David Pyott opened 2006 with a flourish.
Allergan Inc., the Irvine-based drug maker he’s run for the past eight years, prevailed with a trumping $3.2 billion bid for Inamed Corp., a coveted maker of medical cosmetic products.
Then the work began.
Pyott spent much of the year integrating Inamed into Allergan, which already had made a name for itself among cosmetic surgeons with Botox.
Santa Barbara-based Inamed brought sexy, fast-growing medical cosmetics, such as silicone breast implants, dermal fillers to smooth out wrinkles in the lower half of the face and an obesity-fighting device.
They add to Botox, Allergan’s wrinkle removing injection, as well as the company’s eye and skin drugs.
The Inamed deal also helped to cement Allergan as Orange County’s most valuable company on Wall Street, with a recent market value of $18 billion.
The Inamed deal and Allergan’s growth earned Pyott the runner-up nod for the Business Journal’s businessperson of the year honor.
“It was obviously a tremendous year,” Pyott said. “The company will grow about 33% (in 2006), which is a big number.”
Allergan expects to earn $547.4 million to $551.9 million in 2006. It expects sales of $2.97 billion to $3 billion.
The company’s shares ended the year up about 10%.
About half of Allergan’s growth last year came from existing businesses, Pyott said. The rest came from products that Allergan got from Inamed.
Recent regulatory approvals for silicone breast implants and wrinkle smoother Juv & #233;derm have validated the value of the Inamed buy, Pyott said.
“And then we’ve been powering up Lap-Band in a big way,” he said, referring to Inamed’s obesity treatment.
Television spots called “Tame Your Hunger” featuring Lap-Band recently started.
“To our knowledge, it’s the first time a surgical procedure has been advertised on TV,” Pyott said.
Allergan also plans an advertising push aimed at consumers for Juv & #233;derm, he said.
The company surprised some in the drug world in late 2005 when it emerged with an offer for Inamed eight months after the company accepted a $2.5 billion bid from Medicis Pharmaceutical Corp. of Scottsdale.
Medicis, which makes Restylane, a competitor of Juv & #233;derm, eventually bowed out.
Wall Street has taken to the Allergan-Inamed combination.
“They’ll be able to cover a greater portion of the face,” said Timothy Chiang, an analyst with Natexis Bleichroeder Inc., a New York investment bank, in published reports.
The deal “essentially increases their share of voice into the dermatologist’s office,” Chiang said.
Getting Inamed provided Allergan with “a broadening in product offerings in the relatively price inelastic private-pay cosmetic surgery market,” said Ken Kulju, an analyst with Credit Suisse First Boston, earlier this year.
That’s analyst talk meaning that Aller-gan is selling products that patients pay for themselves, without constant pressure from insurers for lower prices.
Overall, Allergan has “basically achi-eved all the milestones we wanted” with Inamed, including cutting costs and cross selling of products, Pyott said.
“The ability to offer a complete package for rejuvenation is very important to our customers,” he said.
Pyott stresses Allergan is more than cosmetics.
“Of course, because all the products from Inamed are very high-interest products, most of the things written right now are Inamed,” he said. “Still, it’s only roughly a third of the company.”
Botox, Allergan’s biggest seller, also is used for medical purposes such as neck spasms. Botox sales grew 23% through September versus the year-ago period, Pyott said.
“A real milestone is that we’re kind of taking bets around here that Botox will reach $1 billion, which kind of rolls off the tongue well, Botox and billions,” Pyott said.
Allergan also is growing in eye drugs, the company’s mainstay business that makes up 50% of sales, Pyott said.
Through September, eye drugs grew 17% compared to 2005, he said.
Eye drug growth is being driven by glaucoma medications such as Lumigan, Combigan and Ganfort, Restasis, which fights dry eyes, and Refresh artificial tears, according to Pyott.
Ganfort, which is approved in Europe, was cited as something that would help boost sales, said David Maris, who recently left his analyst position at Banc of America Securities, in a research note earlier where he upgraded Allergan.
“When you step back from that, you can see that Allergan was just a mass of highlights, and there’s very few lowlights until you get down in real nooks and crannies,” Pyott said in his refined Scottish brogue.
Allergan’s drug business showed the company was able to “divide things up” among those who were “all over the Inamed acquisition and integration, and people whose job was to run the existing businesses,” he said.
“In theory, I suppose with all this stuff going on, you could say we should have been suffering from a lot of stress,” Pyott said. “In fact, this has been an extremely calm year.”
There’s only one thing Pyott said he would have done differently,”get even more money to R & D.;”
Allergan spent $930.1 million, or about 42% of its $2.2 billion of revenue, on research and development through September.
Although Inamed dominated Allergan’s headlines, the company also made a smaller deal in November, when it spent $217 million for French drug maker Groupe Corneal Laboratories of Paris, which Juv & #233;derm originated from.
“The rationale for that was really triple,” Pyott said of buying Groupe Corneal.
Securing rights to Juv & #233;derm in more countries, the ability to set up a “center of excellence” to develop products based on hyaluronic acid,Juv & #233;derm’s core ingredient,and gaining control over manufacturing capacity drove that buy, he said.
