Is the worst over for Allergan Inc.?
The Irvine drug maker said it expects to do well as the economy recovers, pointing to better-than-expected second-quarter results, new products and the resilience of its flagship Botox wrinkle-removing drug.
“We exceeded expectations as a company that will benefit from the economic upswing as it comes around,” Chief Executive David Pyott said.
Two weeks ago Allergan reported sales and profits that beat what Wall Street analysts were looking for on average.
The company reported a profit before charges of $228.4 million, topping the $204 million forecast by analysts.
Sales fell 4% compared to a year earlier to $1.13 billion but bested expectations of $1.08 billion.
“I think we basically gave people a pleasant surprise,” Pyott said. “In terms of earnings, we just blew it away in the second quarter.”
Allergan was more cautious about the current quarter.
The drug maker forecast a third-quarter profit of $204 million to $210 million, below the $219.2 million analysts had been expecting.
Sales are seen coming in at $1.05 billion to $1.1 billion, compared to Wall Street’s expectation of $1.07 billion.
But it’s hard to read anything into the guidance. Pyott has lowered expectations before only to easily beat them later, something he’s referred to as “under promise and over deliver.”
The question for Allergan is whether a downturn in procedures for Botox and the company’s other medical cosmetic products is starting to wane. Sales have been weak this year as customers put off procedures they pay for themselves.
Allergan’s so-called cash pay business appears “to be bottoming out,” said analyst Louise Chen of New York investment bank Collins Stewart LLC in a research note.
The company’s shares, which were up more than 30% for the year as of last week with a market value of nearly $17 billion, could continue to see “positive momentum,” Chen said.
Another analyst isn’t so sure.
“Based on our survey work, we believe cosmetics will contract further in 2009,” said Sean Lavin of New York investment bank Lazard Capital Markets. “The current economic environment has made growth in the elective areas very difficult.”
Allergan said it hasn’t seen any real recovery in some of its pricier medical cosmetics, including its Natrelle breast implants and Lap-Band used in weight loss surgeries.
Second-quarter Botox sales, for both cosmetic treatments and medical conditions, fell 3% from a year ago to $336.8 million. That was better than the yearly 6% decline Botox saw in the first quarter.
“Of all the cash pay businesses, Botox Cosmetic has clearly been the most resilient,” Pyott said on a conference call with analysts.
Botox Cosmetic now has competition, but “as yet, we have not felt any real impact,” Pyott said.
Scottsdale-based Medicis Pharmaceutical Corp. started shipping Dysport in June, “too late in the quarter to affect our results,” Pyott said.
Allergan, which dominates the market now, could lose about 20% of sales to Dysport, Pyott said.
Allergan has started to see a pickup in its Juv & #233;derm skin filler for lower-face wrinkles, “reflecting improving market conditions and some market share gains,” Pyott said.
Juv & #233;derm competes with Medicis’ Restylane.
Eyelash Drug
The company is pinning a lot of hopes on Latisse, a drug to grow eyelashes that started selling earlier this year.
Latisse had sales of $13 million in the second quarter.
The drug came about after Allergan researchers discovered that bimatoprost,the active ingredient in glaucoma drug Lumigan,grew eyelashes as a side effect.
Allergan expects to sell about $60 million worth of Latisse this year, according to Pyott.
“We moved up the guidance for the year,” he said.
Latisse procedures, which average about $120, are seen boosting business for doctors during the recession, Pyott said on Allergan’s call. They’re also seen appealing to younger people, he said.
Actress Brooke Shields, 44, appears in commercials for Latisse.
She “extends across a very broad demographic of ages,” Pyott said. “She has very high sympathy value for people right down into their 20s.”
Analyst Lavin, who’s skeptical about a rebound in Allergan’s medical cosmetics business, said Latisse and potential regulatory approval of Botox for migraines could drive growth in the second half.
Allergan’s drug launches in the second half include the Ozurdex implant for treating back-of-the eye disease, Acuvail for treating post-surgical eye pain and Japanese launches of Botox Cosmetic and Lumigan.
“Some variables” for Allergan include competition for Botox Cosmetic from Dysport and coming generic competition for a pair of eye drugs: Alphagan P for glaucoma and Acular, which treats pain after cataract surgery, analyst Chen said.
Another issue for Allergan: ongoing speculation it could be acquired.
“We believe Allergan is an attractive potential takeout candidate for a large pharma company,” Levin said.
Last week, Allergan saw a surge in options trading with investors betting its stock will go up in the next month, as often happens in a takeover.
Pyott, as per Allergan’s custom, didn’t directly address takeover talk.
“Clearly, we’re always being looked at by Big Pharma, but I could never confirm or deny the rumors,” he said.
