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Article by DailyStocks_admin    (11-11-08 05:39 AM)

Allergan Inc. CEO DAVID E I PYOTT bought 25000 shares on 11-06-2008 at $38.35

BUSINESS OVERVIEW

General Overview of our Business

We are a multi-specialty health care company focused on developing and commercializing innovative pharmaceuticals, biologics and medical devices that enable people to see more clearly, move more freely and express themselves more fully. Our diversified approach enables us to follow our research and development into new specialty areas where unmet needs are significant.

We discover, develop and commercialize specialty pharmaceutical, medical device and over-the-counter products for the ophthalmic, neurological, medical aesthetics, medical dermatological, breast aesthetics, obesity intervention, urological and other specialty markets in more than 100 countries around the world. We are a pioneer in specialty pharmaceutical research, targeting products and technologies related to specific disease areas such as glaucoma, retinal disease, chronic dry eye, psoriasis, acne, movement disorders, neuropathic pain and genitourinary diseases.

In March 2006, we completed the acquisition of Inamed Corporation, or Inamed, a global healthcare manufacturer and marketer of breast implants, a range of dermal filler products to correct facial wrinkles, and bariatric medical devices for approximately $3.3 billion, consisting of approximately $1.4 billion in cash and 34,883,386 shares of our common stock.

In January 2007, we acquired all of the outstanding capital stock of Groupe Cornéal Laboratoires, or Cornéal, a healthcare company that develops, manufactures and markets dermal fillers, viscoelastics and a range of ophthalmic surgical device products, for an aggregate purchase price of approximately $209.2 million, net of cash acquired. The acquisition of Cornéal expanded our marketing rights to Juvéderm tm and a range of hyaluronic acid dermal fillers from the United States, Canada and Australia to all countries worldwide and provided us with control over the manufacturing process and future research and development of Juvéderm tm and other dermal fillers.

In October 2007, we acquired all of the outstanding capital stock of Esprit Pharma Holding Company, Inc., or Esprit, for an aggregate purchase price of approximately $370.7 million, net of cash acquired. In addition to marketing Sanctura ® (trospium chloride), a twice-a-day anticholinergic approved for the treatment of overactive bladder, or OAB, the U.S. Food and Drug Administration, or FDA, approved Sanctura XR tm (trospium chloride extended release capsules) for the once-daily treatment of OAB in August 2007. By acquiring Esprit, we obtained an exclusive license to market Sanctura ® and Sanctura XR tm in the United States and its territories from Indevus Pharmaceuticals, Inc., or Indevus. We pay royalties to Indevus based upon our sales of Sanctura ® and Sanctura XR tm and assumed obligations of Esprit to pay certain other third-party royalties, also based upon sales of Sanctura ® and Sanctura XR tm . We entered into a co-promotion agreement with Indevus pursuant to which Indevus will co-promote Sanctura ® and Sanctura XR tm through at least September 2008, subject to Indevus’ right to extend the agreement for up to six months. We launched Sanctura XR tm in the United States in January 2008.

We were founded in 1950 and incorporated in Delaware in 1977. Our principal executive offices are located at 2525 Dupont Drive, Irvine, California, 92612, and our telephone number at that location is (714) 246-4500. Our Internet website address is www.allergan.com . We make our periodic and current reports, together with amendments to these reports, available on our Internet website, free of charge, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission. Members of the public may read and copy any materials we file with, or furnish to, the Securities and Exchange Commission, or SEC, at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. To obtain information on the operation of the Public Reference Room, please call the SEC at 1-800-SEC-0330. The SEC maintains an Internet site at www.sec.gov that contains the reports, proxy statements and other information that we file electronically with the SEC. The information on our Internet website is not incorporated by reference into this Annual Report on Form 10-K.

Operating Segments

Through the first fiscal quarter of 2006, we operated our business on the basis of a single reportable segment — specialty pharmaceuticals. Due to the Inamed acquisition, beginning in the second fiscal quarter of 2006, we operated our business on the basis of two reportable segments — specialty pharmaceuticals and medical devices. The specialty pharmaceuticals segment produces a broad range of pharmaceutical products, including: ophthalmic products for glaucoma therapy, ocular inflammation, infection, allergy and chronic dry eye; Botox ® for certain therapeutic and aesthetic indications; skin care products for acne, psoriasis and other prescription and over-the-counter dermatological products; and, beginning in the fourth quarter of 2007, urologics products. The medical devices segment produces a broad range of medical devices, including: breast implants for augmentation, revision and reconstructive surgery; obesity intervention products, including the Lap-Band ® System and the BIB tm BioEnterics ® Intragastric Balloon; and facial aesthetics products. The following table sets forth, for the periods indicated, product net sales for each of our product lines within our specialty pharmaceuticals segment and medical devices segment, domestic and international sales as a percentage of total product net sales within our specialty pharmaceuticals segment and medical devices segment, and segment operating income for our specialty pharmaceuticals segment and medical devices segment:

We do not discretely allocate assets to our operating segments, nor does our chief operating decision maker evaluate operating segments using discrete asset information.

See Note 16, “Business Segment Information,” in the notes to the consolidated financial statements listed under Item 15 of Part IV of this report, “Exhibits and Financial Statement Schedules,” for further information concerning our foreign and domestic operations.

Specialty Pharmaceuticals Segment

Eye Care Pharmaceuticals Product Line

We develop, manufacture and market a broad range of prescription and non-prescription products designed to treat diseases and disorders of the eye, including glaucoma, chronic dry eye, inflammation, infection and allergy.

Glaucoma. The largest segment of the market for ophthalmic prescription drugs is for the treatment of glaucoma, a sight-threatening disease typically characterized by elevated intraocular pressure leading to optic nerve damage. Glaucoma is currently the world’s second leading cause of blindness, and we estimate that over 60 million people worldwide have glaucoma. According to IMS Health Incorporated, an independent marketing research firm, our products for the treatment of glaucoma, including Lumigan ® (bimatoprost ophthalmic solution) 0.03%, or Lumigan ® , Alphagan ® (brimonidine tartrate ophthalmic solution) 0.2%, or Alphagan ® , Alphagan ® P (brimonidine tartrate ophthalmic solution) 0.15%, or Alphagan ® P, Alphagan ® P 0.1% (brimonidine tartrate ophthalmic solution) 0.1%, or Alphagan ® P 0.1%, Combigan tm (brimonidine tartrate/timolol maleate ophthalmic solution) 0.2%/0.5%, or Combigan tm and Ganfort ® (bimatoprost/timolol maleate ophthalmic solution) captured approximately 18% of the worldwide glaucoma market for the first nine months of 2007.

Lumigan ® is a topical treatment indicated for the reduction of elevated intraocular pressure in patients with glaucoma or ocular hypertension who are either intolerant or insufficiently responsive when treated with other intraocular pressure-lowering medications. We currently sell Lumigan ® in over 70 countries worldwide and it is now our largest selling eye care product. According to IMS Health Incorporated, Lumigan ® was the third largest selling glaucoma product in the world for the first nine months of 2007. In March 2002, the European Commission approved Lumigan ® through its centralized procedure. In January 2004, the European Union’s Committee for Proprietary Medicinal Products approved Lumigan ® as a first-line therapy for the reduction of elevated intraocular pressure in chronic open-angle glaucoma and ocular hypertension. In June 2006, the FDA approved Lumigan ® as a first-line therapy. In May 2004, we entered into an exclusive licensing agreement with Senju Pharmaceutical Co., Ltd., or Senju, under which Senju became responsible for the development and commercialization of Lumigan ® in Japan. Senju incurs associated costs, makes clinical development and commercialization milestone payments and makes royalty-based payments on product sales. We agreed to work collaboratively with Senju on overall product strategy and management. In June 2007, Senju filed a new drug application in Japan for Lumigan ® .

In November 2003, we filed a New Drug Application with the FDA for Ganfort ® , a Lumigan ® and timolol combination designed to treat glaucoma or ocular hypertension. In August 2004, we announced that the FDA issued an approvable letter for Ganfort ® , setting out the conditions, including additional clinical investigation, that we must meet in order to obtain final FDA approval. In May 2006, we received a license from the European Commission to market Ganfort ® in the European Union. Combined sales of Lumigan ® and Ganfort ® represented approximately 10% of our total consolidated product net sales in 2007. Sales of Lumigan ® represented approximately 11% of our total consolidated product net sales in 2006 and 12% of our total consolidated product net sales in 2005. The decline in the percentage of our total net sales represented by sales of Lumigan ® primarily resulted from the significant increase in our net sales as a result of the Inamed acquisition.

Our third largest selling eye care pharmaceutical products are the ophthalmic solutions Alphagan ® , Alphagan ® P , and Alphagan ® P 0.1%. Alphagan ® , Alphagan ® P and Alphagan ® P 0.1% lower intraocular pressure by reducing aqueous humor production and increasing uveoscleral outflow. Alphagan ® P and Alphagan ® P 0.1% are improved reformulations of Alphagan ® containing brimonidine, Alphagan ® ’s active ingredient, preserved with Purite ® . We currently market Alphagan ® , Alphagan ® P, and Alphagan ® P 0.1% in over 70 countries worldwide.

Alphagan ® , Alphagan ® P and Alphagan ® P 0.1% combined were the fifth best selling glaucoma products in the world for the first nine months of 2007, according to IMS Health Incorporated. Combined sales of Alphagan ® , Alphagan ® P and Alphagan ® P 0.1% and Combigan tm represented approximately 9% of our total consolidated product net sales in 2007, 10% of our total consolidated product net sales in 2006 and 12% of our total consolidated product net sales in 2005. The decline in the percentage of our total net sales represented by sales of Alphagan ® , Alphagan ® P , Alphagan ® P 0.1% and Combigan tm primarily resulted from the significant increase in our net sales as a result of the Inamed acquisition. In July 2002, based on the acceptance of Alphagan ® P , we discontinued the U.S. distribution of Alphagan ® . In May 2004, we entered into an exclusive licensing agreement with Kyorin Pharmaceutical Co., Ltd., or Kyorin, under which Kyorin became responsible for the development and commercialization of Alphagan ® and Alphagan ® P in Japan’s ophthalmic specialty area. Kyorin subsequently sublicensed its rights under the agreement to Senju Pharmaceutical Co., Ltd. Under the licensing agreement, Senju incurs associated costs, makes clinical development and commercialization milestone payments, and makes royalty-based payments on product sales. We agreed to work collaboratively with Senju on overall product strategy and management. Alphagan ® P 0.1% was launched in the U.S. market in the first quarter of 2006. The marketing exclusivity period for Alphagan ® P expired in the United States in September 2004 and the marketing exclusivity period for Alphagan ® P 0.1% will expire in August 2008, although we have a number of patents covering the Alphagan ® P and Alphagan ® P 0.1% technology that extend to 2021 in the United States and 2009 in Europe, with corresponding patents pending in Europe. In May 2003, the FDA approved the first generic of Alphagan ® . Additionally, a generic form of Alphagan ® is sold in a limited number of other countries, including Canada, Mexico, India, Brazil, Colombia and Argentina. See Item 3 of Part I of this report, “Legal Proceedings” and Note 13, “Commitments and Contingencies,” in the notes to the consolidated financial statements listed under Item 15 of Part IV of this report, “Exhibits and Financial Statement Schedules,” for further information regarding litigation involving Alphagan ® . Falcon Pharmaceuticals, Ltd., an affiliate of Alcon Laboratories, Inc., or Alcon, attempted to obtain FDA approval for and to launch a brimonidine product to compete with our Alphagan ® P product. However, pursuant to a March 2006 settlement with Alcon, Alcon agreed not to sell, offer for sale or distribute its brimonidine product until September 30, 2009, or earlier if specified sales conditions occur. The primary sales condition will have occurred if prescriptions of Alphagan ® P have been converted to other brimonidine-containing products we market above a specified threshold.

In addition to our Alphagan ® and Lumigan ® products, we developed the ophthalmic solution Combigan tm , a brimonidine and timolol combination designed to treat glaucoma and ocular hypertension in people who are not responsive to treatment with only one medication and are considered appropriate candidates for combination therapy. In November 2005, we received positive opinions for Combigan tm from 20 concerned member states included in the Combigan tm Mutual Recognition Procedure for the European Union, and we launched Combigan tm in the European Union during the following year. In October 2007, the FDA approved Combigan tm and we launched Combigan tm in the United States in November 2007. Combigan tm is now sold in over 30 countries worldwide.

Chronic Dry Eye. Restasis ® (cyclosporine ophthalmic emulsion) 0.05%, or Restasis ® , is the first and currently the only prescription therapy for the treatment of chronic dry eye worldwide. Restasis ® is our second largest selling eye care product. Chronic dry eye is a painful and irritating condition involving abnormalities and deficiencies in the tear film initiated by a variety of causes. The incidence of chronic dry eye increases markedly with age, after menopause in women and in people with systemic diseases such as Sjogren’s syndrome and rheumatoid arthritis. Until the approval of Restasis ® , physicians used lubricating tears as a temporary measure to provide palliative relief of the debilitating symptoms of chronic dry eye. We launched Restasis ® in the United States in April 2003 under a license from Novartis AG, or Norvartis, for the ophthalmic use of cyclosporine. Restasis ® is currently approved in 28 countries. In April 2005, we entered into a royalty buy-out agreement with Novartis related to Restasis ® and agreed to pay $110 million to Novartis in exchange for Novartis’ worldwide rights and obligations, excluding Japan, for technology, patents and products relating to the topical ophthalmic use of cyclosporine A, the active ingredient in Restasis ® . Under the royalty buy-out agreement, we no longer make royalty payments to Novartis in connection with our sales of Restasis ® . In June 2001, we entered into a licensing, development and marketing agreement with Inspire Pharmaceuticals, Inc., or Inspire, under which we obtained an exclusive license to develop and commercialize Inspire’s product candidate, Prolacria tm (diquafosol tetrasodium), or Prolacria tm , a treatment to relieve the signs of chronic dry eye by rehydrating conjunctival mucosa and increasing non-lacrimal tear component production, in exchange for our agreement to make royalty payments to Inspire on sales of both Restasis ® and, ultimately Prolacria tm , and for Inspire to promote Restasis ® in the United States. In December 2003, the FDA issued an approvable letter for Prolacria tm and also requested additional clinical data. In February 2005, Inspire announced that Prolacria tm failed to demonstrate statistically significant improvement as compared to a placebo for the primary endpoint of the incidence of corneal clearing. Inspire also announced that Prolacria tm achieved improvement compared to a placebo for a number of secondary endpoints. Inspire filed a New Drug Application amendment with the FDA in the second quarter of 2005. In December 2005, Inspire announced that it had received a second approvable letter from the FDA in connection with Prolacria tm .

Inflammation. Our leading ophthalmic anti-inflammatory product is Acular ® (ketorolac ophthalmic solution) 0.5%, or Acular ® . Acular ® is a registered trademark of and is licensed from its developer, Syntex (U.S.A.) Inc., a business unit of Hoffmann-LaRoche Inc. Acular ® is indicated for the temporary relief of itch associated with seasonal allergic conjunctivitis, the inflammation of the mucus membrane that lines the inner surface of the eyelids, and for the treatment of post-operative inflammation in patients who have undergone cataract extraction. Acular PF ® was the first, and currently remains the only unit-dose, preservative-free topical non-steroidal anti-inflammatory drug, or NSAID, in the United States. Acular PF ® is indicated for the reduction of ocular pain and photophobia following incisional refractive surgery. Acular LS ® (ketorolac ophthalmic solution) 0.4% is a version of Acular ® that has been reformulated for the reduction of ocular pain, burning and stinging following corneal refractive surgery. The Acular ® franchise was the highest selling ophthalmic NSAID in the world during the first nine months of 2007, according to IMS Health Incorporated.

Our ophthalmic anti-inflammatory product Pred Forte ® remains a leading topical steroid worldwide based on 2007 sales. Pred Forte ® has no patent protection or marketing exclusivity and faces generic competition.

Infection. Our Ocuflox ® /Oflox ® /Exocin ® ophthalmic solution is a leading product in the ophthalmic anti-infective market. Ocuflox ® has no patent protection or marketing exclusivity and faces generic competition.

We license Zymar ® (gatifloxacin ophthalmic solution) 0.3%, or Zymar ® , from Kyorin Pharmaceutical Co. Ltd., and have worldwide ophthalmic commercial rights excluding Japan, Korea, Taiwan and certain other countries in Asia. We launched Zymar ® in the United States in April 2003. Zymar ® is a fourth-generation fluoroquinolone for the treatment of bacterial conjunctivitis and is currently approved in 29 countries. Laboratory studies have shown that Zymar ® kills the most common bacteria that cause eye infections as well as specific resistant bacteria. According to Verispan, an independent research firm, Zymar ® was the number two ophthalmic anti-infective prescribed by ophthalmologists in the United States in 2007. Zymar ® was the third best selling ophthalmic anti-infective product in the world (and second in the United States) for the first nine months of 2007, according to IMS Health Incorporated.

Allergy. The allergy market is, by its nature, a seasonal market, peaking during the spring months. We market Alocril ® ophthalmic solution for the treatment of itch associated with allergic conjunctivitis. We license Alocril ® from Fisons Ltd., a business unit of Sanofi-Aventis, and hold worldwide ophthalmic commercial rights excluding Japan. Alocril ® is approved in the United States, Canada and Mexico. We license Elestat ® from Boehringer Ingelheim AG, and hold worldwide ophthalmic commercial rights excluding Japan. Elestat ® is used for the prevention of itching associated with allergic conjunctivitis. We co-promote Elestat ® in the United States under an agreement with Inspire within the ophthalmic specialty area and to allergists. Under the terms of our agreement with Inspire, Inspire provided us with an up-front payment and we make payments to Inspire based on Elestat ® net sales. In addition, the agreement reduced our existing royalty payment to Inspire for Restasis ® . Inspire has primary responsibility for selling and marketing activities in the United States related to Elestat ® . We have retained all international marketing and selling rights. We launched Elestat ® in Europe under the brand names Relestat ® and Purivist ® during 2004, and Inspire launched Elestat ® in the United States during 2004. Elestat ® (together with sales under its brand names Relestat ® and Purivist ® ) is currently approved in 38 countries and was the fifth best selling ophthalmic allergy product in the world (and fourth in the United States) for the first nine months of 2007, according to IMS Health Incorporated.

Neuromodulator

Our neuromodulator product, Botox ® (botulinum toxin type A), has a long-established safety profile and has been approved by the FDA for more than 18 years to treat a variety of medical conditions, as well as for aesthetic use since 2002. With more than 3,000 publications on botulinum toxin type A in scientific and medical journals, results of dozens of clinical trials involving more than 10,000 patients and having been used in clinical practice to treat more than a million patients worldwide, Botox ® is a widely researched medicine with more than 100 therapeutic and aesthetic uses reported in the medical literature. Botox ® is now accepted in many global regions as the standard therapy for indications ranging from therapeutic neuromuscular disorders and related pain to facial aesthetics. The versatility of Botox ® is based on its localized treatment effect. Marketed as Botox ® , Botox ® Cosmetic, Vistabel ® or Vistabex ® , depending on the indication and country of approval, the product is currently approved in 77 countries for up to 20 unique indications. Sales of Botox ® represented approximately 31%, 33% and 36% of our total consolidated product net sales in 2007, 2006 and 2005 respectively. The decline in the percentage of our total net sales represented by sales of Botox ® primarily resulted from the significant increase in our net sales as a result of the Inamed acquisition.

Botox ® is used therapeutically for the treatment of certain neuromuscular disorders which are characterized by involuntary muscle contractions or spasms. The approved therapeutic indications for Botox ® in the United States are as follows:


• blepharospasm, the uncontrollable contraction of the eyelid muscles which can force the eye closed and result in functional blindness;

• strabismus, or misalignment of the eyes, in people 12 years of age and over;

• cervical dystonia, or sustained contractions or spasms of muscles in the shoulders or neck in adults, along with associated pain; and

• severe primary axillary hyperhidrosis (underarm sweating) that is inadequately managed with topical agents.

In many countries outside of the United States, Botox ® is also approved for treating hemifacial spasm, pediatric cerebral palsy and post-stroke focal spasticity. We are currently pursuing approvals for Botox ® in the United States and Europe for new indications, including headache, post-stroke focal spasticity, overactive bladder and benign prostatic hypertrophy. In April 2005, we announced plans to move forward with a large Phase III clinical trial program to investigate the safety and efficacy of Botox ® as a prophylactic therapy in patients with chronic migraine, and all patients have now exited the double blind phase of these studies. In May 2005, we reached agreement with the FDA to enter Phase III clinical trials for Botox ® to treat neurogenic overactive bladder and Phase II clinical trials for Botox ® to treat idiopathic overactive bladder. In December 2005, we initiated Phase II clinical trials for Botox ® to treat benign prostatic hypertrophy.

Botox ® Cosmetic. The FDA has approved Botox ® for the temporary improvement in the appearance of moderate to severe glabellar lines in adult men and women age 65 or younger. Referred to as Botox ® , Botox ® Cosmetic, Vistabel ® or Vistabex ® , depending on the country of approval, this product is designed to relax wrinkle-causing muscles to smooth the deep, persistent, glabellar lines between the brow that often develop during the aging process. Currently, over 50 countries have approved facial aesthetic indications for Botox ® , Botox ® Cosmetic, Vistabel ® or Vistabex ® . Health Canada, the Canadian national regulatory body, also approved Botox ® Cosmetic for the treatment of upper facial lines in November 2005, and this indication has also been approved in Australia and New Zealand. In 2002, we launched comprehensive direct-to-consumer marketing campaigns, including television commercials, radio commercials, print advertising and interactive media aimed at dermatologists, plastic and reconstructive surgeons and other aesthetic specialty physicians, as well as consumers, in Canada and the United States and these campaigns continue. We also continue to sponsor aesthetic specialty physician training in approved countries to further expand the base of qualified physicians using Botox ® , Botox ® Cosmetic, Vistabel ® or Vistabex ® . With the integration of the former Inamed medical products into our Total Facial Rejuvenation tm portfolio, we now have a worldwide leadership position in the facial aesthetics market.

CEO BACKGROUND

Mr. Pyott has been Allergan’s Chief Executive Officer since January 1998 and in 2001 became the Chairman of the Board. Mr. Pyott also served as Allergan’s President from January 1998 until February 2006. Previously, he was head of the Nutrition Division and a member of the executive committee of Novartis AG, a publicly-traded company focused on the research and development of products to protect and improve health and well-being, from 1995 until December 1997. From 1992 to 1995, Mr. Pyott was President and Chief Executive Officer of Sandoz Nutrition Corp., Minneapolis, Minnesota, a predecessor to Novartis, and General Manager of Sandoz Nutrition, Barcelona, Spain, from 1990 to 1992. Prior to that, Mr. Pyott held various positions within the Sandoz Nutrition group from 1980. Mr. Pyott is also a member of the board of directors of Avery Dennison Corporation, a publicly-traded company focused on pressure-sensitive technology and self-adhesive solutions, and Edwards Lifesciences Corporation, a publicly-traded company focused on products and technologies to treat advanced cardiovascular disease. Mr. Pyott is a member of the Directors’ Board of The Paul Merage School of Business at the University of California, Irvine (UCI). Mr. Pyott serves on the board of directors and the Executive Committee of the California Healthcare Institute and the Board of the Biotechnology Industry Organization. Mr. Pyott also serves as a member of the board of directors of the Pan-American Ophthalmological Foundation, the International Council of Ophthalmology Foundation, and as a member of the Advisory Board for the Foundation of the American Academy of Ophthalmology.

Mr. Ball has been President, Allergan since February 2006. Mr. Ball was Executive Vice President and President, Pharmaceuticals from October 2003 until February 2006. Prior to that, Mr. Ball was Corporate Vice President and President, North America Region and Global Eye Rx Business since May 1998 and prior to that was Corporate Vice President and President, North America Region since April 1996. He joined Allergan in 1995 as Senior Vice President, U.S. Eye Care after 12 years with Syntex Corporation, a multinational pharmaceutical company, where he held a variety of positions including President, Syntex Inc. Canada and Senior Vice President, Syntex Laboratories. Mr. Ball serves on the board of directors of STEC, Inc., a publicly-traded manufacturer and marketer of computer memory and hard drive storage solutions.

Mr. Barlow has been Senior Vice President, Corporate Controller since February 2005. Mr. Barlow joined Allergan in January 2002 as Vice President, Corporate Controller. Prior to joining Allergan, Mr. Barlow served as Chief Financial Officer of Wynn Oil Company, a division of Parker Hannifin Corporation. Prior to Wynn Oil Company, Mr. Barlow was Treasurer and Controller at Wynn’s International, Inc., a supplier of automotive and industrial components and specialty chemicals, from July 1990 to September 2000. Before working for Wynn’s International, Inc., Mr. Barlow was Vice President, Controller from 1986 to 1990 for Ford Equipment Leasing Company. From 1983 to 1985 Mr. Barlow worked for the accounting firm Deloitte, Haskins and Sells.

Mr. Diradoorian has served as Allergan’s Executive Vice President, Global Technical Operations since February 2006. From April 2005 to February 2006, Mr. Diradoorian served as Senior Vice President, Global Technical Operations. From February 2001 to April 2005, Mr. Diradoorian served as Vice President, Global Engineering and Technology. Mr. Diradoorian joined Allergan in July 1981. Prior to joining Allergan, Mr. Diradoorian held positions at American Hospital Supply and with the Los Angeles Dodgers baseball team.

Mr. Edwards has been Executive Vice President, Finance and Business Development, Chief Financial Officer since September 2005. Prior to that, Mr. Edwards was Corporate Vice President, Corporate Development since March 2003 and previously served as Senior Vice President Treasury, Tax, and Investor Relations. He joined Allergan in 1993. Prior to joining Allergan, Mr. Edwards was with Banque Paribas and Security Pacific National Bank, where he held various senior level positions in the credit and business development functions.

Mr. Ingram has been Executive Vice President, Chief Administrative Officer, General Counsel and Secretary, as well as our Chief Ethics Officer, since October 2006. From October 2003 through October 2006, Mr. Ingram served as Executive Vice President, General Counsel and Secretary, as well as our Chief Ethics Officer. Prior to that, Mr. Ingram served as Corporate Vice President, General Counsel and Secretary, as well as our Chief Ethics Officer, since July 2001. Prior to that he was Senior Vice President and General Counsel since January 2001, and Assistant Secretary since November 1998. Prior to that, Mr. Ingram was Associate General Counsel from August 1998, Assistant General Counsel from January 1998 and Senior Attorney and Chief Litigation Counsel from March 1996, when he first joined Allergan. Prior to joining Allergan, Mr. Ingram was, from August 1988 to March 1996, an attorney with the law firm of Gibson, Dunn & Crutcher. Mr. Ingram manages the Global Legal Affairs organization, Global Regulatory Affairs, Compliance and Internal Audit, Corporate Communications, Global Trade Compliance, the Global Human Resources organization and the Information Technology organization. Mr. Ingram serves as a member of the board of directors of Volcom, Inc., a publicly-traded designer and distributor of clothing and accessories.

Dr. Whitcup has been Executive Vice President, Research and Development since July 2004. Dr. Whitcup joined Allergan in January 2000 as Vice President, Development, Ophthalmology. In January 2004, Dr. Whitcup became Allergan’s Senior Vice President, Development, Ophthalmology. From 1993 until 2000, Dr. Whitcup served as the Clinical Director of the National Eye Institute at the National Institutes of Health. As Clinical Director, Dr. Whitcup’s leadership was vital in building the clinical research program and promoting new ophthalmic therapeutic discoveries. Dr. Whitcup is a faculty member at the Jules Stein Eye Institute/David Geffen School of Medicine at the University of California, Los Angeles. Dr. Whitcup serves on the board of directors of Avanir Pharmaceuticals, a publicly-traded pharmaceutical company.


MANAGEMENT DISCUSSION FROM LATEST 10K

Purchase Price Allocation

The purchase price allocation for acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the identifiable tangible and intangible assets acquired, including in-process research and development, and liabilities assumed based on their respective fair values. Additionally, we must determine whether an acquired entity is considered to be a business or a set of net assets, because a portion of the purchase price can only be allocated to goodwill in a business combination.

On October 16, 2007, we acquired Esprit for an aggregate purchase price of approximately $370.7 million, net of cash acquired. On February 22, 2007, we acquired EndoArt for an aggregate purchase price of approximately $97.1 million, net of cash acquired. On January 2, 2007, we acquired Groupe Cornéal Laboratoires, or Cornéal, for an aggregate purchase price of approximately $209.2 million, net of cash acquired. On March 23, 2006, we completed the acquisition of Inamed Corporation, or Inamed, for approximately $3.3 billion, consisting of approximately $1.4 billion in cash and 34,883,386 shares of our common stock with a fair value of approximately $1.9 billion. The purchase prices for the acquisitions were allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition dates. We engaged an independent third-party valuation firm to assist us in determining the estimated fair values of in-process research and development, identifiable intangible assets and certain tangible assets. Such a valuation requires significant estimates and assumptions, including but not limited to, determining the timing and estimated costs to complete the in-process projects, projecting regulatory approvals, estimating future cash flows, and developing appropriate discount rates. We believe the estimated fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions. Fair value estimates for purchase price allocations may change during the allowable allocation period, which is currently up to one year from the acquisition dates, if additional information becomes available.

Results of Continuing Operations

Through the first fiscal quarter of 2006, we operated our business on the basis of a single reportable segment — specialty pharmaceuticals. Due to the Inamed acquisition, beginning in the second fiscal quarter of 2006, we operate our business on the basis of two reportable segments — specialty pharmaceuticals and medical devices. The specialty pharmaceuticals segment produces a broad range of pharmaceutical products, including: ophthalmic products for glaucoma therapy, ocular inflammation, infection, allergy and chronic dry eye; Botox ® for certain therapeutic and aesthetic indications; skin care products for acne, psoriasis and other prescription and over-the-counter dermatological products; and, beginning in the fourth quarter of 2007, urologics products. The medical devices segment produces a broad range of medical devices, including: breast implants for augmentation, revision and reconstructive surgery; obesity intervention products, including the Lap-Band ® System and the BIB tm BioEnterics ® Intragastric Balloon; and facial aesthetics products. We provide global marketing strategy teams to coordinate the development and execution of a consistent marketing strategy for our products in all geographic regions that share similar distribution channels and customers.

Management evaluates our business segments and various global product portfolios on a revenue basis, which is presented below in accordance with GAAP. We also report sales performance using the non-GAAP financial measure of constant currency sales. Constant currency sales represent current period reported sales, adjusted for the translation effect of changes in average foreign exchange rates between the current period and the corresponding period in the prior year. We calculate the currency effect by comparing adjusted current period reported sales, calculated using the monthly average foreign exchange rates for the corresponding period in the prior year, to the actual current period reported sales. We routinely evaluate our net sales performance at constant currency so that sales results can be viewed without the impact of changing foreign currency exchange rates, thereby facilitating period-to-period comparisons of our sales. Generally, when the U.S. dollar either strengthens or weakens against other currencies, the growth at constant currency rates will be higher or lower, respectively, than growth reported at actual exchange rates.

Product Net Sales

The $868.9 million increase in product net sales in 2007 compared to 2006 was the combined result of an increase of $466.5 million in our specialty pharmaceuticals product net sales and an increase of $402.4 million in our medical devices product net sales. The increase in specialty pharmaceuticals product net sales is due primarily to increases in sales of our eye care pharmaceuticals and Botox ® product lines. The increase in medical devices product net sales reflects significant growth across all product lines. The increase in medical devices product net sales in 2007 compared to 2006 was also positively impacted by the March 2006 Inamed and January 2007 Cornéal business acquisitions. We did not detect any significant impact on our sales during 2007 from declines in consumer spending in the United States or other major international markets.

Eye care pharmaceuticals sales increased in 2007 compared to 2006 primarily because of strong growth in sales of Restasis ® , our therapeutic treatment for chronic dry eye disease, an increase in sales of our glaucoma drug Lumigan ® , including strong sales growth from Ganfort ® , our Lumigan ® and timolol combination, which we launched in 2006 in certain European markets, an increase in product net sales of Alphagan ® P 0.1%, our most recent generation of Alphagan ® for the treatment of glaucoma that we launched in the United States in the first quarter of 2006, an increase in sales of Combigan tm in Europe, Latin America, Asia, Canada and, to a lesser degree, in the United States due to the initial U.S. launch of Combigan tm late in the fourth quarter of 2007, an increase in sales of Acular LS ® , our more recent non-steroidal anti-inflammatory, and growth in sales of eye drop products, primarily Refresh ® and Optive tm , our artificial tear that was launched in the United States, Europe, Latin America, Asia and Australia during 2007. In addition, net sales of eye care pharmaceuticals benefited from an increase in net sales of Elestat ® , our topical antihistamine used for the prevention of itching associated with allergic conjunctivitis, and Zymar ® , an ophthalmic anti-infective product for the treatment of bacterial conjunctivitis, in 2007 compared to 2006. These increases in eye care pharmaceuticals sales were partially offset by lower sales of Alphagan ® P 0.15% due to a general decline in U.S. wholesaler demand resulting from a decrease in promotion efforts. We continue to believe that generic formulations of Alphagan ® may have a negative effect on future net sales of our Alphagan ® franchise. We estimate the majority of the increase in our eye care pharmaceuticals sales during 2007 was due to a shift in sales mix to a greater percentage of higher priced products, and an overall net increase in the volume of product sold. We increased the published list prices for certain eye care pharmaceutical products in the United States, ranging from seven percent to nine percent, effective February 3, 2007. We increased the published U.S. list price for Restasis ® by seven percent, Lumigan ® by seven percent, Alphagan ® P 0.15% and Alphagan ® P 0.1% by eight percent, Acular LS ® by nine percent, Elestat ® by seven percent and Zymar ® by seven percent. This increase in prices had a positive net effect on our U.S. sales for 2007, but the actual net effect is difficult to determine due to the various managed care sales rebate and other incentive programs in which we participate. Wholesaler buying patterns and the change in dollar value of prescription product mix also affected our reported net sales dollars, although we are unable to determine the impact of these effects. We have a policy to attempt to maintain average U.S. wholesaler inventory levels of our specialty pharmaceutical products at an amount less than eight weeks of our net sales. At December 31, 2007, based on available external and internal information, we believe the amount of average U.S. wholesaler inventories of our specialty pharmaceutical products was near the lower end of our stated policy levels.

Botox ® sales increased in 2007 compared to 2006 primarily due to strong growth in demand in the United States and in international markets for both cosmetic and therapeutic use. Effective January 1, 2007, we increased the published price for Botox ® and Botox ® Cosmetic in the United States by approximately four percent, which may have had a positive effect on our U.S. sales growth in 2007, primarily related to sales of Botox ® Cosmetic. In the United States, the actual net effect from the increase in price for sales of Botox ® for therapeutic use is difficult to determine, primarily due to rebate programs with U.S. federal and state government agencies. International Botox ® sales benefited from strong sales growth for both cosmetic and therapeutic use in Europe, Latin America and Asia Pacific. Based on internal information and assumptions, we estimate in 2007 that Botox ® therapeutic sales accounted for approximately 50% of total consolidated Botox ® sales and grew at a rate of approximately 19% compared to 2006. In 2007, Botox ® cosmetic sales accounted for approximately 50% of total consolidated Botox ® sales and grew at a rate of approximately 29% compared to 2006. We believe our worldwide market share for neuromodulators, including Botox ® , is currently over 85%.

Skin care sales, which are presently concentrated in the United States, decreased in 2007 compared to 2006 primarily due to lower sales of Tazorac ® , principally due to the impact of a negative change in formulary positions at key managed cared plans from the end of 2006, and lower sales of other physician dispensed creams, including M.D. Forte ® and Prevage tm MD, partially offset by an increase in sales of Vivit é tm , a new line of physician dispensed skin care products. Net sales of Tazorac ® , Zorac ® and Avage ® decreased $11.3 million, or 12.4%, to $79.9 million in 2007, compared to $91.2 million in 2006. We increased the published U.S. list price for Tazorac ® , Zorac ® and Avage ® by nine percent effective February 3, 2007. On January 24, 2008, we announced a strategic collaboration with Clinique Laboratories, LLC to develop and market a new skin care line, which will be sold exclusively in physicians’ offices. In the third quarter of 2007, we entered into a collaboration with Stiefel Laboratories, Inc. to develop and market new products involving tazarotene for dermatological use worldwide, and to co-promote Tazorac ® in the United States.

In connection with our Esprit acquisition in October 2007, we established a new product line that is focused on the urologics market. Beginning in the fourth quarter of 2007, we began to recognize sales of Sanctura ® , Esprit’s twice-a-day anticholinergic for the treatment of over-active bladder. In January 2008, we launched Sanctura XR tm , our improved once-daily treatment for over-active bladder.

Breast aesthetics product net sales, which consist primarily of sales of silicone gel-filled and saline-filled breast implants and tissue expanders, increased $121.2 million, or 68.4%, to $298.4 million in 2007 compared to $177.2 million in 2006 primarily due to strong sales growth in all of our principal geographic markets and the full year impact of the Inamed acquisition in 2007 compared to only nine months of sales activity in 2006. The November 2006 U.S. Food and Drug Administration, or FDA, and Health Canada, approvals of certain silicone gel filled breast implants for breast augmentation, revision or reconstructive surgery and the transition of the market from lower priced saline products to higher priced silicone products in North America had a positive effect on net sales in the United States and Canada in 2007 compared to 2006.

Obesity intervention product net sales, which consist primarily of sales of devices used for minimally invasive long-term treatments of obesity such as our Lap-Band ® and Lap-Band AP tm Systems and BIB tm System, increased $127.8 million, or 89.8%, to $270.1 million in 2007 compared to $142.3 million in 2006 primarily due to strong sales growth across all of our principal geographic markets and the full year impact of the Inamed acquisition in 2007 compared to only nine months of sales activity in 2006. Net sales of obesity intervention products were also positively benefited in 2007 compared to 2006 by an approximately three percent increase in the published U.S. list price for our Lap-Band ® System effective July 2, 2007 and our introduction in the United States of a premium priced, next generation Advanced Performance (AP) Band.

Facial aesthetics product net sales, which consist primarily of sales of hyaluronic acid-based and collagen-based dermal fillers used to correct facial wrinkles, increased $150.7 million, or 289.3%, to $202.8 million in 2007 compared to $52.1 million in 2006 primarily due to strong sales growth in all of our principal geographic markets and the full year impact in 2007 of the Cornéal and Inamed acquisitions. Our January 2007 launch of our FDA approved hyaluronic acid-based dermal fillers Juvéderm tm Ultra and Juvéderm tm Ultra Plus had a positive effect on net sales in the United States in 2007 compared to 2006. The 2007 launch of these products in Canada and Australia also had a positive effect on net sales growth in 2007 compared to 2006. The increase in net sales was partially offset by a general decline in sales of collagen-based dermal fillers due to our reduced promotion efforts associated with those products. Our acquisition of Cornéal in January 2007, had a positive effect on our net sales of facial aesthetic products in Europe and Asia in 2007 compared to 2006.

Net sales of other medical devices were $2.7 million in 2007 and consisted of sales of ophthalmic surgical devices under a manufacturing and supply agreement. The manufacturing and supply agreement was entered into as part of the July 2007 sale of the former Cornéal ophthalmic surgical device business. This agreement was substantially concluded in December 2007.

Foreign currency changes increased product net sales by $87.4 million in 2007 compared to 2006, primarily due to the strengthening of the euro, Brazilian real, U.K. pound, Australian dollar and the Canadian dollar compared to the U.S. dollar.

U.S. sales as a percentage of total product net sales decreased by 1.7 percentage points to 65.7% in 2007 compared to U.S. sales of 67.4% in 2006, due primarily to an increase in international specialty pharmaceutical product net sales as a percentage of total specialty pharmaceuticals net sales, partially offset by an increase in U.S. sales of medical devices as a percentage of total medical devices net sales, primarily driven by growth in U.S. sales of Juvéderm tm dermal fillers and a decrease in U.S. skin care sales. The increase in the international percentage of specialty pharmaceutical net sales was primarily due to growth in international product net sales of Botox ® and eye care pharmaceuticals.

The $690.9 million increase in product net sales in 2006 compared to 2005 primarily resulted from $371.6 million of medical devices product net sales in 2006 following the Inamed acquisition and an increase of $319.3 million in our specialty pharmaceuticals product net sales. The increase in specialty pharmaceuticals product net sales is due primarily to increases in sales of our eye care pharmaceuticals and Botox ® product lines, partially offset by a decrease in other specialty pharmaceuticals sales, primarily consisting of contract sales to AMO that terminated as scheduled in June 2005.

Eye care pharmaceuticals sales increased in 2006 compared to 2005 primarily because of strong growth in sales of Restasis ® , our therapeutic for the treatment of chronic dry eye disease, an increase in sales of our glaucoma drug Lumigan ® , growth in sales of eye drop products, primarily Refresh ® , an increase in sales of Elestat ® , our topical antihistamine used for the prevention of itching associated with allergic conjunctivitis, an increase in sales of Combigan tm in Europe, Latin America and Canada, an increase in new product sales of Alphagan ® P 0.1%, our recently introduced next generation of Alphagan ® for the treatment of glaucoma that was launched in the United States in the first quarter of 2006, strong sales growth of Zymar ® , a newer anti-infective, and an increase in sales of Acular LS ® , our newer non-steroidal anti-inflammatory. This increase in eye care pharmaceuticals sales was partially offset by lower sales of Alphagan ® P 0.15% due to a general decline in U.S. wholesaler demand and the negative effect of generic Alphagan ® competition, a decrease in sales of Acular ® , our older generation anti-inflammatory, and lower sales of other glaucoma products. We estimate the majority of the increase in our eye care pharmaceuticals sales was due to a shift in sales mix to a greater percentage of higher priced products, and an overall net increase in the volume of product sold. We increased the published list prices for certain eye care pharmaceutical products in the United States, ranging from five percent to nine percent, effective January 22, 2006. We increased the published U.S. list price for Lumigan ® by five percent, Restasis ® by seven percent, Alphagan ® P 0.15% by five percent, Zymar ® by seven percent, and Acular LS ® by nine percent. This increase in prices had a positive net effect on our U.S. sales for 2006, but the actual net effect is difficult to determine due to the various managed care sales rebate and other incentive programs in which we participate. Wholesaler buying patterns and the change in dollar value of prescription product mix also affected our reported net sales dollars, although we are unable to determine the impact of these effects. We have a policy to attempt to maintain average U.S. wholesaler inventory levels of our specialty pharmaceutical products at an amount less than eight weeks of our net sales. At December 31, 2006, based on available external and internal information, we believe the amount of average U.S. wholesaler inventories of our specialty pharmaceutical products was near the lower end of our stated policy levels.

Botox ® sales increased in 2006 compared to 2005 primarily due to strong growth in demand in the United States and in international markets, excluding Japan, for both cosmetic and therapeutic use. Effective January 1, 2006, we increased the published price for Botox ® and Botox ® Cosmetic in the United States by approximately four percent, which we believe had a positive effect on our U.S. sales growth in 2006, primarily related to sales of Botox ® Cosmetic. In the United States, the actual net effect from the increase in price for sales of Botox ® for therapeutic use is difficult to determine, primarily due to rebate programs with U.S. federal and state government agencies. International Botox ® sales benefited from strong sales growth for both cosmetic and therapeutic use in Europe, Latin America and Asia Pacific outside Japan. This increase in international Botox ® sales was partially offset by a $38.8 million decrease in international sales of Botox ® for therapeutic use in Japan, where we adopted a third party license and distribution business model as a result of our long-term agreement with GlaxoSmithKline, or GSK, that commenced in September 2005. Based on internal information and assumptions, we estimate in 2006 that Botox ® therapeutic sales accounted for approximately 52% of total consolidated Botox ® net sales and cosmetic sales accounted for approximately 48% of total consolidated Botox ® net sales. Therapeutic and cosmetic net sales increased by approximately 8% and 32%, respectively in 2006 compared to 2005. The growth rate in Botox ® therapeutic net sales was negatively impacted in 2006 by the $38.8 million reduction in net sales in Japan in 2006 compared to 2005 due to our long-term agreement with GSK. Excluding this net sales reduction of $38.8 million in Japan, therapeutic Botox ® net sales increased by 17% in 2006 compared to 2005. We believe our worldwide market share for neuromodulators, including Botox ® , was over 85%.

Skin care sales increased in 2006 compared to 2005 primarily due to higher sales of Tazorac ® , Zorac ® , Avage ® and MD Forte ® . Net sales of Tazorac ® , Zorac ® and Avage ® increased $4.3 million, or 4.9%, to $91.2 million in 2006, compared to $86.9 million in 2005. The increase in sales of Tazorac ® , Zorac ® and Avage ® resulted primarily from our increasing the published U.S. list price for these products by nine percent effective January 14, 2006.

Net sales from medical device products were $371.6 million in 2006. Product net sales consisted of $177.2 million related to breast aesthetics, $142.3 million for obesity intervention and $52.1 million for facial aesthetics. Medical device product net sales have been included in our consolidated product net sales effective March 23, 2006, the date of the Inamed acquisition.

Foreign currency changes increased product net sales by $15.2 million in 2006 compared to 2005, primarily due to the strengthening of the euro, U.K. pound, Canadian dollar and Brazilian real, partially offset by the weakening of the Australian dollar and other Asian and Latin American currencies compared to the U.S. dollar.

U.S. sales as a percentage of total product net sales decreased by 0.1 percentage points to 67.4% in 2006 compared to U.S. sales of 67.5% in 2005, due primarily to the impact of sales of medical device products, which had a lower amount of U.S. sales as a percentage of total product net sales compared to our pharmaceutical products, and a decrease in U.S. other non-pharmaceutical sales, partially offset by an increase in U.S. Botox ® sales as a percentage of total pharmaceutical product net sales.

Other Revenues

Other revenues increased $6.7 million to $59.9 million in 2007 compared to $53.2 million in 2006. The increase in other revenues in 2007 compared to 2006 is primarily due to an increase of approximately $7.7 million in royalty income earned principally from sales of Botox ® in Japan and China by GlaxoSmithKline, or GSK, under a license agreement, and other miscellaneous royalty income, partially offset by a decrease of approximately $1.0 million in reimbursement income, primarily related to services provided in connection with a contractual agreement for the development of Posurdex ® for the ophthalmic specialty pharmaceutical market in Japan.

Other revenues increased $29.8 million to $53.2 million in 2006 compared to $23.4 million in 2005. The increase in other revenues in 2006 compared to 2005 is primarily related to an increase of approximately $18.0 million in royalty income earned principally from sales of Botox ® in Japan by GSK and other miscellaneous royalty agreements, and an increase of approximately $11.8 million in reimbursement income, earned primarily from services provided in connection with contractual agreements related to the development and promotion of Botox ® in Japan and China, the co-promotion of GSK’s products Imitrex Statdose System ® and Amerge ® in the United States to neurologists, and services performed under a co-promotion agreement for a third-party skin care product.

MANAGEMENT DISCUSSION FOR LATEST QUARTER


Results of Continuing Operations

We operate our business on the basis of two reportable segments — specialty pharmaceuticals and medical devices. The specialty pharmaceuticals segment produces a broad range of pharmaceutical products, including: ophthalmic products for glaucoma therapy, ocular inflammation, infection, allergy and chronic dry eye; Botox ® for certain therapeutic and aesthetic indications; skin care products for acne, psoriasis and other prescription and over-the-counter dermatological products; and, beginning in the fourth quarter of 2007, urologics products. The medical devices segment produces a broad range of medical devices, including: breast implants for augmentation, revision and reconstructive surgery; obesity intervention products, including the Lap-Band ® System and the BIB ™ BioEnterics ® Intragastric Balloon; and facial aesthetics products. We provide global marketing strategy teams to coordinate the development and execution of a consistent marketing strategy for our products in all geographic regions that share similar distribution channels and customers.

Management evaluates our business segments and various global product portfolios on a revenue basis, which is presented below in accordance with GAAP. We also report sales performance using the non-GAAP financial measure of constant currency sales. Constant currency sales represent current period reported sales, adjusted for the translation effect of changes in average foreign exchange rates between the current period and the corresponding period in the prior year. We calculate the currency effect by comparing adjusted current period reported sales, calculated using the monthly average foreign exchange rates for the corresponding period in the prior year, to the actual current period reported sales. We routinely evaluate our net sales performance at constant currency so that sales results can be viewed without the impact of changing foreign currency exchange rates, thereby facilitating period-to-period comparisons of our sales. Generally, when the U.S. dollar either strengthens or weakens against other currencies, the growth at constant currency rates will be higher or lower, respectively, than growth reported at actual exchange rates.

Product Net Sales

The $103.2 million increase in product net sales in the third quarter of 2008 compared to the third quarter of 2007 was the combined result of an increase of $88.6 million in our specialty pharmaceuticals product net sales and an increase of $14.6 million in our medical devices product net sales. The increase in specialty pharmaceuticals product net sales is due primarily to increases in sales of our eye care pharmaceuticals, Botox ® and urologics product lines. The increase in medical devices product net sales reflects growth across all core medical devices product lines. Net sales were also positively affected by a general strengthening of foreign currencies compared to the U.S. dollar in the foreign countries where we operated during the third quarter of 2008 compared to the third quarter of 2007.

Several of our products, including our facial aesthetics products and, to a lesser extent, our obesity intervention and breast implant products, are purchased based on consumer choice and may not be reimbursable by insurance, other health care plans or governmental authorities. If the economic environment and uncertainty that prevailed during the third quarter of 2008 continues, we believe there could be a significant negative effect on consumer spending for these products and a corresponding effect on our sales, operations and profitability.

Eye care pharmaceuticals sales increased in the third quarter of 2008 compared to the third quarter of 2007 primarily because of strong growth in sales of Restasis ® , our therapeutic treatment for chronic dry eye disease, an increase in sales of Combigan ™ , primarily due to its launch in the United States in the fourth quarter of 2007, increased Combigan ™ sales in Canada, Europe, Latin America and Asia, an increase in sales of Ganfort ® , our Lumigan ® and timolol combination for the treatment of glaucoma, an increase in product net sales of Alphagan ® P 0.1%, our most recent generation of Alphagan ® for the treatment of glaucoma, an increase in sales of Acular LS ® , our more recent non-steroidal anti-inflammatory, and growth in sales of eye drop products, primarily Optive ™ , our artificial tear that was launched in the United States, Australia, and parts of Europe, Latin America and Asia during 2007. These increases in eye care pharmaceuticals sales were partially offset by lower sales of Alphagan ® P 0.15% due to a general decline in wholesaler demand resulting from a decrease in promotion efforts. The rate of growth in sales of eye care pharmaceuticals in the third quarter of 2008 was negatively impacted by a decline in the rate of growth in sales of Lumigan ® and Pred Forte ® , our older generation topical steroid for ophthalmic inflammation. We estimate the majority of the increase in our eye care pharmaceuticals sales was due to a shift in sales mix to a greater percentage of higher priced products, and an overall net increase in the volume of product sold. Effective January 19, 2008, we increased the published list prices for certain eye care pharmaceutical products in the United States. We increased the published U.S. list price for Restasis ® by five percent, Lumigan ® by seven percent, Alphagan ® P 0.15% and Alphagan ® P 0.1% by eight percent, Acular LS ® by eight percent, Elestat ® by seven percent and Zymar ® by eight percent. Additionally, effective August 2, 2008, we increased the published list prices in the United States for Alphagan ® P 0.15% and Alphagan ® P 0.1% by seven percent, Acular LS ® by six percent and Zymar ® by six percent. These price increases had a positive net effect on our U.S. sales for the third quarter of 2008 compared to the third quarter of 2007, but the actual net effect is difficult to determine due to the various managed care sales rebate and other incentive programs in which we participate. Wholesaler buying patterns and the change in dollar value of prescription product mix also affected our reported net sales dollars, although we are unable to determine the impact of these effects.

Botox ® sales increased in the third quarter of 2008 compared to the third quarter of 2007 primarily due to growth in demand in international markets and, to a lesser degree, the United States for both cosmetic and therapeutic use. We believe the rate of growth of Botox ® sales, primarily Botox ® Cosmetic, was negatively impacted by declines in consumer spending in the United States and Europe in the third quarter of 2008. Effective January 1, 2008, we increased the published price for Botox ® and Botox ® Cosmetic in the United States by approximately four percent, which we believe had a positive effect on our U.S. sales growth in the third quarter of 2008, primarily related to sales of Botox ® Cosmetic. In the United States, the actual net effect from the increase in price for sales of Botox ® for therapeutic use is difficult to determine, primarily due to rebate programs with U.S. federal and state government agencies. International Botox ® sales benefited from strong sales growth for both cosmetic and therapeutic use in Europe and Asia Pacific, as well as strong sales growth for cosmetic use in Latin America. We believe our worldwide market share for neuromodulators, including Botox ® , is currently approximately 84% to 85%.

Skin care sales, which are presently concentrated in the United States, decreased in the third quarter of 2008 compared to the third quarter of 2007 primarily due to a decrease in sales of Tazorac ® , Zorac ® and Avage ® , our topical tazarotene treatments for acne and psoriasis, and lower sales of other physician dispensed creams, including M.D. Forte ® and Prevage ™ MD, partially offset by an increase in sales of Vivité ™ , a line of physician dispensed skin care products launched in 2007. Net sales of Tazorac ® , Zorac ® and Avage ® were $19.8 million in the third quarter of 2008 compared to $22.1 million in the third quarter of 2007. We increased the published U.S. list price for Tazorac ® , Zorac ® and Avage ® by five percent effective January 19, 2008. In the third quarter of 2007, we entered into a collaboration with Stiefel Laboratories, Inc. to develop and market new products involving tazarotene for dermatological use worldwide, and to co-promote Tazorac ® in the United States. In January 2008, we announced a strategic collaboration with Clinique Laboratories, LLC to develop and market a new skin care line, which will be sold exclusively in physicians’ offices. We expect to launch the new skin care line, Clinique Medical , in the fourth quarter of 2008. In July 2008, we completed the acquisition of all assets relating to Aczone ® (dapsone) Gel 5%, a topical treatment for acne vulgaris, which we currently expect to launch in the fourth quarter of 2008.

In connection with our Esprit acquisition in October 2007, we acquired a new product line focused on the urologics market. Beginning in the fourth quarter of 2007, we began to recognize sales of Sanctura ® , Esprit’s twice-a-day anticholinergic treatment for over-active bladder. In January 2008, we launched Sanctura XR ™ , an improved once-daily anticholinergic treatment for over-active bladder. In the third quarter of 2008, sales of our Sanctura ® franchise products were $17.0 million. There were no comparable sales in the third quarter of 2007.

We have a policy to attempt to maintain average U.S. wholesaler inventory levels of our specialty pharmaceutical products at an amount less than eight weeks of our net sales. At September 30, 2008, based on available external and internal information, we believe the amount of average U.S. wholesaler inventories of our specialty pharmaceutical products was near the lower end of our stated policy levels.

Breast aesthetics product net sales, which consist primarily of sales of silicone gel and saline breast implants and tissue expanders, increased in the third quarter of 2008 compared to the third quarter of 2007 primarily due to sales growth in Europe and Latin America and the transition of the market in North America from lower priced saline products to higher priced silicone gel products, partially offset by a decline in the number of breast implant units sold in the United States. We believe the rate of growth in net sales of breast aesthetics products in the United States and Europe was negatively impacted in the third quarter of 2008 by declines in consumer spending.

Obesity intervention product net sales, which consist primarily of sales of devices used for minimally invasive long-term treatments of obesity such as our Lap-Band ® and Lap-Band AP ™ Systems and BIB ™ System, increased in the third quarter of 2008 compared to the third quarter of 2007 primarily due to strong sales growth in Australia and Latin America and a small increase in net sales in the United States. We believe the rate of growth in net sales of obesity intervention products was negatively impacted in the third quarter of 2008 by the introduction of a competitive product in the United States and by declines in consumer spending in the United States.

Facial aesthetics product net sales, which consist primarily of sales of hyaluronic acid-based and collagen-based dermal fillers used to correct facial wrinkles, increased in the third quarter of 2008 compared to the third quarter of 2007 primarily due to sales growth in the United States, Latin America and Canada . We believe the rate of growth in net sales of facial aesthetics products was negatively impacted in the third quarter of 2008 by declines in consumer spending in the United States and Europe.

Foreign currency changes increased product net sales by $19.1 million in the third quarter of 2008 compared to the third quarter of 2007, primarily due to the strengthening of the euro, Brazilian real, Australian dollar, and Canadian dollar compared to the U.S. dollar.

U.S. sales as a percentage of total product net sales decreased by 1.3 percentage points to 64.1% in the third quarter of 2008 compared to U.S. sales of 65.4% in the third quarter of 2007, due primarily to an increase in international product net sales as a percentage of total product net sales of our Botox ® , eye care pharmaceuticals, breast aesthetics and obesity intervention product lines, partially offset by an increase in sales of our urologics products, which are currently sold only in the United States.

The $494.8 million increase in product net sales in the first nine months of 2008 compared to the first nine months of 2007 was the combined result of an increase of $409.7 million in our specialty pharmaceuticals product net sales and an increase of $85.1 million in our medical devices product net sales.

The increase in specialty pharmaceutical product net sales for the first nine months of 2008 is primarily due to the same factors discussed above with respect to the increase in specialty pharmaceutical product net sales for the third quarter of 2008. In addition, net sales of eye care pharmaceuticals in the first nine months of 2008 compared to the first nine months of 2007 benefited from increases in the net sales of Acular ® , Lumigan ® , Pred Forte ® , Zymar ® , and our Refresh ® family of eye drop products. Net sales of Botox ® for the first nine months of 2008 compared to the first nine months of 2007 was also benefited by an increase in net sales of Botox ® for therapeutic use in Latin America. Net sales of Tazorac ® , Zorac ® and Avage ® were $59.0 million in the first nine months of 2008 compared to $59.6 million in the first nine months of 2007.

The increase in medical device product net sales for the first nine months of 2008 is primarily due to the same factors discussed above with respect to the increase in medical device product net sales for the third quarter of 2008. Additionally, the increase in net sales of facial aesthetics products in the first nine months of 2008 compared to the first nine months in 2007 was also benefited by growth in sales in Europe, primarily due to the first quarter 2008 launch of Juvéderm ™ Ultra with lidocaine, and Asia Pacific. The increase in net sales of facial aesthetics products was partially offset by a general decline in sales of older generation collagen-based dermal fillers.

Foreign currency changes increased product net sales by $100.5 million in the first nine months of 2008 compared to the first nine months of 2007, primarily due to the strengthening of the euro, Brazilian real, Canadian dollar and Australian dollar compared to the U.S. dollar.

U.S. sales as a percentage of total product net sales decreased by 1.9 percentage points to 63.8% in the first nine months of 2008 compared to U.S. sales of 65.7% in the first nine months of 2007, due primarily to the same factors discussed above with respect to the decrease in U.S. sales as a percentage of total product net sales in the third quarter of 2008.

Other Revenues

Other revenues increased $1.3 million to $16.3 million in the third quarter of 2008 compared to $15.0 million in the third quarter of 2007. The increase in other revenues is primarily related to an increase in royalty income from sales of Botox ® in Japan and China by GlaxoSmithKline under a licensing agreement and an increase in reimbursement income for services provided under a co-promotion agreement related to our Lap-Band ® obesity intervention products, partially offset by a decline in other reimbursement income.

Other revenues increased $3.7 million to $48.1 million in the first nine months of 2008 compared to $44.4 million in the first nine months of 2007, due primarily to the same factors discussed above with respect to the increase in other revenues in the third quarter of 2008.

Cost of Sales

Cost of sales increased $21.2 million, or 12.2%, in the third quarter of 2008 to $194.7 million, or 18.0% of product net sales, compared to $173.5 million, or 17.7% of product net sales, in the third quarter of 2007. Cost of sales in the third quarter of 2008 includes the rollout of $4.6 million of retention termination benefits and accelerated depreciation costs capitalized in inventory related to the phased closure of our Arklow, Ireland breast implant manufacturing facility. Cost of sales in the third quarter of 2007 includes a charge of $0.5 million for the purchase accounting fair market value inventory adjustment rollout related to the Cornéal acquisition. Excluding the effect of these charges, cost of sales increased $17.1 million, or 9.9%, in the third quarter of 2008 compared to the third quarter of 2007. This increase in cost of sales, excluding the charges described above, primarily resulted from the 10.5% increase in product net sales. Cost of sales as a percentage of product net sales, excluding the effect of the charges described above, declined to 17.6% in the third quarter of 2008 compared to 17.7% in the third quarter of 2007, primarily due to an overall decrease in cost of sales as a percentage of product net sales for our medical device products, principally related to the continued transition of the breast aesthetics market in North America to higher priced silicone gel products from lower priced saline products, partially offset by an increase in cost of sales as a percentage of product net sales for our obesity intervention and facial aesthetics products in the United States.

Cost of sales increased $81.0 million, or 16.4%, in the first nine months of 2008 to $574.4 million, or 17.4% of product net sales, compared to $493.4 million, or 17.6% of product net sales, in the first nine months of 2007. Cost of sales in the first nine months of 2008 includes charges of $11.7 million for the purchase accounting fair market value inventory adjustment rollout related to the Esprit acquisition and $4.7 million for the rollout of retention termination benefits and accelerated depreciation costs capitalized in inventory related to the phased closure of our Arklow, Ireland breast implant manufacturing facility. Cost of sales in the first nine months of 2007 includes a charge of $0.5 million for the purchase accounting fair market value inventory adjustment rollout related to the Cornéal acquisition. Excluding the effect of these charges, cost of sales increased $65.1 million, or 13.2%, in the first nine months of 2008 compared to the first nine months of 2007. This increase in cost of sales, excluding the charges described above, primarily resulted from the 17.6% increase in product net sales. Cost of sales as a percentage of product net sales, excluding the effect of the charges described above, declined to 16.9% in the first nine months of 2008 compared to 17.6% in the first nine months of 2007, primarily due to an increase in product net sales of our Juvéderm ™ dermal filler family of products as a percentage of total facial aesthetic product net sales, an increase in the sales mix within our eye care pharmaceuticals and skin care product lines of newer products with lower cost of sales as a percentage of product net sales, and the continued transition of the breast aesthetic market in North America to higher priced silicone gel products from lower priced saline products, partially offset by the growth in urologics product net sales, which have a higher cost of sales as a percentage of product net sales than our other specialty pharmaceuticals products. In addition, cost of sales as a percentage of product net sales for our obesity intervention products increased slightly in the first nine months of 2008 compared to the first nine months of 2007.

Selling, General and Administrative

Selling, general and administrative, or SG&A, expenses increased $44.8 million, or 11.3%, to $440.4 million, or 40.7% of product net sales, in the third quarter of 2008 compared to $395.6 million, or 40.4% of product net sales, in the third quarter of 2007. The increase in SG&A expenses in dollars primarily relates to significant increases in selling, marketing and general and administrative expenses, partially offset by a decline in promotion expenses. The increase in selling and marketing expenses in the third quarter of 2008 compared to the third quarter of 2007 principally relates to the addition of our U.S. urologics sales force in the fourth quarter of 2007 related to the Esprit acquisition. In addition, the increase in selling and marketing expenses was also impacted by an increase in personnel and related incentive compensation costs driven by the expansion of our U.S. and Asia Pacific facial aesthetics sales forces and related marketing programs. The increase in general and administrative expenses principally relates to an increase in incentive compensation, legal, finance and information systems costs, as well as the expansion of our management team in Asia. The decline in promotion expenses is primarily due to reduced direct-to-consumer advertising and other promotional costs for our medical device products in the United States, partially offset by an increase in spending in Europe related to our Juvéderm ™ product line. In the third quarter of 2008, SG&A expenses included $6.7 million of costs associated with the U.S. Department of Justice, or DOJ, investigation relating to sales and marketing practices in connection with Botox ® and $0.9 million of gains on the sale of fixed assets and technology related to the phased closure of our collagen manufacturing facility in Fremont, California. Costs associated with responding to the DOJ investigation are expected to total approximately $25 million to $35 million during fiscal year 2008. In the third quarter of 2007, SG&A expenses included $1.9 million of integration and transition costs related to the Inamed and Cornéal acquisitions.

SG&A expenses increased $214.4 million, or 17.6%, to $1,429.5 million, or 43.3% of product net sales, in the first nine months of 2008 compared to $1,215.1 million, or 43.3% of product net sales, in the first nine months of 2007. The increase in SG&A expenses in the first nine months of 2008 compared to the same period in 2007 primarily resulted from the same factors described above with respect to the increase in SG&A expenses in the third quarter of 2008, except that promotion expenses increased in the first nine months of 2008 compared to the first nine months of 2007, primarily due to other promotional costs for our urologics and Botox ® product lines. Launch-related expenses for Sanctura XR ™ and Combigan ™ contributed to the increase in promotion, selling and marketing expenses in the first nine months of 2008. In the first nine months of 2008, SG&A expenses included $15.7 million of costs incurred in the second and third quarters of 2008 associated with the DOJ investigation relating to sales and marketing practices in connection with Botox ® , $1.9 million of integration and transition costs related to the Cornéal and Esprit acquisitions, $0.6 million of costs related to our acquisition of the Aczone ® assets and $0.8 million of termination benefits and asset impairments related to the phased closure of our breast implant manufacturing facility in Arklow, Ireland. In the first nine months of 2007, SG&A expenses included $11.1 million of integration and transition costs related to the Inamed and Cornéal acquisitions, $6.4 million of expenses associated with the settlement of a patent dispute assumed in the Inamed acquisition that related to tissue expanders and $2.3 million of expenses associated with the settlement of a preexisting unfavorable distribution agreement with Cornéal.

Research and Development

R&D expenses increased $22.2 million, or 13.5%, to $186.6 million in the third quarter of 2008, or 17.2% of product net sales, compared to $164.4 million, or 16.8% of product net sales, in the third quarter of 2007. R&D expenses for the third quarter of 2008 included a charge of $6.3 million for an upfront payment for the in-licensing of preclinical drug compounds to treat diseases of the eye from Asterand plc, or Asterand . Excluding the effect of this charge, R&D expenses increased by $15.9 million, or 9.7%, to $180.3 million in the third quarter of 2008, or 16.7% of product net sales, compared to the third quarter of 2007. The increase in R&D expenses in dollars, excluding the charge related to acquiring rights to the drug compounds from Asterand, was primarily a result of higher rates of investment in our eye care pharmaceuticals for next generation product enhancements and line extensions as well as discovery programs, increased spending on Botox ® for overactive bladder and benign prostatic hyperplasia programs and breast implant follow-up studies, partially offset by a reduction in expenses related to memantine and Botox ® for the treatment of chronic migraine headache.

R&D expenses increased $54.5 million, or 10.3%, to $582.9 million in the first nine months of 2008, or 17.7% of product net sales, compared to $528.4 million, or 18.8% of product net sales, in the first nine months of 2007. R&D expenses for the first nine months of 2008 included a charge of $6.3 million for an upfront payment for the in-licensing of preclinical drug compounds from Asterand and a charge of $13.9 million for an upfront payment for the in-licensing of Sanctura XR ™ product rights in Canada, where the product has not yet achieved regulatory approval. R&D expenses in the first nine months of 2007 included a charge of $72.0 million for in-process research and development assets acquired in the EndoArt acquisition. In-process research and development represents an estimate of the fair value of in-process technology at the date of acquisition that had not reached technical feasibility and had no alternative future uses in its current state. Excluding the charges in 2008 related to acquiring rights to drug compounds from Asterand and the Sanctura XR ™ rights in Canada, and the in-process research and development charge in 2007 related to the EndoArt acquisition, R&D expenses increased by $106.3 million, or 23.3%, to $562.7 million in the first nine months of 2008, or 17.1% of product net sales, compared to $456.4 million, or 16.3% of product net sales in the first nine months of 2007. The increase in R&D expenses, excluding these charges, was primarily a result of the same factors described above with respect to the increase in R&D expenses for the third quarter of 2008. In addition, R&D expenses increased in the first nine months of 2008 compared to the first nine months of 2007 due to increased spending for new pharmaceutical technologies, including our alpha agonists for the treatment of neuropathic pain, and increased spending on the development of bimatoprost for the stimulation of eyelash growth and Posurdex ® .

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets increased $10.6 million to $39.3 million in the third quarter of 2008, or 3.6% of product net sales, compared to $28.7 million, or 2.9% of product net sales, in the third quarter of 2007. The increase in amortization expense in dollars is primarily due to an increase in the balance of intangible assets subject to amortization, primarily related to our October 2007 Esprit acquisition and July 2008 purchase of the Aczone ® developed technology.

Amortization of acquired intangible assets increased $23.9 million to $110.0 million in the first nine months of 2008, or 3.3% of product net sales, compared to $86.1 million, or 3.1% of product net sales, in the first nine months of 2007. The increase in amortization expense in dollars is primarily due to the same factors described above with respect to the increase in amortization of acquired intangible assets in the third quarter of 2008.

Restructuring Charges and Integration and Transition Costs

Restructuring charges in the third quarter of 2008 were a net $0.2 million reversal of restructuring charges, consisting of a $0.7 million restructuring charge reversal related to the restructuring and phased closure of the Arklow facility and a $0.5 million charge related to the restructuring and integration of the operations of Inamed Corporation, or Inamed, that we acquired in 2006. Restructuring charges in the third quarter of 2007 were $11.0 million, consisting of $11.2 million related to the restructuring and integration of the Cornéal operations, a $0.3 million restructuring charge reversal related to the restructuring and integration of the Inamed operations and a $0.1 million charge related to the restructuring associated with the EndoArt acquisition.

Restructuring charges in the first nine months of 2008 were $37.6 million, consisting of $26.9 million related to the restructuring and phased closure of the Arklow facility, $6.6 million related to the restructuring and integration of the Cornéal operations, $0.9 million related to the restructuring and integration of the Inamed operations, $3.1 million related to the restructuring and streamlining of our European operations and $0.1 million related to the restructuring associated with the EndoArt acquisition. Restructuring charges in the first nine months of 2007 were $24.3 million, consisting of $13.2 million related to the restructuring and integration of the Cornéal operations, $9.9 million related to the restructuring and integration of the Inamed operations, $1.0 million related to the restructuring and streamlining of our European operations and $0.2 million related to the restructuring associated with the EndoArt acquisition.

Restructuring and Phased Closure of Arklow Facility

On January 30, 2008, we announced the phased closure of our breast implant manufacturing facility at Arklow, Ireland and the transfer of production to our manufacturing plant in Costa Rica. The Arklow facility was acquired by us in connection with our acquisition of Inamed in 2006 and employs approximately 360 people. Production at the facility is expected to be phased out by early 2009. Based on current foreign currency exchange rates, we estimate that the total pre-tax restructuring and other transition related costs associated with the closure of the Arklow manufacturing facility will be between $65 million and $70 million, consisting primarily of employee severance and other one-time termination benefits of $31 million to $33 million, asset impairments and accelerated depreciation of $17 million to $18 million, and contract termination and other costs of $17 million to $19 million. We expect that $48 million to $52 million of the pre-tax charges will be cash expenditures. Certain employee retention termination benefits and accelerated depreciation costs related to inventory production in Arklow will be capitalized to inventory as incurred and recognized as cost of sales in the periods the related products are sold.

We began to record costs associated with the closure of the Arklow manufacturing facility in the first quarter of 2008 and expect to continue to incur costs through the fourth quarter of 2009. During the three and nine month periods ended September 30, 2008, we recorded a $0.7 million restructuring charge reversal and $26.9 million of pre-tax restructuring charges, respectively. During the three and nine month periods ended September 30, 2008, we recognized as cost of sales the rollout of $4.6 million and $4.7 million, respectively, of capitalized employee retention termination benefits and accelerated depreciation costs related to inventory production. During the three and nine month periods ended September 30, 2008, we also recognized $0.1 million and $0.8 million, respectively, of SG&A expenses and $0.1 million and $0.3 million, respectively, of R&D expenses related to one-time termination benefits and asset impairments.

At September 30, 2008, $9.1 million of capitalized employee retention termination benefits and accelerated depreciation costs are included in “Inventories” in the accompanying unaudited condensed consolidated balance sheet.


CONF CALL

Jim Hindman - Senior Vice President, Treasury, and Investor Relations

Thank you, Marian. Good morning. With me for today's conference call is David Pyott, Chairman of the Board and Chief Executive Officer, Jeff Edwards, Executive Vice President of Finance and Business Development, Chief Financial Officer, Dr. Scott Whitcup, Executive Vice President, Research and Development and Jim Barlow, Senior Vice President and Corporate Controller.

Before we move ahead, I'd like to remind you that certain statements that we will make in this presentation are forward-looking statements. These forward-looking statements reflect Allergan's judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting Allergan's business.

Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made in this conference call and webcast, we refer you to the disclaimer regarding the forward-looking statements that is included in our third quarter 2008 earnings release, which was furnished to the SEC today on Form 8-K, as well as our filings with the SEC referenced in that disclaimer.

We will follow up the question-and-answer session of this call with a short listen-only segment where we will provide additional miscellaneous information that relates to our business. Under Regulation FD, in order to be able to discuss this information freely during the quarter, we must be sure that this is in the public domain.

This conference call and accompanying webcast are being simultaneously broadcast over the Internet with replays available for one week. You can access this information on our website at www.allergan.com.

At this point, I'd like to turn the call over to David Pyott.

David Pyott - Chairman of the Board and Chief Executive Officer

Sure. Thank you, Jim. Good morning, ladies and gentlemen. In spite of the impact of the downturn in Europe and United States in the third quarter in our cash pay business, Allergan has still managed to increase sales by 8.6% in local currencies with stronger performance of the reimbursed pharmaceutical businesses. With our application discipline we attention to detail execution we reduced adjusted diluted earnings per share of $0.65 coming end of the top range of our guidance and generating 12% adjusted diluted EPS growth by the third quarter of 2007, grossly increase adjusted R&D expend by 10%. We also become to leverage our historical declined levels of SG&A expenditures. The full reconciliation of GAAP adjusted numbers is laid out in our press release.

Looking forward to the fourth quarter our guidance for adjusted diluted EPS is in the range of $0.72 to $0.76 marketing increase of 20 to 27%. Boosted by the passage of the US federal R&D tax credit in the fourth quarter.

Sales guidance for the fourth quarter growth and local currencies within the range of minus 1% to plus 4% with the Australian time to the US dollar expecting to reduce growth by 700 basis points or 7% industry is outing in the dollar growth in the range of minus 3 to minus 8%. Finally, looking at full year guidance of 253 to 257 for adjusted to diluted EPS these calculates to 16 to 18% increased versus 2007 investor line with our historical aspiration of mid-to high teens EPS growth.

As we look forward into 2009, planning has become quite difficult given all the economic dislocations in fact due to sever contribute in demand and the sudden and dramatic strengthening of the US dollar versus major currencies and also interest rates.

Giving all the uncertainty we felt it’s prudent to give you a broad preliminary estimate of 2009 adjusted diluted EPS in the range of 5% to 12% over the final diluted adjusted EPS number for 2008 based on currently prevailing foreign exchange rates.

At the time of announcing of our Q4 results in early February of 2009 and in keeping our past practice we will establish more precise guidance. In our 2009 plan it is our intent to continue to increase our investment into long term value creation driver our R&D deleverage our substantial investment and sales forces made over the recent years and also our investments into direct to consumer advertising. In this tough environment we are monitoring all expenses very tightly and have a tight time over hiring including replacements. As the world economy recovers we intend to reestablish our historical aspiration that met to high teens adjusted EPS growth.

On R&D, we are further adding to the depth and value of our R&D product line enhancing other guidance internal programs as evidenced last three months activities and then supplemented from the outside with recent equity investments in last time single collaboration deals with bio nova, and today spectrum pharmaceuticals.

Our total relevant in co-promotion equipment was Spectrum announced today gives us to Spectrums apaziquone program for the world excluding Asia and this product is already in phase three and is the perfect fit with our specialist urology business. This product is expected to be approved from the 2013, 2014 timeframe with worldwide peak sales in our territory of around $500 million. I think projection should last through 2022.

Given the current subdued outlook over the short term for growth provide of our base cash pay businesses we're fortunate that we have many, many new growth drivers in the offing some of which should be substantial products.

Many products have been filed or about to be filed with the US FDA. The FDA receives Regulatory approval between now and the end of 2009.

Let me give you the list. LUMIGAN X, the multi plus for eyelash growth. South pole attempts Silica investment implants. JUVEDERM is lied cane. BOTOX with specificity indication actular X and positive X for macular the Dee ma associated with retinal vein occlusion. Further more, we're expecting approvals from the Japanese MHI values for BOTOX for the cosmetic indication, BOTOX for juvenile cerebral palsy and LUMIGAN. Further more we expect an approval to BOTOX cosmetic in China. And we anticipate filing BOTOX for chronic migraine with the US FDA by mid-2009.

And finally, we're in the process of launching several newly approved products such as Axon and anemic medical just now in the US. Dermal filler in Europe and will be launched in early 2009 in the US. Given concerns raised by our major competitor Alcon regarding the US opthalmic pharmaceutical market I will start with comments in eye care. We are pleased to be continuing strong performance of eye care with third quarter growth year-over year of 11.5% in dollars and 9.1%in local currency included those are the worldwide numbers as we met both our internals goals as well as expectations established by no sales sight analysts. Year to date September Allergan has grown exactly 5.5% in local currency compared to the market growing AIMS global at 9% in the first half of the year versus the first half of 2007.

For the first half IMS reports Allergan in market growth at 12% and shows that as the fastest growing by a wide margin. Although we do not yet have the benefit of product launches in Japan where we collaborate with St. Jude and St. Vaunt.

Outside Japan we're the fastest growing company in each geographic region. If one excludes the new retina market in which we do not yet compete. And the other kind of hitting record shares in many markets in the US, in Europe, Latin America and Asia outside Japan. As a mark of the health of our eye care businesses, we have increased fourth quarter sales guidance on a performance basis versus the projections given in our previous guidance supplied in the last earnings call including here you'll see the impact of currency when you do the numbers.

Now coming to the US ophthalmic market in particular we used very strong as our data provider whereas Allergan uses clearer path. For us we already have September data from base band and they show a buoyant September market with that position dollar growth at 18% year-over-year and growth for the third quarter at 12.3%. Year-to-date growth in the market was 9.8% for the first nine months of 2007. Year-to-date Allergan increased sales and acquisition dollars by 12.8% whereas outcome increased by 8.3%.

We believe that the numbers from baseline in IMS accurately reflect end market demand. Maybe stepping back for a moment, Allergan and Alcon have very different portfolios and product in China. Allergan has virtually no ophthalmic generics spread outs invest no exposure in the ophthalmic generics market which is declining in value. Likewise we have no exposure to the general practitioner and pediatrician channels which are flat being dominated by allergy products which are also flat in value.

At Allergan we're fortunate that we have the greatest exposure to the highest value growth segments of therapeutic glaucoma and survival antinflammatories. In market we steps in September is maintaining its growth rate of 30% in line with year to date growth of 39%. We steadily increasing units filled for prescription. COMBIGAN has been added to the ALPHAGAN franchise and was picking up steadily given the convenience of the cut out tolerability. Best Oxygan is still growing in trailing prescriptions. COMBIGAN has reached 35% to new prescription share of Cosalt. The Cosalt based and growing genetic in the US and our strong formulary positions for COMBIGAN we expect further sales gains.

Within the cost development category LUMIGAN has marginally lost share given the success that time see. However, with the expected approval of LUMIGAN expect to reserve LUMIGAN to a market share growth trajectory.

Outside the US our growth across the world is being driven primarily by glaucoma and dry eye franchises. Growing sales in glaucoma and the ALPHAGAN franchise including COMBIGAN and then LUMIGAN, by GANFORT, and then dry eyes from OPTIVE and the refresh line of tears. We continue to round out the availability of our products worldwide with third quarter approvals of LUMIGAN and GANFORT to Romania. COMBIGAN in Hong Kong and Malaysia, the new unit dose product Optive Sensitive was launched in the US and OPTIVE was launched in the UK, Austria, Portugal, South Africa, and Chile in the quarter.

My math shows Allergan's Artificial Tears growing at 12% at constant currency in the first half of 2008 versus prior year. So in conclusion, I can state our eye care business is in a robust position and we're now poised to enter the rapidly growing retina market in 2009 with an eye care. So I gave all of my thoughts about the challenges of our cash pay businesses which were affected by the US economy and then a slowdown in Europe from the early summer onwards reflecting general economic problems in several European countries.

The BOTOX franchise grew 7% in dollars and six in local currency in the quarter. Globally, we estimate a modest 2% market share in the first half of 2008 versus the same period in 2007 to new entrants such as Zyramin, Meditox from Korea and China Toxin. Nevertheless we continue to enjoy about 84 to 85% market share on a global basis.

In some secondary markets, we have seeded share as we've chosen not to reduce prices to much competition in some government tenders for therapeutic uses in places such as Scandinavia, Brazil, and Mexico. On a positive note, BOTOX is still gaining share in the top five markets of Europe in both the therapeutic and cosmetic segments despite the of Zyramin which now suffers from stagnant market share in its German home market, with Zyramin's historical gains coming at the expense of export.

Across this we generally see low price competition fighting amongst themselves. BOTOX continues to grow rapidly in Asia and parts of Latin America. Planning ahead for 2009 it is clear that we will have to manage through a challenging market for aesthetics as we deal with competition in the US. However, we are encouraged on the therapeutic side that the FDA has granted us toxicity file, a priority review with action expected by the end of Q1.

Also with positive results from our Phase III chronic migraine trial, we hope to file for FDA approval in 2009, and if approved, we believe the chronic migraine should be another growth driver in 2010. Regarding profitability of the BOTOX franchise, we should enjoy at least from GSK's approvals in Japan and China.

Moving on to dermal fillers, sales remain strong with third quarter growth year-over-year of 18% in dollars and 16% in local currency. In market for Q2 we estimate that the global filler market continued to grow rapidly with growth year-over-year at 19% even up a little from the 17% in market growth in Q1.

Now looking at Q3 it seemed that the US market continued to grow slowly with JUVEDERM picking up share to be at parity with the Restylane franchise. In Canada, market conditions remained strong with JUVEDERM achieving approximate parity with the Restylane franchise. We are pleased that we launched our JUVEDERM plus Lidocaine products in September in Canada, which should lead to more market share gains as well as further stimulation of the market.

In Europe, Q-Med report 42% growth in their Q3 sales points to a strong market. In Europe Perlane was just formally launched as a key element in our whole phase offering. In the late summer we commenced an innovative TB and print campaign for JUVEDERM Ultra and Ultra Plus. Those are the products incorporating Lidocaine in France and the UK and are pleased with the consumer response. The addition of multiplus eye growth -- eyelash growth and the JUVEDERM first aid products will be useful enhancements to the Allergan facial aesthetics portfolio in the United States if approved in 2009. Regarding breast aesthetics, sales in the third quarter increased 3.4% in dollars and 1.6% in local currency. The dropoff in growth from Q2 to Q3 occurred overseas. Particularly in Europe where we had been growing in double digits until Q2 and then sales in Q3 accelerated especially in southern Europe. In Asia and Latin America where we integrated the operations and added breast aesthetics to our product range, we need to go strongly above at a lesser rate than earlier in the year.

In the United States we see declines in the volume of procedures pretty much at the same rate as Q3 as Q2. With the volume decline being offset by the pickup in value as the market converts from saline to silicone. We probably maintain discipline and maintaining price levels as we opt to compete in product quality, range of offering and service.

Regarding our internal efficiencies, we're pleased with the progress of transitioning our manufacturing from Ireland to Costa Rica and also recent we benefited from the consolidation of our US logistics into a Fed ex-hub in mentors. In global basis we estimate with the market in Q2 grew 10% year-over-year coming down from the end market global growth of 15% in Q1.

For intervention we report the sales increase of 7% in dollars and six in local currency in the US we've experienced a significant discretion market growth in the end fact of portion cough patient cough base with the range of 2to $4000 even for reimbursed procedures. Cash pay part of the market has declined considerably given approximately $15,000 for out of pocket costs. Also we feel in competitive intrusion about taken on bound we're pleased that the market share gains have slowed considerably in recent months.

Europe experienced poor sales in Q3 given negative reimbursement changes in several major continental markets. In Australia sales in that already well developed market continued on a strong growth trajectory. Great progress is been made in United Kingdom and march headway has been made in net sales market in Latin America. For skin care, sales declined 905%. In market as our Acquisition dollars increased 2.7% with factory sales declined year-over-year due to a minor increase of trade inventory a year ago in Q3 of 2007.

In addition sales of the older physician dispensed products VIVITE declined as we focused our efforts on the newer VIVITE line and now launch all the medical product range. Finally y in the urology areas sales in Q3 of $70 million increased sequentially from sales of $11 million in Q2. SANCTURA's X unique profile is the only ending in the category. And the favorable based on dry mark gives the product good acceptance in the urology specialty. Analyzing prescription trajectory in terms of prescription for months since launch SANCTURA X on continues to exceed the performance and is only slightly behind that of advice care.

Regarding Tier II care, we're encouraged that we're added to certain fee form layers at the beginning of October. With the spectrum collaboration we continue to build depth in the urology specialty. Offset this specialty urology and OBGYN Primary care, it is clear that we should avoid defocusing efforts and therefore our continuing discussions with several big companies as well as contract sales organizations in terms of collaboration.

I'd now like to pass over to Jeff Edwards who will comment with financials.

Jeff Edwards - Executive Vice President and Chief Financial Officer

Thanks David and good morning to all of those on the call. Allergan continue to demonstrate during the third quarter its ability to generate consist performance results despite the impact of difficult economic conditions. As mention on previous earnings call, Allergan diversionification business across of cash pay and reimbursed products and between domestic and international operations continues to be a strategic benefit to the company. Turning to the third quarter our diversify face of business and ability to carefully control business expenditures allowed the company to deliver the top end of our earnings per share guidance for the quarter. For the third quarter as a result of the continued difficult economic conditions, gains sales results for slightly below the guidance range provided to you on the second quarter call.

Well we cannot control the overall health of the economy we can continue to calculate monitor our markets and manage business expenses as necessary through appropriate leverage with the goal of delivering our bottom line EPS guidance. Consistent with our strategy to support the future health of the company, Allergan will continue to make meaningful investments within research and development to support our long term growth as evidenced by the various license and agreements announced in the earnings release.

Continuing to make these strategic R&D investments in the future of the company is important. And while we plan to continue to carefully monitor our broader base expenses through these challenging tough economic times, we'll be very thoughtful in our evaluation to ensure we are leveraging in these expense base in the appropriate areas. We will carefully control these areas of spending, focusing on the new products and indications that we expect to launch in 2009.

From the third quarter we continue to make targeted investments in the components of our business where the likely financial returns are significant while leveraging areas that were deemed to generate less favorable financial returns. This focused approach enabled to the company to deliver adjusted EPS results at the top end of our guidance range. Adjusted diluted earnings per share for the third quarter was $0.65 marking 12.1% increase over 2007 results for the same quarter.

The reconciliation of all the adjustments to GAAP earnings is set out in our earnings release. Adjusted selling general and administrative expenses were 40.1% of product net sales for quarter totals $434 million. This percentage and amount of SG&A's spend represents our lowest level in four quarters. Reflecting our commitment to leverage our expense base. As mentioned previously, we constantly undertake thoughtful evaluations of these investments to ensure the date continue to generate favorable financial returns to maintain certain level of financial flexibility which can be adjusted as necessary in response to changing business factors. Excluding the effects of non-GAAP adjustments and amortization of the tangibles.

Allergan's Q3, 2008 gross margin is 82.4% increased 10 basis points when compared to prior year. While the Q3 medical device gross profit percent increased versus the same quarter last year. There was a slight reduction in the Q3 former gross profit percentage as a result of the change in sales mix between quarters. With respect to spending in the R&D area, the company remained very focused on invested in many mini foot projects in both our former and medical device pipelines resulting in adjusted R&D investor ratio of 16.7% for the quarter.

Allergan's adjusted R&D spend for the quarter totaled $180 million a $16 million increase over the third quarter of 2007. As outlined by David, a few moments ago it's clear that our choice of investments within the R&D area is producing a stream of filings and major progress in clinical development.

With respect Allergan's consolidated net worth increased to approximately 3.99 billion at the end of September 2008 from approximately 3.74 billion at the end of 2007. Consolidated Allergan's sales outstanding was 39 days while consolidated Allergan's inventory days on hand was 126 days.

At the end of the third quarter, Allergan's cash and cash net of debt positions totaled approximately 1.01 billion or 85 million respectively when you look at cash net of debt. 2008 operating cash flow after CapEx was approximately $178 million for the quarter. During the quarter, Allergan utilized approximately $75.3 million to acquire 1.37 million shares through its open market share repurchase program.

Allergan's did not acquire any shares through this program during the same period in 2007. For the fourth quarter of 2008 Allergan estimates product net sales in the range of 990 million to 1.04 billion at current exchange rates. This estimate has been negatively impacted by approximately $70 million of currency versus our prior guidance assumptions. The midpoint of this guidance represents growth of approximately 2% on a constant currency performance basis and a decline of approximately 5% in dollars versus the prior year. The ongoing dramatic and rapid strengthening of the US dollar against other currency has created challenging hurdle when comparing total dollar growth to the prior year. In addition to sales these currency movements will have a negative impact on EPS growth for the quarter however the effect will be somewhat offset by the natural expense hedge as a result of our operations outside of the United States, including the large majority of our manufacturing facilities that supply product to the US and the benefit of our option hedging strategy.

It should be noted that effective September of this year, we executed a series of foreign exchange options transactions focused on the 2009 year to attempt to get ahead of the negative affects of the strengthening US dollar. Allergan is certainly focused on hedging approximately 50% of our net foreign currency exposure within our major currencies by the use of an options based strategy.

Q4 EPS will be positively impacted by approximately $0.04 due to the renewal of the US R&D tax credit as the full year benefit of the credit is retroactively applied to the fourth quarter. Including the estimated impact of currency and the tax credit adjusted diluted earnings per share guidance in the fourth quarter is expected to be in the range of 72 to $0.76. This represents EPS growth of between 20 and 27% from the same period last year or adjusted for impact of the R&D tax credit catch up growth of between 30 and 20%.

The near unprecedented dislocation of the world economy and the very significant strengthening of the US dollar in response to this economic decline has made it somewhat difficult to respond with inclined adjustments to our normal business practice.

Regarding full year guidance for 2008, Allergan is updating the 2008 adjusted diluted earnings per share guidance range to between $2.53 and $2.57 which represents growth of between 16 and 18% for the year. We have provided a broader than typical range of EPS guidance as a consequence of the ongoing difficulty in predicting consumer confidence levels and ongoing uncertainty within the currency markets.

With respect to currency, our current assumptions are based upon the prevailing US dollar rates versus our major currencies. Allergan's previous guidance for the full year tax rate assumed that the US R&D tax credit would be renewed and therefore we continue to anticipate a full year tax rate of approximately 26%.

Regarding full year 2008 total sales guidance Allergan is adjusting the range to between 4.290 billion and 4.340 billion. Updated product sales guidance is included in our earnings release. Please note that the LUMIGAN franchise guidance assumes the approval of LUMIGAN X during the fourth quarter.

Our solid results, during the third quarter is another testament to the value of the depth and breath of Allergan's diversified lines of business. Allergan prides itself on the disciplined approach taken with respect to how our dollars are spent and what kind of investment returns to require to justify the spending. This focused approach and our commitment to leveraging of our cost structure will continue to place Allergan in a position of strength within our markets and enable us to emerge strong from this economic downturn.

So, with that operator, I'd like to ask to open the call to questions.


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