Plenty of smooth sailing ahead for Botox
Allergan doesn't have U.S. competition for Botox, at least for now.
By Aaron Smith, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) - Allergan, a California biotech, is lucky enough to have a wide-open U.S. playing field free of immediate competitors for its blockbuster drug: the wrinkle remover Botox.

Allergan (up $0.34 to $108.84, Research) finds itself in an enviable situation. The license to market Botox's most serious competitor, Reloxin, was recently acquired by Medicis Pharmaceutical Corp (down $0.13 to $32.47, Research). But Reloxin is not approved in the U.S., which leaves the market wide open for Allergan, at least for now.

"In essence, [Allergan] owns the market in the U.S. and they're gaining share in Europe, as well," said Timothy Chiang, analyst for investment firm Natexis Bleichroeder. "[Botox] is a product that's been growing about 20 percent a year and it's approaching $1 billion. There is a lot of off-label usage of this product."

Botox, which totaled $830 million in 2005 sales, is a muscle-calming injectable drug that removes wrinkles. Unlike another well-known cosmetic drug, Restylane, which is made by Medicis and is injected into the face to fill it out, Botox is based on a toxin that is diluted to harmless levels and is injected into facial muscles to temporarily paralyze them. The two drugs are classified differently and are not considered direct competitors.

Allergan chief executive officer David Pyott said that because the toxic base for Botox is severely diluted, only very small amounts of the base compound are required to manufacture large quantities of the drug.

"To sell $830 million of this stuff, you need less than one gram [of the active ingredient,]" said Pyott in a recent interview, referring to the dilution of the drug. Pyott attributes the drug's success to the fact that "vanity is a global need."

In addition to its use as a wrinkle-remover, Botox is approved for five different types of treatments in the U.S. and 20 internationally, including the treatment of severe underarm sweating and head and neck pain. In addition, Botox is being studied as a potential treatment for migraines, overactive bladder and muscle spasms. Altogether, Allergan says its drug has 100 potential uses, and analysts say that part of the drug's sales come from physicians prescribing the drug off-label, or for uses that are not approved by the Food and Drug Administration.

On March 23, Allergan completed its $3.2 billion acquisition of Inamed, a California company best known for its breast implants, which expands its roster of cosmetic products.

As a result of that merger, anti-trust laws forced Inamed to let go of its marketing rights for Reloxin, an experimental drug based on the same toxic compound as Botox. The U.S. marketing rights to that drug were sold to Medicis, which had actually failed in its bid to acquire Inamed. Reloxin is produced by the French company Ipsen and is sold in Europe under the name Dysport, but is still considered experimental in the U.S. and can't be sold here.

Chiang of Natexis Bleichroeder said that Allergan won't have to worry about Reloxin until at least 2008, the earliest estimated time that Medicis would be able to get it on the U.S. market. Medicis hopes to file Reloxin to the FDA in 2007, Chiang said.

"Given that Medicis was beaten out by Allergan in its attempt to acquire Inamed, we expect them to be very motivated to make Reloxin a success," wrote David Maris, analyst for Bank of America, in a March 14 report.

Mentor Corp. (down $0.16 to $45.15, Research) of Santa Barbara, Inamed's chief rival in the breast implant business, is also developing a potential Botox competitor known as Puretox, but that drug is still in the early phases of human testing. Puretox won't enter the U.S. market for years, assuming its clinical trials are successful.

The analysts interviewed for this story do not own stock in the companies mentioned here.

To read more about Botox, click hereTop of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.