Allergan Inc.’s emphasis on spending money “in the clinic” has fattened up its research and development pipeline and caught the eye of Wall Street.
The Irvine-based maker of Botox and other drugs will spend close to $1 billion this year on research and development, executives told investors and analysts during its annual research and development presentation in New York.
Allergan highlighted 16 products it has in the works, including four potential new uses for its flagship Botox drug.
It’s also working on four other drug candidates, two extended-release eye implants, a treatment for the skin disease rosacea, a biodegradable mesh used in plastic surgery, and a formulation of its eyelash grower to treat baldness.
Allergan said five of those products could be launched next year, with a combined potential to add between $600 million and $1 billion to annual sales.
Allergan had $5.4 billion in sales in 2011, good for No. 5 on this week’s list of largest public companies based in Orange County (see List, page 12; related stories throughout issue).
2013 Lineup
Allergan said it expects the 2013 lineup to include two new uses for its best-selling Botox—one to treat idiopathic overactive bladder and another for crows’ feet lines, an extension of its initial cosmetic approval for brow wrinkles.
Others expected are a combined dose of glaucoma drugs Lumigan and Ganfort in Europe; a new version of its Juvéderm cosmetic lower-face filler, to be called Juvéderm Voluma; and SeriScaffold, a biodegradable mesh for plastic surgery that has already received Food and Drug Administration clearance and European regulatory approval.
Fuel
“Of course, to fuel all of this requires a lot of money,” Allergan Chief Executive David Pyott told investors and analysts during the research and development day last month.
Allergan expects to spend about $920 million on research and development this year, or about 16% of its projected full-year product sales of $5.65 billion to $5.85 billion.
Pyott told the audience that investors and analysts were surprised Allergan was signaling further research and development increases.
Most believed the company would cut such spending in the wake of several recent regulatory approvals, he said.
“We were saying, ‘No, it will continue to go up.’” Pyott said. “And today, you will see why…because we put a lot of new programs into the clinic.”
Keeps Pace
This year’s spending on research and development about matches 2011, which saw the string of product approvals that had some on Wall Street expecting the company to dial it down this year.
Among the recent approvals have been the use of Botox for chronic migraine headaches, upper limb spasticity and neurogenic overactive bladder; a lower-dose form of Lumigan; and another version of lower-face filler Juvéderm.
“So the focus today is not only what else we have in the late-stage pipeline but how we are reloading the pipeline,” said Scott Whitcup, Allergan’s executive vice president for research and development. “We’re fortunate that we treat diseases of an aging population, and so the demographics, the aging population, will help drive growth in our markets.”
• Headquarters: Irvine
• Business: drug maker
• Founded: 1948
• Ticker symbol: AGN (NYSE)
• Market value: about $29 billion
• Notable: Plans to spend more than $900 million on research and development this year, aims for approvals on five new products in 2013
Anticipation
One of Allergan’s most anticipated research and development projects involves Latisse, its eyelash-growing drug, as a possible treatment for baldness.
The company is in ongoing second-phase clinical trials of bimatoprost, Latisse’s active ingredient.
Frederick Beddingfield, chief medical officer for Allergan’s Allergan Medical unit, called bimatoprost for the scalp “a big opportunity for men and very importantly for women.”
He cited statistics showing that some 54 million Americans suffer from hair loss and spend $3.5 billion annually on products “that really do not work very well—most of these are non-pharmaceutical products with little, if any, scientific merit.”
Revenue Potential
The market for an advanced baldness-fighter could bring Allergan $400 million to $800 million or possibly more in annual revenue, wrote Seamus Fernandez, an analyst with Leerink Swann LLC in Boston, in a report issued after the company’s research and development day.
Other high-potential products in development with target dates beyond next year include Botox for treating osteoarthritis, a targeted toxin for neuropathic pain, and a drug to treat age-related macular degeneration, a leading cause of vision loss, according to Annabel Samimy of St. Louis-based Stifel, Nicolaus & Co.
“With the revenue potential of these programs, Allergan’s long-term growth is tangible and sustainable,” Samimy said in a research note.
