Allergan Inc., the Irvine drug maker that’s Orange County’s second most valuable company after Broadcom Corp., got a bullish nod from Banc of America Securities, which started tracking the company.
“Allergan’s products continue to show strong sales trends with corporate growth in the low to mid-teens expected over the next three years,” analyst Frank Pinkerton said in a research note.
Pinkerton set a $125 a share price target for Allergan, which was trading at about $114 last week with a market value of $17.3 billion.
Growth for Allergan, Pinkerton said, should come from newly approved silicone breast implants, increased marketing of the Lap-Band obesity-fighting stomach device and medical uses for flagship Botox.
Pinkerton said he expects Allergan to get more leverage from last year’s $3.2 billion buy of Inamed Corp. in the next three years. The company could see some cost savings and sales growth with more marketing and sales of Inamed’s products.
“With the acquisition of Inamed, Allergan has added a top-tier aesthetics company that should benefit from the vanity desires of the aging baby boomer population, as well as significant growth areas in niche medicine, such as obesity,” he said.
Allergan’s pipeline is attractive to Pinkerton. It contains 20 products, including extensions of Botox and glaucoma products, he said.
“The company also plans to expand its pipeline portfolio with several products concentrating on conditions of aging, such as age-related macular degeneration and macular edema, and unmet medical needs, like neuropathic pain,” he wrote.
Allergan’s pipeline drugs “represent larger market opportunities with limited competition.”
The analyst also pointed to risks, including generic competition for Allergan’s eye drugs.
The company’s been able to blunt that risk so far, he said.
“When the first generic version of (glaucoma drug) Alphagan received approval in May 2003, the company was able to soften the impact by launching Alphagan P and Combigan (Europe),” Pinkerton said.
Alphagan’s European patent expires in 2009. The patent for Acular, which treats itchy eyes, expires in Europe next year and in the U.S. in 2009.
Another risk: Increasing competition for Botox, which so far has “enjoyed free rein,” Pinkerton wrote.
“Two competitors, Medicis (Pharmaceutical Corp.) and Mentor (Corp.), are anticipated to launch competing botulinum toxin products in 2009 and 2011,” Pinkerton wrote. “While we do not believe that either will take immediate significant share from Botox, it is likely that Allergan could lose some incremental sales and not enjoy historical price increases.”
Allergan wasn’t the only company that Banc of America started watching this month.
Alcon Inc., the Nestl & #233; SA unit with 600 workers in Irvine, received a “buy” rating from Pinkerton. The analyst also gave a buy rating to Mentor.
Survey Questions Cost-Sharing
The thinking that more healthcare cost-sharing by patients will make people more conscious of medical costs may be off, according to a report from the Center for Studying Health System Change.
The center found many doctors don’t consider patients’ out-of-pocket costs when recommending pricey tests and treatments.
Only 51.2% of doctors consider out-of-pocket costs when deciding whether to hospitalize a patient when outpatient treatment is an option. Slightly less than half, 40.2%, factor in patients’ costs when deciding what diagnostic tests to recommend.
Almost 80% of physicians consider the patient’s potential cost when prescribing a generic drug over a brand-name prescription.
“Because physicians consider patient cost less frequently in making decisions about more expensive services, it’s likely that increased patient cost-sharing will be limited as an effective cost-control tool,” said Hoangmai Pham, a center researcher and the study’s lead author, in a release.
The study was based on the center’s Community Tracking Study Physician Survey, which collected information from 6,628 practicing doctors.
The center is a Washington-based nonprofit funded by the Robert Wood Johnson Foundation. Orange County is one of 12 communities the center looks at nationwide.
Bits and Pieces:
Patient Care Technology Systems LLC, a Mission Viejo medical software company, said its Amelior ORTracker software program is being used by Lehigh Valley Hospital and Health Network in Pennsylvania Volcano Corp., a medical device maker that originated in Orange County before moving to Rancho Cordova almost four years ago, and ev3 Inc., owner of Irvine-based Micro Therapeutics Inc., signed a marketing and distribution pact. Under the deal, Volcano plans to sell ev3’s SpiderFX embolic protection medical device to contain and remove embolic debris that becomes dislodged during blood-vessel medical procedures Hoag Memorial Hospital Presbyterian hospital in Newport Beach said HealthGrades, a rating agency, tapped it as an award winner for patient safety outcomes.
