EXHIBIT 10.1
IVAX Corporation
4400 Biscayne Boulevard
Miami, Florida 33137
Telephone 305-575-6000
FOR IMMEDIATE RELEASE
IVAX ANNOUNCES RESTRUCTURING; OFFERS THIRD QUARTER OUTLOOK
EXPECTS ANNUALIZED COST SAVINGS
FORECASTS LOSS FOR 1996 THIRD QUARTER
RECEIVES FDA APPROVAL FOR PROPRIETARY DRUG ELMIRON/registered mark/
Miami, Florida, September 30, 1996 -- IVAX Corporation (AMEX:IVX)
announced today that it is restructuring its U.S. generic pharmaceutical
business to enhance operating efficiencies and reduce costs. The restructuring
includes work force reductions, facility consolidations and other cost saving
measures. When fully implemented, IVAX expects the restructuring ultimately to
reduce costs on an annualized basis by approximately $20 million before taxes.
The restructuring is expected to give rise to an approximate $13 million pre-tax
charge to be recorded in the 1996 third quarter.
"As we indicated in our 1996 second quarter earnings release, we have
scrutinized our generic drug business and, with today's announcement, we take
the first steps of an ongoing, company-wide commitment to improve our
competitive edge through cost reductions and improved efficiencies," said
Phillip Frost, M.D., IVAX' Chairman and Chief Executive Officer. "In August, we
created a task force comprised of IVAX' senior management to rapidly identify
and implement strategies to reduce costs and improve efficiencies in our U.S.
generic drug business without compromising product quality, customer
satisfaction or future growth prospects. The task force's initial emphasis is on
facility consolidation and work force reductions."
"A linchpin of our plan to consolidate manufacturing facilities will
take place shortly. In August 1996, we agreed to acquire from Glaxo Wellcome
Inc. a highly-efficient, 275,000 square foot facility located in Kirkland,
Canada. The acquisition is scheduled to close in the first quarter of 1997. The
Kirkland facility has the capacity to manufacture a wide range of pharmaceutical
products, including injectable pharmaceuticals, which is an important
manufacturing capability that we do not presently possess. The facility comes
staffed with approximately 165 highly-trained employees and is fully equipped.
Following the acquisition, we will manufacture certain products for Glaxo
Wellcome, and expect to contract manufacture products for other third parties on
an ongoing basis. The facility's advanced, efficient
IVAX Corporation
September 30, 1996
Page 2
equipment and design should ultimately lower the overall manufacturing costs of
our products to be manufactured there."
"IVAX' Shreveport, Louisiana facility, which manufactures a variety of
generic and branded pharmaceuticals, is expected to be closed by year-end 1996.
IVAX' Syosset, New York facility, which manufactures topical pharmaceutical
products, and a related R&D facility, are expected to be closed by the end of
the 1997 first quarter. Production from these facilities will be transferred to
the Kirkland facility."
"We also expect to close our facility located in Fort Lauderdale,
Florida. Administrative and related functions presently located there will be
transferred to our facilities in Miami late this year or in early 1997. Product
packaging operations presently located in Fort Lauderdale will be transferred to
the Kirkland facility during the 1997 first quarter."
"Our generic drug distribution facility in Northvale, New Jersey is
expected to be closed during the 1996 fourth quarter. Our Mason, Ohio generic
drug distribution facility, and McGaw's distribution operations in Fairfield,
Ohio, will be closed early in the 1997 second quarter. Distribution from those
facilities ultimately will be transferred to an advanced,
strategically-centralized distribution center to be leased in Kenton County,
Kentucky. The Kentucky facility is being built by the owner to our
specifications."
"In addition to workforce reductions associated with these facility
closings and consolidations, other workforce reductions are underway. We will
continue the process of substantially streamlining our generic pharmaceutical
selling, marketing, manufacturing, administrative and product development teams
located at our two Miami facilities, at our St. Croix, Virgin Islands facility,
and elsewhere. Not including employee positions arising from the Kirkland
acquisition, the restructuring ultimately will result in the elimination of
approximately 450 employee positions, which is over a quarter of the present
employee positions at Zenith Goldline."
"Many of the foregoing initiatives will begin to offer cost savings in
the fourth quarter of 1996, and substantially all of them will be fully
implemented and offering cost savings by early in the 1997 second quarter. Once
the restructuring is fully implemented, we should see annualized cost savings of
approximately $20 million before taxes, or $12 million after taxes."
Dr. Frost commented on future initiatives: "Today's restructuring marks
just the beginning of our commitment to improve shareholder value through
improved efficiencies and cost reductions. We are targeting a number of other
areas in our generic drug and other businesses for additional savings. For
example, we are conducting an extensive evaluation of our U.S. pharmaceutical
manufacturing operations to better utilize our remaining facilities. To assist
us, we have retained a consulting firm that is well-recognized in strategic
planning and engineering for the pharmaceutical industry."
IVAX Corporation
September 30, 1996
Page 3
"Along similar lines, after receiving FDA approval to do so, we will
transfer production of our verapamil HCl ER product from Miami to Ireland. The
transfer will permit us to close one of our Miami facilities and to better
utilize our Irish facility, and will lower our effective tax rate by subjecting
a portion of our verapamil profits to Ireland's favorable tax rates. Looking
outside our U.S. generic drug business, as previously indicated, we are
examining non-core businesses for opportunities to improve shareholder value."
Dr. Frost provided a preliminary outlook for IVAX' 1996 third quarter
results: "The restructuring is estimated to result in a 1996 third quarter
charge of approximately $13 million before taxes, or about $8 million after
taxes. As part of our ongoing efforts to streamline our operations, we may incur
additional charges. In addition to the restructuring charge, several factors
relating to our U.S. generic drug business will influence our third quarter
results. First, our customer inventory levels continue to be high, so customer
re-orders remain depressed. Second, prices have continued to decline for generic
drug products. Third, lower prices at a time of elevated inventories will
increase shelf stock adjustments paid to customers to levels well above more
typical quarters. Fourth, we expect reserves for returns and inventory
write-offs to be well above typical quarters as well. Lastly, a wholesaler
customer who owed us approximately $16 million filed a Chapter 11 bankruptcy
petition during the third quarter. Accordingly, in the 1996 third quarter, we
supplemented our existing second quarter reserve of approximately $6 million
relating to this account with additional reserves of approximately $7 million."
"As a result, I regret to say that we forecast a loss of approximately
$35 million for the 1996 third quarter, before taking into account the
restructuring charge. Because certain of the factors affecting the quarter are
subject to estimation and cannot be precisely quantified at this time, the
actual loss for the quarter ultimately may be greater or less than our
forecasted loss by as much as several million dollars. We continue to work
through our present challenges, and expect to see substantial improvement in our
consolidated operating results for the 1996 fourth quarter."
IVAX expects to issue a news release reporting its definitive 1996
third quarter earnings in late October or early November. The estimated
restructuring charge, combined with the anticipated loss for the third quarter,
is expected to result in IVAX being out of compliance with the provisions of its
revolving line of credit agreement. IVAX is working with the participating banks
to obtain a waiver of any default and to amend the credit agreement.
"U.S. generic drug sales are poised to double over the next three to
five years," said Dr. Frost. "With today's initiatives, we are committed to
building a leaner, stronger generic drug business to capture a greater share of
this market. At the same time, we are increasing our commitment to our
proprietary drug development programs, for therein lies the key to sustained
future growth."
"Affirming our resolve in this regard, we were pleased to announce
today that we received clearance from the FDA to begin marketing our patented
prescription medication
IVAX Corporation
September 30, 1996
Page 4
Elmiron/registered mark/. Elmiron/registered mark/ is our medication
for the pain or discomfort associated with INTERSTITIAL CYSTITIS (IC), a
chronic, progressive and debilitating urinary bladder disease afflicting
primarily women. IC is a disease characterized by severe bladder and pelvic
pain, and urinary frequency. Other than Elmiron/registered mark/, there is no
effective orally-administered treatment for the symptoms of this incapacitating
disease. We continue to study Elmiron/registered mark/ for other indications as
well, and have entered into a Collaborative Research and Development Agreement
with the National Institutes of Health to study Elmiron/registered mark/'s
activity in the reversal of certain forms of advanced kidney disease."
"Elmiron/registered mark/ is IVAX' first innovative new drug approved
by the FDA for marketing in the U.S. In addition to being important news for IC
sufferers across the country, our Elmiron/registered mark/ approval is a major
step towards our goal of offsetting the inherent volatility of earnings derived
from our generic drug business with a range of proprietary new drugs to provide
for more balanced future growth."
"Other innovative drug projects in our portfolio include
Cervene/registered mark/ for the mitigation of central nervous system damage
following ischemic stroke, and Paxene/trademark/ for the treatment of breast,
ovarian and other cancers. Both projects are in Phase III Clinical Trials, and
New Drug Applications for these compounds are expected to be submitted to the
FDA during 1997. IVAX is also developing innovative products for the treatment
of asthma, including products which feature our patented breath-activated
metered dose inhaler called Easi-Breathe/trademark/. These innovative products,
if approved, will be of tremendous therapeutic and commercial significance, and
should combine with our greater efficiencies to significantly enhance IVAX'
growth prospects in the intermediate and long term."
STATEMENTS MADE IN THIS PRESS RELEASE, INCLUDING THOSE RELATING TO THE
ESTIMATED COST REDUCTIONS, THE AMOUNT OF THE RESTRUCTURING CHARGE EXPECTED IN
THE THIRD QUARTER, THE PURCHASE OF THE KIRKLAND FACILITY, THE TIME FRAMES FOR
CLOSING AND CONSOLIDATING FACILITIES AND ELIMINATING EMPLOYEE POSITIONS, THE
EXPECTED MANUFACTURING COSTS OF PRODUCTS MADE AT THE KIRKLAND FACILITY, THE
EXPECTED TRANSFER OF VERAPAMIL PRODUCTION FROM MIAMI TO IRELAND, THE AMOUNT OF
THE WRITE-OFF EXPECTED IN THE THIRD QUARTER RELATING TO THE WHOLESALER
CUSTOMER'S RECEIVABLE, THE EXPECTED LOSS FOR THE THIRD QUARTER, EXPECTATIONS FOR
THE FOURTH QUARTER, THE PROSPECTS OF THE GENERIC DRUG INDUSTRY, AND THE EXPECTED
SUBMISSIONS OF NDAS FOR CERVENE /REGISTERED MARK/ AND PAXENE /TRADEMARK/, ARE
FORWARD LOOKING AND ARE MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE
SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES WHICH MAY CAUSE RESULTS TO DIFFER MATERIALLY FROM THOSE SET FORTH
IN THESE STATEMENTS. AMONG OTHER THINGS, THE COST REDUCTIONS ARE ESTIMATED BASED
ON PRELIMINARY INFORMATION AS WELL AS CERTAIN ASSUMPTIONS WHICH MANAGEMENT
BELIEVES TO BE REASONABLE AT THIS TIME AND ARE SUBJECT TO THE SUCCESSFUL
COMPLETION OF THE ACTIONS DESCRIBED IN THIS PRESS RELEASE; THE EXPECTED
RESTRUCTURING CHARGE IS AN ESTIMATE BASED ON CERTAIN ASSUMPTIONS WHICH
MANAGEMENT BELIEVES TO BE REASONABLE AT THIS TIME; THE PURCHASE OF THE KIRKLAND
FACILITY IS SUBJECT TO A NUMBER OF CONTRACTUAL CONDITIONS, INCLUDING
GOVERNMENTAL APPROVALS; THE TIMING OF THE CLOSING AND CONSOLIDATING OF
FACILITIES AND THE ELIMINATION OF EMPLOYEE POSITIONS ARE SUBJECT TO THE
ACQUISITION OF THE KIRKLAND FACILITY, THE CONSTRUCTION AND LEASING OF THE
KENTUCKY DISTRIBUTION CENTER, AND FDA APPROVAL TO TRANSFER
IVAX Corporation
September 30, 1996
Page 5
MANUFACTURING OF CERTAIN PRODUCTS; THE AMOUNT OF THE WRITE-OFF OF THE
WHOLESALER CUSTOMER'S RECEIVABLE IS SUBJECT TO DEVELOPMENTS IN THE RELATED
REORGANIZATION WHICH COULD IMPACT THE VALUE OF THE RECEIVABLE; THE TRANSFER OF
VERAPAMIL PRODUCTION IS SUBJECT TO FDA APPROVAL; AND THE EXPECTED SUBMISSIONS OF
NDAS FOR CERVENE/REGISTERED MARK/ AND PAXENE/TRADEMARK/ ARE SUBJECT TO THE
SUCCESSFUL COMPLETION OF CLINICAL TRIALS AND THE DEVELOPMENT OF ADDITIONAL DATA
REQUIRED FOR THE NDAS. THE WAIVER OF, AND AMENDMENT TO, THE CREDIT AGREEMENT IS
SUBJECT TO THE DISCRETION OF THE PARTICIPATING BANKS. EXPECTATIONS CONCERNING
FINANCIAL RESULTS FOR THE 1996 THIRD AND FOURTH QUARTERS ARE NOT ACTUAL RESULTS
AND ARE BASED ON PRELIMINARY ESTIMATES AS WELL AS CERTAIN ASSUMPTIONS WHICH
MANAGEMENT BELIEVES TO BE REASONABLE AT THIS TIME, INCLUDING ESTIMATES AND
ASSUMPTIONS CONCERNING THE PRICE AND NUMBER OF COMPETITORS FOR IVAX' GENERIC
DRUGS, THE VOLUME AND PRODUCT MIX OF SALES, AND THE LEVELS OF REQUIRED RESERVES
FOR RETURNS, SHELF STOCK ADJUSTMENTS, AND OTHER ITEMS. THE U.S. GENERIC DRUG
INDUSTRY IS EXTREMELY COMPETITIVE, WITH PRICING DETERMINED BY MANY FACTORS,
INCLUDING THE NUMBER AND TIMING OF PRODUCTS INTRODUCTIONS. ALTHOUGH THE PRICE OF
A GENERIC DRUG PRODUCT GENERALLY DECLINES OVER TIME AS COMPETITORS INTRODUCE
ADDITIONAL VERSIONS OF THE PRODUCT, THE ACTUAL DEGREE AND TIMING OF PRICE
COMPETITION IS NOT PREDICTABLE. IN ADDITION TO THE FACTORS SET FORTH ELSEWHERE
IN THIS RELEASE, THE ECONOMIC, COMPETITIVE, GOVERNMENTAL, TECHNOLOGICAL AND
OTHER FACTORS IDENTIFIED IN IVAX' FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION COULD AFFECT THE FORWARD LOOKING STATEMENTS CONTAINED IN THIS PRESS
RELEASE.
CONTACT:
Joseph C. Jones
Vice President -
Investor Relations
IVAX Corporation
305-575-6042
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