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Forget Q2 Results, Q3 Outlook: Botox News Grabs Focus

Botox: migraine approval could come by end of October

Allergan Inc. beat expectations with its second-quarter results and cautioned Wall Street about the current quarter.

But all analysts wanted to talk about was Botox.

The Irvine drug maker said last week regulators have asked Allergan for a doctor training plan and other advanced details on using Botox to treat migraines, which analysts took as a sign that approval could be near.

The Food and Drug Administration could sign off on Botox for migraines by the end of October. In July, British regulators cleared Allergan to market Botox for migraines there.

U.S. regulators actually extended their review of using Botox for migraines by three months. But investors didn’t seem to care, sending Allergan’s shares up 7% on the day of the company’s second-quarter results last week.

“Given the materials they’ve asked us for under the statutes, (regulators) are entitled to reset the clock by three months,” said David Pyott, Allergan’s veteran chief executive.

Allergan, the county’s most valuable company on Wall Street, had a market value of about $19 billion last week.

On a conference call, analysts “were asking a ton of questions about Botox for migraine,” Pyott said.

Botox is Allergan’s flagship drug with sales of $360 million in the second quarter, or about a third of Allergan’s $1 billion in sales for the three months.

The drug is a household name for its cosmetic use to temporarily remove wrinkles. It’s also used to treat muscle spasms and excessive sweating.

Products

Allergan’s other products include eye and skin drugs, as well as medical cosmetics Juvéderm, a lower-face wrinkle filler, Natrelle breast implants and Latisse, an eyelash grower.

It’s now 80% likely the FDA will approve Botox for migraines, analyst Larry Biegelsen of Wells Fargo Securities said, up from his earlier prediction of 60%.

Botox for migraine could be another growth driver for Allergan.

“We estimate that (chronic migraine) represents a $400 million to $500 million opportunity for Botox,” Biegelsen said.

Allergan projects Botox sales of $1.33 billion to $1.37 billion this year.

With the attention on Botox, investors and analysts shrugged off Allergan’s tradition of conservative forecasts, in this case for the third quarter and the rest of 2010.

For the current quarter, Allergan forecast a profit of $228 million to $239 million, just shy of the $240 million analysts had been expecting.

The drug maker said third-quarter product sales—slightly less than total sales—should come in at $1.13 billion to $1.18 billion. Analysts had been forecasting sales of $1.19 billion.

For 2010, Allergan said it could see a profit of $944 million to $957 million, versus the $960 million analysts had been looking for.

The drug maker sees its full-year product sales coming in at $4.6 billion to $4.75 billion, shy of the $4.77 billion analysts had in mind.

A stronger dollar against the euro and other currency issues were among the reasons for Allergan “maintaining a degree of caution for the second half, although we’ve done very well in the first,” Pyott said.

In the second quarter, Allergan reported an adjusted profit of $258 million, up 13% from a year earlier and topping the $243 million analysts expected.

Revenue was $1.2 billion, up 9% and in line with expectations.

“I think people were pretty happy with all the operating numbers in the quarter,” Pyott said.

Shares of Allergan surged in July when its name came up in speculation about French drug maker Sanofi-Aventis SA’s desire to buy an American company.

Allergan, along with Genzyme Corp. and Biogen Idec Inc., both of Cambridge, Mass., were mentioned in the buzz.

Then, in late July, Sanofi was reported to have made an initial $18 billion offer for Genzyme, taking the speculation wind out of Allergan’s shares.

No ‘Rocking Chair’

Pyott brushed off the drama.

“This must be at least the fifth round of rumors around Allergan being bought, and you know, I’m not on a rocking chair yet—I’m still firmly (sitting) in my office,” said Pyott, who turns 57 in October and has run Allergan since 1998.

Pyott called the Sanofi speculation “just part of the industry gossip.”

With ongoing consolidation and a need for growth by Big Pharma, “a lot of people are very enamored by Allergan because of its growth record and growth prospects,” he said.

“It’s always best to be the best-looking girl in town, right?” Pyott said. n

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