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Allergan Looks to Benefit from Botox Demand, Business Mix


Plastic surgeons and dermatologists expect to give more Botox shots and wrinkle fills in 2012, according to a poll. But therapeutic uses for Botox have helped buoy sales.

All things considered, Botox maker Allergan (AGN) survived the US recession fairly well.

After dipping down into the low $30s in late 2008 (investors figured Botox shots would wane as markets melted down), the stock has been a steady riser in the following years. As it turned out, people did get Botox shots even as the economy limped along and as new competitors came into the field.

In the past 12 months, Allergan's stock rose more than 20%, trading at $87.16 at Thursday's close. At least one analyst thinks the stock can gain another $10 in the coming year.

More than 80 dermatologists and plastic surgeons polled by Leerink Swann recently said they expect 5% growth in Botox and facial filler treatments in the next 12 months. They also predict a 5% increase in consultations. Hardly any of the docs expect a drop off in business. Some physicians say their patients are feeling more confident about spending, according the poll.

Even with competition, Botox dominated 84% of the market for wrinkle treatments (including 82% of new patients), according to Leerink Swann analyst Seamus Fernandez. He rates Allergan's stock a buy and has a $96-$97 a share price target for the next 12 months.

He's not the only bull on the stock. According to one set of analyst recommendations, there are 15 buys, eight holds and 1 sell on the stock.

Appealing to the vanity crowd isn't the only strategy for Allergan, however. Botox also has been able to increase sales by winning additional therapeutic uses for the drug. For instance, sales were boosted last year from injections for patients with chronic migraine headaches. (The US Food and Drug Administration approved that use of Botox in October 2010.) Botox sales were about $1.2 billion through the first nine months of last year vs. about $1 billion in the year-earlier period.

Allergan also benefits from a mix of businesses including an eye-care drug business that exceeds Botox revenue, as well as facial filler Juvederm, skin care products and breast implants.

With Allergan's eye-care business ($1.9 billion in sales through nine months last year), Botox's therapeutic uses and other products, the majority of the company's products are actually covered by health insurers. In fact, Fernandez says only 30% of sales come from "self-pay" products, showing that the company isn't solely dependent on zapping wrinkles.

Still, the cosmetic market continues to be an important, albeit crowded, one for Allergan. The company competes with Medicis Pharmaceutical's (MRX) Dysport injections and Restylane facial fillers. And it competes with some of the largest drug and medical device companies for a variety of products, including giant Johnson & Johnson (JNJ) for breast implants.

Allergan CEO David Pyott told Reuters last week that he hopes his company will benefit from the replacement of faulty breast implants in France made by the now-shuttered Poly Implant Prothese.

Fernandez thinks Allergan will pick up business overseas, potentially offsetting slowness in the US. The Leerink Swann docs' poll estimated US breast implants were down about 3% in the fourth quarter. And the analyst expects the US economy to continue to be a deterrent for women seeking such procedures.

Allergan is scheduled to disclose its fourth-quarter results February 2. Fernandez predicts the company will report 2011 earnings per share of $3.63. Allergan had no EPS in 2010 and non-GAAP income of $3.16 a share.

Twitter: @brettchase

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