27 octobre, 2006 15:16

Allergan's formula for success: Boomers' obsession with youth

Company on a roll with sales of Botox and other products

LEONARD ZEHR

BIOTECHNOLOGY REPORTER

Looking for that perfect stocking stuffer for your significant other this holiday season? Allergan Inc. has a couple suggestions: its new Juvederm facial skin-smoothing treatment to fill out and shape wrinkles and new silicone gel breast implants.

Demand for Allergan's appearance-enhancing products is surging as boomers appear willing to open their wallets to fight signs of aging, analysts said, adding that people are trying aesthetic treatments earlier and using them longer.

A recent study by The Freedonia Group of Cleveland predicts that America's obsession with youth will drive 9.1-per-cent annual growth in cosmetic procedures the rest of the decade, reaching a value of $17.3-billion (U.S.) in 2010.

"With the much anticipated recent launch of Juvederm under way to complement its robust Botox franchise . . . we believe Allergan has good momentum into the fourth quarter" as the company awaits another major catalyst, the approval of silicone breast implants, by year's end, Bank of America analyst David Maris says.

Last Friday, Health Canada in a surprise move lifted a 14-year ban on the sale of silicone gel breast implants for cosmetic use, giving marketing clearance to Allergan and Mentor Corp., subject to additional testing and patient education. Canada and the U.S. pulled the products from the market in 1992 after health concerns surfaced about defective implants that leaked.

The U.S. Food and Drug Administration is also expected to allow silicone breast implants, which are seen as superior to saline implants, back on the market before the end of the year. Analysts said FDA approval could double the size of the U.S. breast implant market next year from an estimated $180-million this year.

"Silicone gel-filled breast implants would present another addition to our medical aesthetic franchise and to our Total Rejuvenation product portfolio that we can now offer to physicians and patients," a spokeswoman for Irvine, Calif.-based Allergan said.

Mr. Maris rates the stock a "buy" with a 12-month target price of $117, using a multiple of 27 times estimated share profit of $4.33 in 2007. It closed at $115.91 on the New York Stock Exchange yesterday, for a 23-per-cent lift since June.

Yesterday's selloff reflected a bearish call on cosmetics makers by Mad Money TV commentator Jim Cramer. He said Allergan and Medicis Pharmaceutical Co. are better investments, however, because the medicines they make, which are injected in order to get rid of wrinkles, are "more drastic than cosmetics and face less cutthroat competition."

Allergan shares have been on a roll since the company acquired competitor Inamed Corp. for $3.2-billion in March. The deal, which gave Allergan access to Juvederm, is expected to double the size of its revenue from skin treatment and breast enhancement products, and boost aesthetic sales to a 30-per-cent share of the global market, analysts say.

Juvederm in January will go head-to-head against Medicis Pharmaceutical Corp.'s Restylane, which has estimated annual sales of $150-million. Medicis's shares plunged earlier this year as some analysts predicted Juvederm would take market share from Restylane because it is indicated to last longer and Allergan's cache with Botox. But the stock has rebounded in the past four months on the strength of a thicker version of Restylane, which is awaiting FDA approval.

While Botox injections relax muscles in the face, Juvederm fills out and shapes wrinkles, giving doctors a one-stop suite of products. The company plans to price Juvederm next Wednesday, when it releases third-quarter financial results.

Buoyed by sales strength of key products, Mr. Maris is forecasting Allergan's third-quarter sales at $783-million, a year-over-year increase of 29 per cent. The top line includes Botox sales of $233-million, up 8 per cent, and eye-care drug sales of $382-million, up 7 per cent. He pegs profit at $142-million or 93 cents a share in the quarter, up 11 per cent from the year earlier 83 cents.