Allergan Inc.’s chief executive is optimistic about the prospects for its newly acquired acute migraine headache drug, despite a regulatory setback.
“Doctors are extremely interested in [Levadex] and see it as a perfect companion product for a different patient profile than Botox for chronic migraine,” David Pyott said in an interview last week.
“In terms of the product, I feel as good as I ever did about Levadex, maybe even slightly better,” Pyott said. Allergan got Levadex through its recently closed $958 million buy of Mountain View-based Map Pharmaceuticals Inc.
The Food and Drug Administration declined to approve Levadex last month, citing manufacturing problems. Allergan bought Fall River, Mass.-based Exemplar Pharma LLC, the company that fills Levadex’s canisters, and is working to correct the problems.
The “dilutive impact” of Allergan’s buy of Map also was among the reasons for a new financial outlook for this year. The drug maker now expects a profit of $1.43 billion to $1.44 billion, compared with a previous forecast of $1.44 billion to $1.47 billion.
Analysts expect Allergan to post a $1.44 billion profit this year.
The earnings outlook wasn’t the only factor that sent Allergan shares down 14% on May 1, the day it released its first-quarter results. Shares had begun to climb by the end of last week, when Allergan’s market value had once again topped $30 billion.
The big dip keyed off a first-quarter report that came with word of delays on a pair of drugs under development: Darpin, which is being developed to treat age-related macular degeneration; and bimatoprost, which is the active ingredient in Allergan’s Latisse eyelash grower and is seen as a potential treatment for hair loss on the scalp.
Allergan said data from a second-phase clinical trial of Darpin indicated that the drug candidate showed some product differentiation in comparison to Lucentis, a rival from Switzerland-based Roche Holding AG, but not enough to quickly move it to a third phase.
• Headquarters: Irvine
• Business: Drug maker
• Founded: 1948
• Ticker symbol: AGN (NYSE)
• 2012 revenue: $5.8 billion
• Recent earnings: $12.4 million for Q1
• Market value: About $30.6 billion
• Notable: Q1 results reflected $259 million write-down on discontinued operations, including Lap-Band unit, which is up for sale
“What we said was we weren’t going directly to Phase II but we were doing additional Phase II work, and that would, in turn, delay approval by approximately one to two years,” Pyott said.
Analysts were “trying to press (Dr. Scott) Whitcup on all sorts of questions” regarding Darpin, Pyott said, referring to Allergan’s executive vice president and chief scientific officer. Whitcup replied that Allergan hasn’t yet completed its data study on the second phase.
“Some people assumed we could just rush right into Phase III,” Pyott said. “I personally don’t understand the arithmetic people must have been doing.”
Wall Street
Allergan is licensing Darpin from Molecular Partners AG in Switzerland.
The Darpin news raised concerns among some on Wall Street.
“There was a rush to ascribe a lot of value to Darpin and our view is that this is still very much an unproven asset with limited data,” analyst David Amsellem of Minneapolis-based Piper Jaffray told Reuters.
Amsellem said that he didn’t expect Darpin to get to market until the end of the decade and that “if you couple that with the setback of the hair-loss product, the late-stage pipeline for Allergan right now is really quite thin.”
Bimatoprost trials for male and female hair loss “indicated that the formulation was well-tolerated but did not provide sufficient efficacy to proceed directly to Phase III,” Pyott said. Allergan is looking at using a “high concentration” of bimatoprost with a “novel formulation” going forward, he added.
Lap-Band
Pyott also mentioned that Allergan has formally committed to pursuing a sale of its Lap-Band weight-loss business. He said strategic and private equity buyers have examined it and that the company now expects to “execute a signed agreement” by the middle of the year.
Investors “also take the view [that], as we pointed out, a business that isn’t growing doesn’t belong in Allergan’s portfolio.”
Allergan’s first-quarter operating profit came in at $297.5 million, beating Wall Street expectations of $291.4 million.
First-quarter net income fell 95% to $12.4 million, due in large part to a $259 million write-down on discontinued operations, primarily the Lap-Band business.
Allergan’s first-quarter total product sales, which are slightly lower than total sales, came to $1.4 billion, in line with analysts’ forecasts.
