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Banking on Botox no concern for Allergan CEO

Sep 14, 2011, 5:32 a.m.
A sample of Botox is seen at the Long Island Plastic Surgical Group at the Americana Manhasset luxury shopping destination in Manhasset, New York September 30, 2010. REUTERS/Shannon Stapleton

By Lewis Krauskopf

NEW YORK (Reuters) - Allergan Inc is not worried about over-reliance on sales of its flagship Botox drug, the company's chief said, citing extensive safety data and supply reserves of the injectable medicine.

The wrinkle-smoothing treatment recently won U.S. approval to treat migraine headaches and overactive bladders, positioning it for an even bigger chunk of Allergan's sales than the 30 percent it commands now.

Allergan Chief Executive David Pyott told Reuters he expects Botox sales to exceed $1 billion apiece for cosmetic and therapeutic use. Allergan forecasts nearly $1.6 billion in Botox sales this year.

"It's just a question of when do we cruise past the $2 billion mark," Pyott said in an interview in New York on Monday. "In theory, it could even grow beyond that (30 percent of sales)."

The company has about nine months worth of stock of Botox around the world should it encounter some type of supply constraint.

"Running out of Botox would be a very bad idea," Pyott said.

Pyott also brushed aside safety concerns for the product, pointing to 20 years of data that "is not only great for us but for regulators. They feel, even in relatively high doses, there's a lot known about this compound."

Allergan's reliance on Botox is a risk, said Morningstar analyst Michael Waterhouse, especially if competitors make inroads. While smaller companies have struggled with their Botox-like drugs, Waterhouse cites a looming threat from a Johnson & Johnson product named PurTox that could reach the market by 2013.

Waterhouse said Allergan stock, which has outperformed most large drugmaker shares this year, is fairly valued.

"Because we do see more competitors emerging, companies like Johnson & Johnson that have the wherewithal to go toe-to-toe with someone like Allergan, I do think they'll need to continue to diversify the business," Waterhouse said.

Pyott is aware of that need and wants to add to Allergan's product portfolio across its six therapeutic areas that involve medicines prescribed by specialists. They include neurology, where Botox has helped establish the company's presence.

ADVANTAGE IN NEUROLOGY

Allergan has licensed from MAP Pharmaceuticals Inc rights to Levadex, an experimental migraine treatment that the company expects to be approved next year.

With many migraine treatments being sold as generics, Pyott expects Allergan to be one of the only companies actively promoting the drugs to doctors, giving it an advantage.

"We like quiet places, because if you're the only guy, you're appreciated," he said.

Pyott is also interested in other neurology areas, such as drugs for epilepsy and Parkinson's disease.

"We keep looking externally to see if there are things that fit into the category where the bulk of prescriptions are generated by the neurologist."

Beyond licensing products, Pyott said the company could easily do an acquisition of more than $1 billion, and pointed to its $3.3 billion purchase in 2006 of Inamed, a maker of breast implants and the Lap-Band gastric banding device.

Pyott said the largest deal he ever considered exceeded $10 billion, without naming the company. But he would be cautious about such a sizable deal for Allergan, which has a market value of about $24 billion.

Allergan's specialty focus, which also includes a large eye-drug franchise, has won favor on Wall Street. The stock is up 12 percent this year, against a 3 percent decline of the NYSE Arca Pharmaceutical index <.DRG> of large drugmakers and a 9 percent decline for the broader S&P 500 <.SPX>.

Pyott said he was hopeful the company would achieve mid-teens percentage earnings per share growth for the next four or five years.

Botox is fueling sales, Pyott said, as are 2010 approvals of new versions of its Lumigan glaucoma drug and Juvederm dermal filler.

(Reporting by Lewis Krauskopf; Editing by Michele Gershberg)

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