
`spin off transaction described in this report are forward-looking statements.
`
`All forward-looking statements in this report reflect the Company’s current
`analysis of existing trends and information and represent the Company’s judg-
`ment only as of the date of this report. Actual results may differ from current
`expectations based on a number of factors affecting Allergan’s businesses,
`including, by way of example only, changing competitive, regulatory and market
`conditions; the timing and uncertainty of the results of both the research and
`development and regulatory processes; domestic and foreign health care and
`
`cost containment reforms; technological advances and patents obtained by
`competitors; the performance, including the approval, introduction and consumer
`acceptance of new products and continuing acceptance of currently marketed
`products; the effectiveness of consumer advertising and promotional campaigns;
`the timely and successful implementation of strategic initiatives including, by
`way of example only, the consummation of the spin off transaction described in
`this report; the uncertainty associated with the identification of and successful
`consummation and execution of external corporate development transactions;
`and Allergan’s ability to obtain and maintain a sufficient supply of its products to
`meet market demand in a timely manner. In addition, matters generally affecting
`the economy, such as changes in interest and currency exchange rates and
`the state of the economy worldwide, can affect the Company’s results. Therefore,
`the reader is cautioned not to rely on these forward-looking statements. The
`Company disclaims any intent or obligation to update these forward-looking
`statements. Additional information concerning the factors that affect Allergan's
`businesses can be found in Allergan press releases as well as Allergan’s periodic
`public filings with the Securities and Exchange Commission. In particular, the
`discussion under the heading “Certain Factors and Trends Affecting Allergan and
`its Businesses” in Allergan's 2001 Form 10-K provides additional risk factors.
`
`APOTEX 1048, pg. 2
`
`

`

`O U R M I S S I O N
`
`TO BECOME THE PARTNER OF CHOICE FOR EVER BETTER HEALTH CARE
`
`THROUGH THE VALUE OF OUR TECHNOLOGICAL INNOVATION, INDUSTRY
`
`LEADERSHIP, PARTNERING SKILLS AND RELATIONSHIPS, WORLDWIDE
`
`I N F R A S T R U C T U R E , R E S E A R C H A N D M A N U FA C T U R I N G C A PA B I L I T I E S .
`
`TO DEVELOP A UNIQUE LEVEL OF UNDERSTANDING OF OUR CUSTOMERS
`
`IN ORDER TO IMPLEMENT OPERATIONAL STRATEGIES THAT PROVIDE THE
`
`GREATEST VALUE FOR OUR CUSTOMERS AND STAKEHOLDERS.
`
`O U R V I S I O N
`
`T O C O N T I N U E A S A N I N N O VAT I V E , T E C H N O L O G Y D R I V E N , G L O B A L
`
`H E A LT H C A R E C O M PA N Y F O C U S E D O N P H A R M A C E U T I C A L S
`
`I N S P E C I A LT Y M A R K E T S T H AT D E L I V E R VA L U E T O C U S T O M E R S ,
`
`S AT I S F Y U N M E T M E D I C A L N E E D S A N D I M P R O V E PAT I E N T S ’ L I V E S .
`
`AGN 01 : p 3
`
`APOTEX 1048, pg. 3
`
`

`

`COMPANY PROFILE
`
`ALLERGAN AT A GLANCE
`
`Allergan, Inc., with headquarters
`in Irvine, California, is a technology-
`driven, global health care company
`that develops and commercializes
`specialty pharmaceutical products
`for the ophthalmic, neurological,
`dermatological and other specialty
`markets as well as ophthalmic
`surgical devices and contact lens
`care solutions.* Allergan markets
`products in over 100 countries
`worldwide that deliver value to our
`customers, satisfy unmet medical
`needs and improve people’s lives.
`
`Allergan has approximately
`6,400 employees worldwide with
`2001 sales of nearly $1.7 billion.
`Allergan is differentiated from
`other specialty pharmaceutical
`companies through its discovery-
`to-development research programs
`and its global marketing and
`sales capabilities.
`
`*
`In January 2002, Allergan announced
`plans to spin off its ophthalmic surgical
`
`device and contact lens care businesses.
`
`This transaction is expected to be
`
`completed in mid-2002 through a tax-free
`
`dividend to Allergan stockholders.
`
`OPHTHALMIC PHARMACEUTICALS
`
`BOTOX / NEUROTOXIN
`
`BOTOX and BOTOX COSMETIC
`(botulinum toxin type A)
`
`The most widely used botulinum
`toxin product in the world and the
`foundation for Allergan’s global
`leadership in neurotoxin therapy.
`As the primary treatment for many
`focal movement disorders since
`the mid-1980’s, indications for
`BOTOX have expanded as scien-
`tists and physicians recognize its
`broad applicability.
`
`• Facial Aesthetics
`(glabellar lines / brow furrow)
`Approved in 10 countries.
`
`• Cervical Dystonia
`(painful neck spasm)
`Approved in 49 countries.
`
`• Juvenile Cerebral Palsy
`(muscles of one or more limbs
`are permanently contracted and
`stiff making normal movement
`difficult in children)
`Approved in 43 countries.
`
`• Adult Spasticity
`(increased rigidity in a group of
`muscles, causing stiffness and
`restriction of movement)
`Approved in 18 countries.
`
`• Hyperhidrosis
`(excessive sweating)
`Approved in 10 countries.
`
`ACULAR
`(ketorolac tromethamine ophthalmic solution 0.5%)
`
`The No.1 non-steroidal anti-inflammatory
`(NSAID) in the U.S. and used for a range of
`conditions including allergy, photophobia, post-
`surgical pain, and post-surgical inflammation.
`
`ALOCRIL
`(nedocromil sodium 2%)
`
`A fast acting non-steroidal anti-
`inflammatory drug approved to treat the
`itch associated with ocular allergy.
`
`ALPHAGAN
`(brimonidine tartrate ophthalmic solution 0.2%)
`
`The first alpha2-agonist approved for the
`long-term treatment of elevated intraocular
`pressure (IOP) in patients with glaucoma
`and ocular hypertension. ALPHAGAN is the
`second largest product in glaucoma and in
`eye care pharmaceuticals worldwide.
`
`ALPHAGAN P
`(brimonidine tartrate ophthalmic solution 0.15%)
`
`Preserved with PURITE: A new formula-
`tion containing brimonidine tartrate, a
`relatively selective alpha-2 agonist,
`which is the same active ingredient in
`ALPHAGAN. ALPHAGAN P is indicated
`for the lowering of IOP and is comparable
`in efficacy to ALPHAGAN with lower rates
`of ocular allergy.
`
`LUMIGAN
`(bimatoprost ophthalmic solution 0.03%)
`
`The first synthetic prostamide analog and
`an important component in the Company’s
`growing position as a leader in glaucoma
`management. It is indicated for the reduc-
`tion of elevated 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 measures over time) to
`another IOP-lowering medication.
`
`OCUFLOX
`(ofloxacin ophthalmic solution 0.3%)
`
`Indicated for use in bacterial conjunctivitis
`and corneal ulcers and the No. 1 anti-
`infective prescribed by ophthalmologists
`in the U.S.
`
`REFRESH TEARS
`
`Artificial tear products for various needs
`led by the REFRESH brand which includes:
`REFRESH PLUS, the No. 1 unit dose prod-
`uct worldwide; REFRESH TEARS, the No. 1
`multi-dose product in the U.S.; REFRESH
`P.M., for overnight relief of dry eye;
`REFRESH CONTACTS, relief from dryness
`and irritation for contact lens wearers; and
`REFRESH LIQUIGEL, a unique extra-strength
`formula containing one of the most effec-
`tive lubricant and preservative systems,
`combining the strength of a gel with the
`convenience of a liquid eye drop.
`
`APOTEX 1048, pg. 4
`
`

`

`SKIN CARE
`
`OPHTHALMIC SURGICAL
`
`CONTACT LENS CARE
`
`COMPLETE
`
`A proprietary multi-purpose solu-
`tion for all soft contact lenses
`which has a built-in lubricant to
`help provide more comfortable
`lens wear. COMPLETE is also
`the fastest growing multi-purpose
`solution in the world, growing
`at a rate of nearly 3:1 over
`the competition.
`
`COMPLETE BLINK-N-CLEAN
`
`These contact lens drops offer a
`unique blend of gentle-to-the-eye
`cleaning agents in a tear-like for-
`mula that conveniently dissolves
`away material that causes irrita-
`tion and discomfort.
`
`CONTACT LENS CARE
`
`As the No. 2 contact lens care
`company in the world and the
`No. 1 company in Europe and
`Japan (excluding heat-based
`system products), other leading
`worldwide product offerings
`include: CONSEPT F, OXYSEPT
`1-STEP, ULTRACARE, ULTRAZYME
`and TOTAL CARE.
`
`AZELEX
`(azelaic acid cream 20%)
`
`A mild emollient and moisturiz-
`ing treatment indicated for
`mild-to-moderate acne that
`allows for use under makeup,
`moisturizers, sunscreens and
`other topical medications.
`
`FLUOROPLEX
`(fluorouracil 1%)
`
`Indicated for the treatment
`of certain skin problems such
`as actinic (solar) keratoses
`(small red or skin color growths
`that appear as a result of over
`exposure to the sun).
`
`MD FORTE
`
`MD FORTE is a physician-
`recommended line of aesthetic
`skin care products containing
`alpha hydroxy acids for reducing
`the appearance of fine facial
`lines and wrinkles.
`
`TAZORAC Gel
`(tazarotene gel 0.05% and 0.1%)
`
`A topical receptor-selective
`retinoid approved for the treat-
`ment of acne and psoriasis.
`
`TAZORAC Cream
`(tazarotene cream 0.05% and 0.1%)
`
`A new formulation of the topi-
`cal, receptor-selective retinoid
`delivers the same efficacy of
`the Gel while providing a new
`alternative for treating a broader
`range of patients with varied
`skin types and conditions.
`
`AMADEUS
`
`Allergan entered the refractive
`surgery market in September
`2000 with the AMADEUS
`microkeratome. The AMADEUS
`is viewed by leading refractive
`surgeons as one of the finest,
`most reliable and most
`precise microkeratomes on
`the market today.
`
`ARRAY
`
`The ARRAY silicone multifocal
`intraocular lens (IOL) provides a
`range of vision from near to far
`and significantly reduces the
`patient’s dependence on eye-
`glasses. The ARRAY provides
`distance vision comparable,
`and near vision superior, to
`monofocal IOLs and is the only
`multifocal IOL marketed in
`the U.S.
`
`CLARIFLEX
`
`The CLARIFLEX with its unique
`OptiEdge design is a third-gen-
`eration silicone monofocal IOL
`that has been shown to reduce
`internal reflections and glare.
`
`SENSAR with OptiEdge
`
`A new acrylic monofocal IOL
`with the patented OptiEdge
`design was developed to have
`a sharp, vertical edge on the
`posterior side where it comes
`in contact with the lens capsule
`and a round anterior surface to
`reduce unwanted reflections.
`
`SOVEREIGN with WHITESTAR
`
`The new WHITESTAR technolo-
`gy allows for a dramatic
`decrease in the amount of ener-
`gy delivered to the eye. It is
`the most sophisticated phaco-
`emulsification system in the
`global market with advanced
`sensors to control fluidics dur-
`ing irrigation and aspiration in
`small-incision cataract surgery.
`
`The UNFOLDER
`
`The UNFOLDER Gold, Silver and
`Sapphire IOL implementation
`systems ensure controlled and
`predictable release of the IOL
`into the eye, delivering the lens
`when and where the surgeon
`wants it – inside the eye’s cap-
`sular bag.
`
`APOTEX 1048, pg. 5
`
`

`

`FINANCIAL OVERVIEW
`
`In millions, except per share data
`
`INCOME STATEMENT HIGHLIGHTS
`
`Product net sales
`
`Net earnings
`
`Basic earnings per share
`
`Diluted earnings per share
`
`Dividends per share
`
`ADJUSTED AMOUNTS (1)
`
`Net earnings
`
`Basic earnings per share
`
`Diluted earnings per share
`
`Year Ended December 31,
`
`2001
`
`2000
`
`$1,685.2
`
`$1,562.6
`
`224.9
`
`1.71
`
`1.68
`
`0.36
`
`262.3
`
`1.99
`
`1.96
`
`215.1
`
`1.65
`
`1.61
`
`0.32
`
`213.7
`
`1.64
`
`1.60
`
`(1)
`
`The adjusted amounts in 2001 exclude the $40.0 million one-time charge
`for in-process research and development related to the purchase of
`Allergan Specialty Therapeutics, Inc. (ASTI) and the after-tax effect of:
`1) $1.7 million restructuring charge reversal which increased operating
`income in 2001, 2) income of $1.5 million from a partnering agreement
`which increased operating income in 2001, 3) $5.2 million loss on the per-
`manent impairment of equity investments, 4) $4.5 million in asset gains,
`5) gain on the sale of divested pharmaceutical products in Brazil of $2.0 mil-
`lion, 6) $3.4 million unrealized gain on derivative instruments, and 7) certain
`one-time costs totaling $4.4 million associated with the spin-off of the
`Optical Medical Device Businesses included in operating income in 2001.
`
`The adjusted amounts in 2000 exclude the after-tax effect of 1) a $2.0
`million restructuring charge reversal which increased operating income
`in 2000, 2) gain on sales of investments of $2.0 million, and 3) expenses
`of $2.0 million from partnering agreements.
`
`(2)
`
`The adjusted amounts used in the earnings per share graph for 1999
`exclude the after-tax effect of 1) $9.6 million in restructuring charge reversals
`which increased operating income in 1999, 2) $1.4 million in asset gains,
`reducing write-offs recorded in 1998, which increased operating income in
`
`1999, 3) gain on sales of investments of $14.0 million, 4) the contribution to
`The Allergan Foundation of $6.9 million, 5) income of $9.5 million, net of
`expenses of $5.9 million from partnering agreements, and 6) certain one-time
`costs totaling $1.9 million included in operating income in 1999.
`
`The adjusted amounts used in the earnings per share graph for 1998 exclude
`$171.4 million in expense resulting from the dividend to shareholders of stock
`in ASTI, and the after-tax effect of: 1) $74.8 million in restructuring charges
`charged to operating expense in 1998, 2) $58.5 million in asset write-offs
`charged to operating expense in 1998, 3) gain on sales of investments, net
`of write-offs of certain investments, of $54.1 million, 4) the contribution to
`The Allergan Foundation of $11.0 million, and 5) income of $12.9 million from
`partnering agreements included in operating expense in 1998.
`
`The adjusted amounts used in the earnings per share graph for 1997
`include a $16.5 million decrease in income taxes associated with the buy
`back of Allergan Ligand Retinoid Therapeutics, Inc. (ALRT) and the after
`tax effect of 1) $12.4 million in gains on sale of investments, 2) $9.6 mil-
`lion in income from sales of product rights, 3) $7.5 million in income from
`settlement of a product related lawsuit, and 4) $4.9 million in settlement
`costs, severance, and costs related to the buy back of ALRT.
`
`NET SALES
`In millions of dollars
`Specialty pharmaceuticals sales
`as a percent of total sales
`
`GROSS PROFIT
`In millions of dollars
`Gross profit as a percent of sales
`
`67.3%
`
`63.0%
`
`58.6%
`
`56.4%
`
`50.9%
`
`75.7%
`
`72.5%
`
`71.1%
`
`67.7%
`
`64.9%
`
`97
`$1,138.0
`
`98
`$1,261.7
`
`99
`$1,406.2
`
`00
`$1,562.6
`
`01
`$1,685.2
`
`97
`$738.7
`
`98
`$854.7
`
`99
`$999.8
`
`00
`$1,133.5
`
`01
`$1,275.0
`
`AGN 01 : p 6
`
`APOTEX 1048, pg. 6
`
`

`

`In millions
`
`2001
`
`2000
`
`% Change
`
`% Change
`in Constant
`Currency
`
`Year Ended December 31,
`
`Year-Over-Year
`
`NET SALES BY PRODUCT LINE
`
`SPECIALTY PHARMACEUTICALS
`Eye Care Pharmaceuticals
`Skin Care
`BOTOX / Neurotoxin
`
`Total
`
`OPTICAL MEDICAL DEVICES
`Ophthalmic Surgical
`Contact Lens Care
`
`Total
`
`$ 745.8
`78.9
`309.5
`
`1,134.2
`
`$ 675.3
`68.7
`239.5
`
`983.5
`
`253.9
`297.1
`
`551.0
`
`250.4
`328.7
`
`579.1
`
`Total Product Net Sales
`
`$1,685.2
`
`$1,562.6
`
`10 %
`15 %
`29 %
`
`15 %
`
`1 %
`(10 )%
`
`(5 )%
`
`8 %
`
`13 %
`15 %
`33 %
`
`18 %
`
`6 %
`(4) %
`
`0.1%
`
`12 %
`
`PRODUCTS SOLD BY LOCATION
`Domestic
`International
`
`EMPLOYEE DATA
`Number of employees
`
`55.4 %
`44.6 %
`
`51.7 %
`48.3 %
`
`6,436
`
`6,181
`
`4 %
`
`RESEARCH AND DEVELOPMENT (1, 2)
`In millions of dollars
`Research and development as a percent of sales
`
`DILUTED EARNINGS PER SHARE AS ADJUSTED (1, 2)
`In dollars
`
`+22.5%
`
`+24.0%
`
`+26.5%
`
`+29.1%
`
`12.8%
`
`12.4%
`
`11.6%
`
`11.1%
`
`9.9%
`
`97
`$125.8
`
`98
`$125.4
`
`99
`$162.9
`
`00
`$193.6
`
`01
`$216.5
`
`97
`$0.72
`
`98
`$1.02
`
`99
`$1.29
`
`00
`$1.60
`
`01
`$1.96
`
`AGN 01 : p 7
`
`APOTEX 1048, pg. 7
`
`

`

`TO OUR INVESTORS
`
`STRONG FINANCIAL PERFORMANCE IN A CHALLENGING ECONOMIC ENVIRONMENT
`
`We are pleased to report on yet another year of strong performance with earnings per share increasing 22.5%
`over the prior year to $1.96, excluding the effect of certain one-time transactions and items in 2000 and 2001.
`With some 45% of our sales generated outside the United States, this high quality earnings result was
`achieved in the face of a strengthening U.S. dollar against virtually all other world currencies, which dampened
`the Company’s sales by $57 million.
`
`Four years ago, we established a set of aspirations to generate annual sales growth in the mid-teens percent-
`age range, as measured in constant currency, and to increase earnings per share in excess of 20%. For the
`fourth year in a row, we successfully delivered on our earnings per share objective whilst continuing to increase
`our investments in the core growth drivers of our business – R&D and sales and marketing. In 1999 and 2000,
`we increased sales by over 15%, in constant currency, excluding the effect of discontinued products. In 2001, we
`did not quite achieve our aspiration with sales growth of 11.5%, in constant currency. Renewed strong growth
`naturally depends on the flow of new innovative products from R&D and approvals by regulatory agencies.
`We are delighted that 2001 was the most successful year in the history of Allergan for regulatory approvals.
`The launches for new products and approvals of new indications for BOTOX have led to stronger growth in the
`second half of the year, with total product sales in constant currency increasing almost 15% versus 8% in the
`first six months of the year. Additionally, our pharmaceutical business grew approximately 23%, in constant
`currency, in the second half of the year.
`
`Again, in 2001, further expansion in our gross margins contributed to strong financial performance. Since 1997,
`we have been able to raise gross margins by over 1000 basis points from 64.9% to 75.7% in 2001. This has been
`driven not only by a steadily increasing pharmaceutical product sales mix, but continual gross margin improve-
`ments in virtually all of the Company’s individual businesses. Careful management of costs and the benefits of
`higher throughput in only five efficient global manufacturing plants have contributed to this exceptional track
`record. Importantly, the Company diligently adhered to its ongoing policy of containing administrative costs. Our
`intent to better serve our customers is achieved through strategic reinvestment of a portion of our gross margin
`improvements into R&D and sales and marketing programs. R&D investment represented 12.8% of sales, an
`increase of 12% in dollars compared to 2000, excluding the one-time $40 million expense associated with the
`purchase of Allergan Specialty Therapeutics, Inc. in 2001 and the $2 million expense associated with partnering
`agreements in 2000. Since the end of 1997, our R&D team has been expanded by 42% to approximately 1,100
`people and our sales forces have expanded by 44% to approximately 1,700 employees.
`
`The Company finished the year in a strong financial position with a cash balance of $782 million and a positive
`net cash position of $167 million. In 2001, Allergan generated free cash flow of $224 million. Return-on-equity
`soared from 11.2% in 1997 to 26.8% in 2001, increasing from 24.5% in 2000. With tight controls, detailed
`management reports and accurate forecasting, we have been able to establish consistency in earnings and
`have now exceeded Wall Street analysts’ consensus earnings estimates for 16 straight quarters.
`
`STRONG INNOVATION
`
`Allergan is a company that is driven by scientific innovation to address unmet medical needs. After three
`years of rapidly increasing R&D investment, 2001 was the year for numerous and important approvals of new
`products and new clinical indications. On March 16, 2001, as a first in the history of the Ophthalmic Division of
`the FDA, two glaucoma products from the same company were approved on the very same day: LUMIGAN
`
`D A V I D E . I . P Y O T T , C H A I R M A N O F T H E B O A R D , P R E S I D E N T A N D C H I E F E X E C U T I V E O F F I C E R
`
`AGN 01 : p 8
`
`APOTEX 1048, pg. 8
`
`

`

`
`
`APOTEX 1048, pg. 9
`
`

`

`and ALPHAGAN P. Additionally, over the course of the year, LUMIGAN was approved in all the major markets of
`Latin America. In late 2001, LUMIGAN received a positive opinion from the Committee for Proprietary Medicinal
`Products in Europe, which should enable the product to be launched there in early 2002. BOTOX received
`approvals for several important therapeutic indications: cervical dystonia in Japan; spasticity in Canada and certain
`countries of the European Union; and hyperhidrosis in Australia, Canada, New Zealand and the United Kingdom.
`BOTOX for facial aesthetics (brow furrow) received the first regulatory approval in Canada and later in New
`Zealand and Argentina.
`
`Following the banner year for approvals in 2001, we expect approximately five product approvals in 2002, three in
`2003 and four in 2004 in the United States, Europe and Japan. For this reason, we believe that we have one of
`the deepest and broadest pipelines in the specialty pharmaceutical industry with strong internal R&D capabilities
`ranging from drug discovery, medicinal chemistry, formulation, all the way through to clinical development. Our
`development expertise is worldwide with R&D centers located in California, Europe and Japan. Internal compe-
`tencies are strengthened through a network of collaborations with academic institutions, biotechnology firms
`and companies specialized in discovery tools and genomics. Furthermore, we have in-licensing arrangements
`with a significant number of large pharmaceutical companies in the United States, Europe and Japan.
`
`STRONG MARKET POSITIONS
`
`For yet another year, we can report that we have achieved global market share gains across most of the busi-
`nesses in which we compete – ophthalmic pharmaceuticals, skin care, ophthalmic surgical products and contact
`lens care solutions. In the case of BOTOX, we declined a modest 3% share points, but retained an impressive
`global market share of approximately 90% as a new competitor entered this dynamic, rapidly expanding market.
`
`As a modestly sized company within the pharmaceutical industry, we have primarily focused our energies on
`specialist markets and have earned substantial market shares within these segments by providing our customers
`with exceptional products and service. Ultimately, it is our goal to achieve No.1 or No.2 market share position
`in each of our market categories. Great products from a fine R&D organization are the starting point, thereafter,
`it is a question of rapid and superior execution in the marketplace. Meeting the needs of patients and exceeding
`the expectations of physicians in terms of customer service and scientific support are primary objectives. To this
`end, we are proud that our ophthalmic sales forces were ranked No. 1 for service and medical knowledge in
`the U.S. by ophthalmologists for the fourth year in a row in 2001, and for the second consecutive year in Canada,
`as reported in renowned independent market research surveys.
`
`In 2001, we moved up from fourth position to third in ophthalmology, one step nearer to attaining our goal of
`world leadership in ophthalmology. Our strategy is to offer a full line of ophthalmic products that are leaders in
`their individual categories and to attain leadership in the most important market segment, glaucoma. Global sales
`of our glaucoma product line increased 19%, in constant currency, during 2001 driven by the launches of LUMIGAN
`and ALPHAGAN P. LUMIGAN was launched in the United States and most of the Latin American markets in 2001.
`We are pleased with the results to date and continue to believe that it has the potential of establishing itself as a
`best in class drug. With ALPHAGAN, we already possess the world’s No. 2 drug for glaucoma. ALPHAGAN P, a new
`and improved formulation of the original product, offers the advantage of a much lower incidence of allergic
`response. Uptake of this product since its September 2001 launch in the United States has been very strong.
`
`At $310 million in sales in 2001, BOTOX is the Company’s largest product and represents one of Allergan’s many
`high potential offerings. With the launch of a competitive product in the United States in early 2001, we retained
`an impressive 95% share of the U.S. market. Outside of the United States, the BOTOX business was successful
`in generating rapid market share gains in Europe, Latin America and Asia Pacific. Our significant investments
`in clinical development programs and the important approvals secured in 2001 led to a 33% growth in BOTOX
`sales, as measured in constant currency.
`
`In the area of skin care, TAZORAC has established itself as a potent topical agent in the treatment of acne and
`psoriasis and has positioned Allergan as the fastest growing company within these United States markets. With
`an anticipated FDA approval in 2002 of tazarotene for the indication of photodamage, we foresee a powerful pro-
`motion synergy with BOTOX COSMETIC, once approved in the U.S., in the rapidly growing facial aesthetic market.
`
`AGN 01 : p 10
`
`APOTEX 1048, pg. 10
`
`

`

`Our Surgical business delivered strong performance in Europe and Asia Pacific, with international sales growing
`double digits. This was offset by a marginal decline in the United States, which was caused by weak medical
`equipment sales. With a unique range of intraocular lenses for cataracts, and the launch of next-generation
`technologically advanced lenses in 2001, we were able to further strengthen our No.1 position in Europe and
`continue to gain share in Japan and the United States. Allergan also penetrated the refractive surgical market
`with the rollout of the AMADEUS microkeratome.
`
`Sales of our contact lens care solutions were in marginal decline in 2001 faced with minor contraction of the
`world market. The use of higher value peroxide systems continues to migrate to less-expensive, more con-
`venient one-bottle multi-purpose solutions. In addition, the market continues to be impacted by the increase
`in refractive surgery procedures and the rapid growth of disposable contact lenses. Given this challenging
`market environment, we are particularly pleased that we managed to gain global market share while substan-
`tially increasing business-segment profitability. Our successful strategy was based on the rapid growth of our
`COMPLETE brand of multi-purpose solutions where we have been able to establish premium pricing support-
`ed by a superior product in terms of eye comfort, innovative stylish packaging and a “no rub” claim.
`
`SPIN OFF OF THE OPTICAL MEDICAL DEVICE BUSINESSES
`
`In early 2002, we announced the spin off of the surgical and contact lens care businesses (together the optical
`medical device business) into a separate publicly traded company called Advanced Medical Optics, Inc. (AMO).
`This is the most invigorating event in the history of Allergan since Allergan itself was successfully spun out of
`SmithKline in 1989. This transaction should create greater opportunities and stimulate new innovation and growth
`in the fields of specialty pharmaceuticals and optical medical devices. The independent management teams
`will focus on their own core businesses that have fundamentally different market growth rates, R&D intensity
`and product life cycles. Independent of Allergan, and freed from Allergan’s natural bias as a specialty
`pharmaceutical company to allocate resources to pharmaceuticals, AMO will be in a better position to make
`greater investments in new technologies, sales and marketing and pursue strategic alliances and collaborations in
`the field of optical medical devices. For Allergan, this completely fulfills our strategic vision to transform ourselves
`into a specialty pharmaceutical company. As a “pure play” specialty pharmaceutical company, Allergan looks
`forward to achieving mid-to-upper teens top-line sales growth rates and to accelerate its already robust earnings
`growth rate to the 22% to 25% range.
`
`• • • • •
`
`We are particularly gratified that we again produced exceptional financial, operational and scientific results
`despite a challenging economic environment. This is a tribute to the strong management team and a highly
`talented group of associates worldwide who strongly identify not only with our financial goals, but seek per-
`sonal satisfaction in fulfilling unmet medical needs, improving patients’ lives and providing excellent service
`to medical professionals. In our industry, Allergan has been recognized by many as both an excellent place of
`employment with our high standards and personable “small” company atmosphere, as well as one of the
`best run companies in our sector. The Board of Directors and I wish to thank and recognize all of our employ-
`ees’ individual contributions.
`
`With the spin off of the optical medical device businesses, we face significant and exciting change – change
`which will be better for each business. Allergan’s management team, with rigorous processes and clear
`accountabilities, will successfully implement this transition with the objective of creating AMO as a strong
`and viable industry leader in optical medical devices. I wish the employees of AMO good fortune and great
`success in the future.
`
`David E. I. Pyott
`Chairman of the Board, President and Chief Executive Officer
`
`AGN 01 : p 11
`
`APOTEX 1048, pg. 11
`
`

`

`RESEARCH AND DEVELOPMENT
`
`A key component of Allergan’s long-term strategy is to discover and
`
`develop innovative new products that address unmet medical needs
`
`in specialty markets. Focused investment on internal research and
`
`development efforts, combined with extensive industrial and academic
`
`collaborations, as well as in-licensing of compounds at various stages
`
`of clinical development, have led to a robust new product pipeline.
`
`In the last four years, Allergan has increased its investment in R&D
`
`by $91 million. At year end, the R&D team represented approximately
`
`1,100 of the Company’s employees.
`
`Allergan’s expertise in eye care has made the search for new
`
`medicines to attack sight-threatening diseases such as glaucoma
`
`and age-related macular degeneration a primary area of investment.
`
`In addition, it is Allergan’s strategy to expand its leadership role in
`
`neurotoxin science, develop new potential applications for retinoids
`
`in skin care, cancer and metabolic disease, implement advances
`
`in technologies for cataract and refractive surgery, and improve the
`
`comfort properties and conditioning of its contact lens care systems.
`
`A L L E R G A N ’ S V I S I O N I N C L U D E S T H E D E V E L O P M E N T O F N E W P O T E N T I A L A P P L I C A T I O N S F O R
`
`R E T I N O I D S I N V A R I O U S T Y P E S O F C A N C E R .
`
`AGN 01 : p 12
`
`APOTEX 1048, pg. 12
`
`

`

`
`
`APOTEX1048, pg. 13
`
`APOTEX 1048, pg. 13
`
`

`

`TECHNOLOGY PIPELINE
`
`Product
`
`Disease Target
`
`Technology Alliances
`
`Early
`
`Late
`
`Filed
`
`Approved
`
`PHASE
`
`OPHTHALMIC PHARMACEUTICALS
`
`Alphagan/Timolol Combination* (Europe) Glaucoma
`
`Alphagan/Timolol Combination* (U.S.)
`
`Glaucoma
`
`Lumigan (Europe)
`
`Lumigan (Japan)
`
`Lumigan/Timolol Combination
`(U.S./Europe)
`
`Glaucoma
`
`Glaucoma
`
`Glaucoma
`
`Memantine Oral*
`
`Glaucoma/Neuroprotection
`
`Merz + Co. GmbH & Co./
`Children’s Hospital, Harvard
`
`Androgen Tear*
`
`Restasis (U.S./Europe)
`
`Dry Eye
`
`Dry Eye
`
`ATX-S10* (U.S./Europe)
`
`Vitrase
`
`Age Related Macular
`Degeneration (ARMD)
`
`Severe Vitreous
`Hemorrhage
`
`Novartis/University of Georgia
`Research Foundation, Inc.
`
`Photochemical Co., Ltd.
`
`Ista Pharmaceuticals
`
`Epinastine (Europe)
`
`Allergy
`
`Boehringer Ingelheim
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`Epinastine (U.S.)
`
`Gatifloxacin (U.S.)
`
`Tazar