Allergan Inc. Chief Executive David Pyott made good on his earlier pronouncement that his company will take “more shots on goal” this year.
The Irvine-based drug maker did more than shoot last week—it scored again with a $958 million deal that’s a key to another sort of goal: a bid to stay on top of the multibillion-dollar market for migraine headaches with a set of branded products led by its Botox drug.
The latest strategic move came last week with a deal for Map Pharmaceuticals Inc. of Mountain View.
Map makes Levadex, an inhalable drug for acute migraines. The two companies were already in a partnership that started in 2011, when Allergan paid $60 million for the rights to comarket Levadex for certain uses.
The pending deal would put Levadex firmly under the banner of Allergan, which has annual revenue of more than $5 billion and market value of about $32.1 billion.
Allergan’s offer comes to $25 a share for Map, 60% over its closing price on Jan. 22, the day the deal was announced. Map’s shares had risen to just less than $25 late last week, giving the company a market value of about $872 million, a slight fraction of Allergan’s.
The deal comes as Map, which has yet to reach profitability, awaits a Food and Drug Administration decision on approving Levadex for U.S. sales.
“Sometimes it’s good just to move when all the stars and the planets come into alignment,” Pyott said on a conference call last week. “We’re really excited by the Levadex opportunity and forecast that peak sales will be approximately $500 million. We expect that Levadex will further bolster Allergan’s position of leadership in migraine.”
FDA
Map is in the process of seeking FDA approval for Levadex. Regulators had quashed Map’s prior request for Levadex approval in early 2012 because of questions on manufacturing processes. The request was resubmitted last October, and Pyott said Allergan is hopeful that an FDA approval will come in April.
A green light from the federal agency will trigger immediate marketing efforts, according to Pyott.
“We would launch shortly thereafter,” he said.
Allergan is looking to package Levadex with its flagship Botox, which is best known as a wrinkle smoother but was approved for chronic migraines in 2010.
Allergan is already perceived as the top brand for migraine drugs, according to Pyott, citing a survey of neurologists who treat the headaches.
Levadex and Botox for migraine are expected to attract the same type of doctors, which will allow Allergan to use its existing specialty sales force in the U.S. to sell both drugs, according to Pyott.
Botox and Levadex could be offered in package deals in a segment with growing sales and relatively few branded competitors. Data from Burlington, Mass.-based research firm Decision Resources shows that the global migraine drug market should reach $5.8 billion by 2021.
“Most of the large pharma companies have withdrawn due to” patent expirations, Pyott said. “Pretty much in a strange way, we’re now the big dog.”
Another possible advantage for Allergan: Competition from generic versions of migraine drugs could be limited because many migraine patients also suffer from nausea and are unable to swallow pills, analyst David Amsellem of Minneapolis-based Piper Jaffray & Co. told Dow Jones News Service.
Amsellem also mentioned that Valeant Pharmaceuticals International Inc., a Canadian drug maker with roots in Orange County, markets a nasal form of the drug, which has the clinical name of dihydroergotamine. He said, however, that it’s never generated significant sales because of an unappealing taste and limited promotion.
An article on the Motley Fool investor website called Allergan’s purchase “a smart move” because it was already planning to co-promote Levadex if approved.
“And the company can afford the acquisition,” author Brandy Betz wrote, noting that the company reported having about $2.7 billion in cash and equivalents as of the third quarter.
Allergan will report its fourth-quarter and full-year results on Feb. 5.
Pyott said on the call that he expects the Levadex deal to dilute Allergan’s earnings this year “as we have the R&D costs to bring Levadex over the finish line,” as well as other costs.
Allergan also indicated caution during the recent conference call, saying that it expects Levadex’s initial sales to be slow, and economic austerity measures in Europe could also complicate how it catches on overseas.
“For the course of this year, the sales would be quite limited because it takes time to get everything out,” Pyott said.
Allergan expects wider use of Levadex in 2014, when it plans to hire a sales force that will target headache specialist doctors who aren’t board-certified neurologists or pain specialists but are “major prescribers of migraine drugs,” Pyott said.
Homecare
He said that Levadex’s formulation will allow it to go to a self-administered homecare product for patients rather than a hospital-based, intravenous treatment, thanks to a drug inhalation process developed by Map.
Allergan does plan to look at some other research and development projects for Levadex in the future, said Scott Whitcup, chief scientific officer.
Those include a pediatric indication and potential uses for Parkinson’s disease and epilepsy.
The deal for Map is the latest—and the biggest, by far—for Allergan in recent months. The company paid $350 million for the skin-care business of Carlsbad-based SkinMedica Inc. in November, and has done three smaller deals recently.
