Flagship Botox a Vanity Hit; Rival Looms
Irvine-based specialty drug maker Allergan Inc. is basking in Wall Street’s good favor, thanks to some tiny toxic injections.
The shots are of Allergan’s purified botulinum neurotoxin complex A, or Botox. The neurotoxin causes botulism,a potentially fatal form of food poisoning. But in small doses, the drug paralyzes muscles by blocking nerve impulses.
Botox was developed to treat serious muscle disorders. But a sizable chunk of the drug’s growth has come from an unexpected corner: plastic surgeons.
Botox is Allergan’s star, allowing the company to boost profits as well as pour more money into research and development. Botox accounted for $239.5 million of Allergan’s $1.6 billion in sales last year. Adjusted for currency, sales of the drug were up 36.2% from 1999 and have outpaced those of Allergan’s other major product, glaucoma treatment Alphagan.
“The drug is probably the silver bullet for the company,” said Ken Laudan, an analyst with Atlanta-based Robinson-Humphrey Co. “The growth rate stands at 30%, contrasted with Alphagan, which has plateaued in the 10% to 15% growth range.”
The Food and Drug Administration has approved Botox for several uses, including treatment of neck spasms and eye-muscle afflictions. But around 10 years ago, a Canadian doctor found that patients who had Botox injections saw their brow furrow and other facial wrinkles smooth out, giving them a more youthful appearance.
The result has been rapid growth in so-called “off-label” Botox use by cosmetic doctors who offer wrinkle-removing injections for $350 a shot.
Figures from the Chicago-based American Academy of Cosmetic Surgery showed that 730,787 such Botox procedures were performed last year, up 17% from 1999.
Analysts say cosmetic procedures account for about a fifth of Botox sales. To be sure, the business isn’t being turned away at Allergan. Still, the company is wary about playing up Botox’s off-label popularity. Chairman and Chief Executive David Pyott, in several interviews, has politely distanced the company from the subject.
Meanwhile, the company last month won Canadian approval to market Botox for cosmetic uses in that country, and Allergan has applied to the FDA for similar approval here. Allergan anticipates a decision by year’s end or early 2002, said spokeswoman Christine Cassiano.
If U.S. regulators sign off, “Botox will explode in its use after that,” said Dr. Howard Conn, an Irvine cosmetic surgeon who specializes in eyelid surgery and laser rejuvenation procedures. Conn uses Botox, saying it “augments the result” of other procedures.
Conn and other plastic surgeons haven’t let any concerns about off-label use keep them from utilizing Botox,often within the context of a “lunchtime” facial rejuvenation procedure that can be done on an outpatient basis. Botox is popular among affluent women older than 30, though doctors see their share of men, too.
“I could not imagine my practice without it,” said Dr. Thomas Barnes, a diplomate of the American Board of Cosmetic Surgery who practices in Newport Beach. Botox has “grown because the results are so rewarding,” he said. “It’s a series of small injections. Within a few days, the frown, forehead, crow’s feet (smooth out).”
Dr. Leslie Bolton, a plastic surgeon who practices in Long Beach and Beverly Hills, calls Botox injections “a loss leader”,meaning they bring people in, though he doesn’t necessarily make much money off the treatments. “The cost is so high,it costs me $400 for enough to treat two patients,” Bolton said. “The reality is that there’s not a huge profit margin.”
Bolton contends that Allergan officials “would be shooting themselves in the foot” if they overlooked Botox’s popularity as a wrinkle-reducing agent.
Botox has faced virtually no competition for the better part of 10 years now. But some observers believe Myobloc, a newly introduced neurotoxin produced by Irish drug maker Elan Corp. could affect Botox’s position in the market.
“Myobloc is not as pure a form of neurotoxin as Botox,” analyst Laudan said. “Theoretically, that means (Botox) is more effective.”
Myobloc could affect Botox if it is sold at about the same price. A price rivalry also “could have some implications for the cosmetic market,” Laudan said.
While a hit with the affluent, Botox’s cosmetic users may be more sensitive to price because their treatments are out-of-pocket as opposed to neurological uses, which are covered by insurance, Laudan said.
David Therkelsen, an analyst with Dain Rauscher Wessels in Minneapolis, said Allergan shouldn’t be too worried about a looming Botox competitor. Botox should hold its own in the neurotoxin market, which grows at a 40% yearly clip, he estimated.
“We continue to believe that Allergan’s Botox is strongly positioned to maintain the lion’s share of this rapidly growing market,” Therkelsen said in an April research note.
But some OC physicians say they are seeing signs of creeping discounting in the Botox cosmetic arena.
“You see people advertising budget Botox,” said Barnes, who charges between $350 and $750 for treatments.
Some patients stand to be pulled away by lower prices but may come back if the results aren’t what they expect, Barnes contends.
“It probably will happen,” Irvine doctor Conn said. “Anything that is relatively easy to do will attract a lot of doctors and a lot of competition.”
Even though Botox has gained prominence as an anti-aging treatment, Laudan estimates that 80% of its revenue comes from neurological use. That’s something Allergan gently reminds people of.
“Because the focus is so Hollywoodized, (people forget) that it originated for serious disorders, as opposed to cosmetic usage,” Allergan’s Cassiano said. n
