Allergan Reports Second Quarter Operating Results; Earnings Per Share Up 20.5 Percent, Excluding One-Time Items; Company Raises Full-Year Earnings Guidance to $1.94.

Business Editors & Health/Medical Writers

IRVINE, Calif.--(BW HealthWire)--July 26, 2001

Board of Directors Declares Quarterly Dividend

Allergan, Inc. (NYSE:AGN) today announced second quarter 2001 worldwide sales of $417.2 million, an increase of 3.2 percent, or 7.9 percent at constant currency over the second quarter of 2000.

Excluding the $40 million one-time charge related to the purchase of Allergan Specialty Therapeutics, Inc. (ASTI) and an unrealized non-cash loss on derivative instruments, Allergan's diluted earnings per share for second quarter of 2001 were $0.47, an increase of 20.5 percent over the second quarter 2000 earnings per share of $0.39. Including the one-time charge related to the purchase of ASTI and the unrealized loss on derivative instruments, Allergan reported diluted earnings per share of $0.16 for the second quarter of 2001.

Allergan also today announced that its Board of Directors has declared a second quarter dividend of $0.09 per share, payable September 14, 2001, to stockholders of record on August 20, 2001.

At constant currency rates, sales for the six months ended June 29, 2001 increased by $65.0 million, or 8.3 percent, over the comparable period in 2000. Including the impact of currency, sales for the first six months ended June 29, 2001 were $813.3 million, a 4.2 percent increase over $780.3 million reported for the six months ended June 30, 2000.

Excluding the one-time charge related to the purchase of ASTI and the net year-to-date unrealized non-cash gain on derivative instruments, Allergan's diluted earnings per share during the first six months of 2001 of $0.84 increased 18.3 percent over the Company's diluted earnings per share of $0.71 during the first six months of 2000. Including one-time items, Allergan's diluted earnings per share for the first six months of 2001 were $0.55, compared with $0.72 for the first six months of 2000.

"We are pleased to report earnings per share growth over 20 percent for the quarter, in spite of an approximate $19 million negative impact from currency on sales for the quarter," said Allergan's Chairman, President and CEO, David E.I. Pyott. "As we enter the second half of 2001, our product pipeline remains strong; new collaborations such as those we entered into this quarter with Oculex and Inspire continue to increase the depth of the pipeline and illustrate our progressive leadership in the discovery of quality treatments for debilitating ophthalmic diseases. Strong growth-oriented products such as Lumigan(TM), which has already captured 3.8 percent new prescription share of the U.S. glaucoma market in just three months since its launch and Botox(R), which recently received approval for hyperhidrosis in the United Kingdom, for brow furrow in Canada and for cervical dystonia in Japan, and the upcoming launch of Alphagan(R) P in the U.S., continue to fuel the Company's positive outlook," Pyott added.

Specialty Pharmaceutical Performance

Eye Care Pharmaceutical Product Line

At constant currency rates, second quarter 2001 worldwide eye care pharmaceutical sales increased 7.7 percent over the second quarter of 2000. Including the effects of currency, second quarter worldwide eye care pharmaceutical sales amounted to $181.0 million, a 4.1 percent increase over last year's $173.9 million.

Worldwide net product sales for Alphagan(R) (Brimonidine Tartrate Ophthalmic Solution 0.2%), indicated for lowering intraocular pressure (IOP) in patients with ocular hypertension and primary open angle glaucoma, were $57.3 million in the second quarter of 2001, an increase of 1.6 percent, or 3.8 percent at constant currency over the same period last year.

At constant currency, eye care pharmaceutical sales for the first six months of 2001 increased 7.6 percent, or $26.9 million over the same period last year. Including the effects of currency, eye care pharmaceutical sales were $369.0 million, an increase of 4.5 percent over $353.0 million reported for the first six months of 2000.

Worldwide net product sales for Alphagan(R) were $123.8 million in the first half of 2001, a 3.4 percent increase, or 5.2 percent at constant currency, over the same period last year.

Year-to-date worldwide net product sales for Lumigan(TM) (Bimatoprost Ophthalmic Solution 0.03%), indicated for the reduction of elevated intraocular pressure (IOP) in patients with open-angle glaucoma or ocular hypertension who are intolerant of other IOP-lowering medications or insufficiently responsive to another IOP-lowering medication, were $9.6 million.

According to Scott Levin data as of July 13, 2001, Allergan's share of the United States glaucoma market, including new prescriptions for Lumigan(TM) and Alphagan(R) ophthalmic solutions, has grown 20 percent, or close to 3 share points, since the beginning of the year to reach 17.1 percent market share. Lumigan's(TM) and Alphagan's(R) latest new prescription shares were 3.8 percent and 13.3 percent, respectively.

During the quarter, Allergan entered into a license and research collaboration with Oculex Pharmaceuticals, Inc. to discover, develop and commercialize compounds for ophthalmic use, based on Oculex's proprietary biodegradable and reservoir drug delivery technologies. Additionally, Allergan entered into a licensing, development and marketing agreement with Inspire Pharmaceuticals, Inc. which includes Inspire's INS365 and Allergan's Restasis(TM) cyclosporine ophthalmic emulsion, 0.05%, both in Phase III clinical development for dry eye.

Skin Care Product Line

Sales for Allergan skin care products were $18.7 million for the quarter ended June 29, 2001, an increase of 13.3 percent from $16.5 million reported in the second quarter of last year.

Worldwide net sales for Tazorac(R) and Zorac(R) brands (Tazarotene Gel and Cream 0.05% and 0.10%), indicated for the treatment of acne and psoriasis, were $10.1 million in the second quarter of 2001, a 35.5 percent increase at constant currency over the same period last year.

Allergan reported skin care product sales of $36.7 million for the first six months of 2001, an increase of 14.0 percent over the comparable period in 2000.

Worldwide net product sales of Tazorac(R) and Zorac(R) were $18.5 million for the first six months of 2001, a 29.2 percent increase at constant currency over the same period last year.

Botox(R)/Neurotoxin Product Line

At constant currency rates, Botox(R) (Botulinum Toxin Type A) Purified Neurotoxin Complex net sales for the second quarter increased by 31.3 percent over the second quarter of 2000. Including the effects of currency, sales for Botox(R) were $76.4 million during the second quarter of 2001, a 27.1 percent increase over 2000's second quarter sales of $60.1 million.

At constant currency rates, Botox(R) sales for the first six months of 2001 increased 32.3 percent over the same period last year. Including the effects of currency, Botox(R) net product sales for the first six months of 2001 increased 28.5 percent to $144.0 million from the $112.1 million reported over the same period last year.

After the close of the quarter, Allergan's Botox(R) received its first European approval in the United Kingdom by the Medicines Control Agency (MCA) for use in the management of severe hyperhidrosis (excessive sweating) of the axillae (underarm) that is unresponsive to topical treatments with antiperspirants or antihidrotics. During the quarter, Allergan received regulatory approval from Canadian Health Authorities (Therapeutic Products Programme) for Botox(R) for the cosmetic indication treating prominent lines of the brow. The approval is specifically for the treatment of glabellar lines associated with corrugator and/or procerus muscle activity. Botox(R) was also approved for use in cervical dystonia by the Ministry of Health and Labor Welfare, Japan.

Ophthalmic Surgical and OTC Performance

Ophthalmic Surgical Product Line

At constant currency rates, surgical sales increased 7.1 percent compared to the second quarter of 2000. Sales for the ophthalmic surgical business were $65.7 million during the second quarter of 2001 compared with $65.1 million reported for last year's second quarter.

At constant currency rates, ophthalmic surgical sales increased 6.4 percent over the first six months of 2000. Ophthalmic surgical sales for the first six months of 2001 were $122.4 million compared with $121.6 million reported for the same period last year.

In the quarter, Sensar(TM) acrylic foldable intraocular lens was approved by the Ministry of Health and Labor Welfare, Japan.

Contact Lens Care Product Line

At constant currency rates, contact lens care sales decreased 8.0 percent compared to the second quarter of 2000. Including the impact of currency, sales for the contact lens care business were $75.4 million for the second quarter of 2001, a decrease of 14.8 percent over 2000 second quarter sales of $88.5 million. Worldwide net product sales for Complete(R) brand solutions, indicated for soft contact lens care, were $35.1 million, in the second quarter of 2001, a 10.7 percent increase, or 19.0 percent increase at constant currency, over the same period last year.

At constant currency rates, contact lens care sales decreased 6.5 percent compared to the first six months of 2000. Including the impact of currency, contact lens care sales for the first six months of 2001 were $141.2 million or 12.5 percent less than the same period last year.

For the 12 months ended March 31, 2001, and according to the most recent available market data, the worldwide market for contact lens care products declined approximately 4 percent. Over the same time frame, Allergan increased its market share to approximately 21 percent. Allergan's Complete(R) Multi-Purpose Solution increased its market share in this segment by approximately 29 percent, or 3 share points, in the same 12-month period.

Consistent with stated objectives, on a year-over-year basis, Allergan continued to improve the profit metrics in its contact lens care business.

Additional Financial Highlights

Gross profit for the second quarter of 2001 was $317.4 million or 76.1 percent of net sales, which represents a 3.9 percentage point increase from the second quarter of 2000. The gross profit percentage for the six months ended June 29, 2001, was 75.5 percent, representing a 3.1 percentage point increase from the comparable 2000 percentage. The gross profit percentage increased in 2001 compared to 2000 primarily as a result of shifts in the mix of products sold to higher margin products, including Botox(R) and skin and eye care pharmaceuticals.

On April 20, 2001, Allergan purchased the Class A Common Stock of Allergan Specialty Therapeutics, Inc. (ASTI) for $71.0 million. In the quarter, Allergan has taken a one-time charge of $40 million, or $0.30 per share, related to in-process research and development and has capitalized the value of core technology on its balance sheet.

SG&A expenses increased $11.6 million in the second quarter over the same period last year to $178.9 million. SG&A as a ratio to net sales was 42.9 percent for the second quarter of 2001, compared to 41.4 percent for the same period last year. Including the purchase of ASTI, research and development expenses increased $43.2 million in the second quarter over the same period last year to $94.9 million. Excluding the purchase of ASTI, research and development expenses were $54.9 million and as a ratio to net sales were 13.2 percent for the second quarter of 2001, compared to 12.8 percent for the same period last year.

Including the purchase of ASTI, research and development expenditures in the first six months of 2001 increased $43.2 million to $140.6 million.

At June 29, 2001, Allergan's consolidated net worth was $913.6 million. Cash net of debt was $69.2 million as the Company held $700.1 million in cash compared to $630.9 million in debt as of this same date. Allergan's debt to equity percentage was 69.1 percent and debt to capital percentage was 40.9 percent at June 29, 2001. As of June 29, 2001, the Company's days-sales-outstanding was 61. The Company's inventory days-on-hand level was 118 as of June 29, 2001.

Earnings Per Share Impact by Adoption of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"

As communicated in the first quarter earnings release, the Company's management decided not to designate its derivative instruments as accounting hedges upon its implementation of SFAS No. 133 on January 1, 2001. As a result, the Company marks-to-market all derivative contracts and reports changes in the mark-to-market value on its income statement under the heading unrealized gain/loss on derivative instruments. For the first quarter ended March 30, 2001 this mark-to-market activity resulted in an unrealized gain of $3.5 million, including the $2.5 million pre-tax effect of the adoption of SFAS No. 133 on January 1, 2001.

During the second quarter ended June 29, 2001 several of the outstanding derivative contracts, which accounted for approximately $1.1 million of the unrealized gain reported on March 30, 2001, expired in an "in the money" position and resulted in a realized gain of $1.9 million. This reversal of the previously reported unrealized gain at March 30, 2001 for the expired derivatives has been accounted for as an unrealized loss in the Company income statement and represents the $1.1 million one-time item. Additionally, the $1.9 million realized gain for such expired derivative contracts was accounted for as Other, net on the Company's income statement.

At June 29, 2001 all remaining derivative contracts were marked-to-market. These remaining contracts continue to retain unrealized value substantially in excess of what their value was at the time Allergan entered into the contracts, however these contracts have not significantly fluctuated in value from the mark-to-market value recorded at March 30, 2001.

The remaining foreign exchange derivative contracts presently in place at Allergan will mature during the third and fourth quarters of 2001. These foreign exchange contracts provide Allergan with a unilateral option to exercise these derivatives at certain predetermined foreign exchange rate levels. To the extent these contracts mature in an "in-the-money" position, Allergan will exercise its unilateral option and will recognize a realized gain. At maturity, these foreign exchange derivative contracts may have an actual positive cash value, however, cannot have a negative cash value. Allergan's foreign exchange hedging strategy utilizes derivative contracts which function as "insurance" against potentially negative market environments and do not subject the Company to realized downside exposure at the maturity of the contracts.

On a going-forward basis within Allergan's quarterly earnings releases, the Company will quantify the impact to earnings of the mark-to-market adjustment required under SFAS No. 133 on its outstanding derivative contracts. The Company will continue to provide earnings per share information with and without the impact of the mark-to-market adjustment.

Financial Outlook for 2001

As a result of ongoing weakening of foreign currencies versus the Dollar, the Company has updated its sales estimates for the full year 2001. Specifically, since the outset of 2001, three major currencies that represent a substantial component of Allergan's foreign exchange exposure weakened versus the Dollar. The decline was 9.1 percent in the case of the Japanese Yen, 9.8 percent in the case of the Euro, and 18.5 percent in the case of the Brazilian Real. Since the beginning of the second quarter and the last time guidance was provided, the Yen, Euro and Real deteriorated, as measured on a weighted average basis related to Allergan's international sales, by 2.5 percent. This weakening of foreign currencies resulted in an approximate $8 million additional negative impact to Allergan's sales in the second quarter 2001 sales results.

Based on estimates of foreign currency rates for the remainder of 2001, Allergan believes full year sales will be in the range of $1.65 billion to $1.725 billion. With respect to year-over-year product line annual sales growth rate estimates, as measured in local currency, the Company believes that ranges provided during its January 31, 2001 conference call continue to represent good estimates with a single exception related to its ophthalmic surgical business. The Company has revised its estimates with respect to ophthalmic surgical sales growth rates for the year 2001 to a range of 5 to 10 percent. As a reminder, the Company provided the following year-over-year product line annual sales growth rate estimates: an increase of 12 to 17 percent for eye care pharmaceuticals and skin care pharmaceuticals, an increase of 25 to 35 percent for Botox(R), and a decrease of 3 to 8 percent for contact lens care. Finally, the Company estimates 2001 sales for its recently launched glaucoma agent, Lumigan(TM), to be between $30 and $50 million.

With respect to earnings per share and key ratios, Allergan has increased its 2001 EPS estimate to $1.94, excluding the impact of all non-recurring gains and charges. Earnings per share in the third and fourth quarters of 2001 should approximate $0.50 and $0.60, respectively. In addition, Allergan has revised its objectives with respect to 2001 gross profit margins, to a level of approximately 74.5 percent, an increase of some 200 basis points from full year 2000 results.

Forward-Looking Statements

In this press release, the statements from Mr. Pyott, and our statements in the "Financial Outlook for 2001" section are forward-looking statements. It is important to note that our financial targets are not predictions of actual performance. Because forecasts are inherently estimates that cannot be predicted with precision, the Company's performance at times differed from its targets, and the Company often does not know what the actual results will be until after a quarter's end. Therefore, the Company will not report or comment on its progress during the quarter. Any statement made by others with respect to progress mid-quarter cannot be attributed to the Company.

Any other statements in this press release that refer to Allergan's estimated or anticipated future results are forward-looking statements. All forward-looking statements in this press release reflect the Company's current analysis of existing trends and information and represent the Company's judgment only as of the date of this press release. Actual results may differ from current expectations based on a number of factors affecting Allergan's businesses, including 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; 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 these and other risk factors can be found in press releases issued by Allergan as well as Allergan's public periodic filings with the Securities and Exchange Commission, including the discussion under the heading " Certain Factors and Trends Affecting Allergan and its Businesses" in Allergan's 2000 Form 10-K and Form 10-Q for the quarter ended March 30, 2001. Copies of Allergan press releases and additional information about Allergan are available on the World Wide Web at http://www.allergan.com, or you can contact the Allergan Investor Relations Department by calling 714-246-4636.

Allergan Inc.

Allergan, Inc., headquartered in Irvine, California, is a technology-driven, global health care company providing eye care and specialty pharmaceutical products worldwide. Allergan develops and commercializes products in the eye care pharmaceutical, ophthalmic surgical device, over-the-counter contact lens care, movement disorder, and dermatological markets that deliver value to our customers, satisfy unmet medical needs and improve patients' lives.

                            ALLERGAN, INC.
             Condensed Consolidated Statements of Earnings
                              (Unaudited)

in millions, except per share amounts
                                 Three Months Ended   Six Months Ended
                                  June 29,  June 30, June 29,  June 30,
                                    2001      2000     2001      2000
Product sales
Net sales                         $417.2    $404.1    $813.3    $780.3
Cost of sales                       99.8     112.2     199.1     215.6
  Product gross margin             317.4     291.9     614.2     564.7

Research services
Research service revenues
 (primarily from related parties
 through April 16, 2001)            14.6      13.8      41.5      29.4
Cost of research services           13.4      13.0      39.0      27.8
  Research services margin           1.2       0.8       2.5       1.6

Selling, general and administrative179.1     168.1     368.3     333.6
Technology fees from related party  (0.2)     (0.8)     (0.7)     (1.6)
Research and development            94.9      51.7     140.6      97.4

Operating income                    44.8      73.7     108.5     136.9

Interest income                      8.1       4.9      19.1       8.8
Interest expense                    (5.6)     (5.5)    (10.9)    (10.4)
Gain on investments, net              --       0.6        --       0.6
Unrealized gains/(losses)
 on derivative instruments          (1.1)       --       4.9        --
Other, net                           1.4       0.6       2.0       0.5
                                     2.8       0.6      15.1      (0.5)

Earnings before income taxes
 and minority interest              47.6      74.3     123.6     136.4

Provision for income taxes          25.4      22.3      47.4      40.9
Minority interest                    0.3       0.1       0.4       0.1

Net earnings before cumulative
 effect of change in
 accounting principle               21.9      51.9      75.8      95.4

Cumulative effect of change in
 accounting principle, net $0.7
 million of tax                       --        --       1.8        --
Net earnings                     $  21.9  $   51.9   $  74.0   $  95.4

Basic earnings per share:
  Before cumulative effect of
   change in accounting
   principle                     $   0.17 $    0.40  $   0.57  $   0.73
  Cumulative effect of
   accounting change, net             --        --      (0.01)      --
  Net basic earnings per share   $   0.17 $    0.40  $   0.56  $   0.73

Diluted earnings per share:
  Before cumulative effect of
   change in accounting
   principle                     $   0.16 $    0.39  $   0.56  $   0.72
  Cumulative effect of
   accounting change, net             --        --      (0.01)      --
  Net diluted earnings per share $   0.16 $    0.39  $   0.55  $   0.72

Weighted average number of common
 shares outstanding:
  Basic                            131.8     130.3     131.8     130.1
  Diluted                          134.6     133.8     134.4     133.2


                            ALLERGAN, INC.
                 Condensed Consolidated Balance Sheets
                              (Unaudited)

in millions                                  June 29,     December 31,
                                               2001          2000

Assets

Cash and equivalents                       $   700.1        $   773.9
Trade receivables, net                         279.2            290.1
Inventories                                    129.3            122.7
Other current assets                           157.2            139.6

Total current assets                         1,265.8          1,326.3

Property, plant and equipment, net             357.7            351.6
Other noncurrent assets                        323.0            293.1

Total assets                               $ 1,946.5        $ 1,971.0


Liabilities and stockholders' equity

Notes payable                              $    96.6        $    59.2
Accounts payable                                95.6             96.3
Accrued expenses and income taxes              252.2            277.0

Total current liabilities                      444.4            432.5

Long-term debt                                 534.3            584.7
Other liabilities                               54.2             80.0
Stockholders' equity                           913.6            873.8

Total liabilities and stockholders' equity $ 1,946.5        $ 1,971.0


                            ALLERGAN, INC.
                       Net Sales by Product Line
                              (Unaudited)

in millions                      Three Months Ended   Six Months Ended
                                June 29,    June 30, June 29,  June 30,
                                  2001        2000     2001      2000

Specialty Pharmaceuticals:
   Eye Care Pharmaceuticals      $181.0      $173.9   $369.0    $353.0
   Skin Care                       18.7        16.5     36.7      32.2
   Botox/Neuromuscular             76.4        60.1    144.0     112.1
     Total                        276.1       250.5    549.7     497.3

Medical Devices and
 OTC Product Lines:
   Ophthalmic Surgical             65.7        65.1    122.4     121.6
   Contact Lens Care               75.4        88.5    141.2     161.4
     Total                        141.1       153.6    263.6     283.0

TOTAL NET SALES                  $417.2      $404.1   $813.3    $780.3

Domestic                             55%         50%      57%       53%

International                        45%         50%      43%       47%