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Allergan Looking Good for Product-Driven Growth

Botox: now a migraine-fighter

Irvine-based drug maker Allergan Inc. should see another strong year of growth tied to its flagship Botox, according to an analyst.

A recent report by Seamus Fernandez of Boston-based investment bank Leerink Swann LLC suggested that Allergan—which generally ranks among Orange County’s most valuable public companies—could also gain more shareholder value with a sale or spin-off of its Lap-Band weight-loss business, which has been affected by the choppy economy.

Fernandez said he expects Allergan—which also makes eye drugs, skin fillers and breast implants—to see high-single-digit sales growth this year in spite of an estimated $125 million foreign currency headwind.

Allergan is set to release its full-year and 2011 financial results Feb. 1. The company traditionally gives its full-year financial forecasts at that time.

Wall Street expects Allergan to post a profit of $1.3 billion on sales of $5.9 billion this year.

Fernandez wrote that Allergan’s 2012 should be driven by the ongoing introduction of Botox for chronic migraine headaches, third-phase clinical data for Botox in treating overactive bladder for which there’s no known cause, and the prospects for eye drugs and its pipeline. The company’s research and development day at Allergan headquarters March 28 also is expected to feature updates on eye drugs and on the use of eyelash-growing drug Latisse as a possible growth agent for hair on the scalp, he noted.

Fernandez’s suggestion on Lap-Band, which Allergan has forecast as having $220 million to $240 million in full-year 2011 revenue, comes as sales taper off. Third-quarter sales fell 16% to $50 million.

Allergan said it is not interested in selling its obesity-intervention business.

• Headquarters: Irvine

• Business: Drug maker

• Founded: 1950

• Ticker symbol: AGN (NYSE)

• Market value: about $26.95B

• Notable: Set for annual R&D update March 28 at headquarters

“Committed”

“We remain committed to our Lap-Band business and are making continuous investments in and dedicating resources to broaden coverage of and access to the device for those obese patients in need of surgical intervention,” said Caroline Van Hove, an Allergan spokeswoman.

Earlier, Allergan Chief Exe-cutive David Pyott said that Lap-Band’s slowdown was “all about both companies and their health insurers making access more difficult.”

Health maintenance organizations historically have not covered the Lap-Band. Preferred provider organizations usually only pay part of the cost for the surgery, which can cost from $12,000 to $20,000 on average.

“Unfortunately, Lap-Band probably correlates as the only product in our line very strongly with unemployment rates,” Pyott said, noting that out-of-pocket costs for patients “could easily be $4,000 … and of course, if you’re already economically challenged or concerned about your job or all those issues, that’s a lot of money.”

Fernandez also suggested Allergan could expand use of its Ozurdex biodegradable eye drug delivery implant by partnering with other ophthalmology companies, he said.

Partners?

The analyst wrote that potential partners could include Alcon Inc., the Swiss company with about 800 workers in Irvine; Rochester, N.Y.-based Bausch & Lomb Inc., which has its eye surgery hub in Aliso Viejo; Roche AG in Switzerland; or Bayer/Regeneron in Germany. He said other potential catalysts for Allergan include an upcoming March 26 review date by the Food and Drug Administration for Levadex, an acute migraine drug candidate that Allergan is co-marketing with Map Pharmaceuticals Inc., a Mountain View drug maker.

Levadex, which is inhaled, is part of a migraine franchise that Allergan has created after its 2010 FDA approval of Botox for chronic migraine. Allergan is expected to add Levadex to its Botox marketing efforts aimed at migraine sufferers.

Pyott has said Allergan will be able to sell Levadex and Botox with little branded competition, because many migraine drugs have gone off patent.

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