Allergan Inc. (AGN) recently received a major boost with the US Food and Drug Administration (FDA) approving Botox for the treatment of chronic migraine headaches in adults. The company added that the drug demonstrated results lasting up to twelve weeks when injected in patients at recommended points in the head and neck. We expect Allergan shares to react positively to the news.
Chronic migraine is a severe neurological disorder in which patients suffer from headaches for a minimum of 15 days per month, with each bout lasting for at least four hours a day.
Botox’ approval for the chronic migraine indication was based on the results from the late-stage PREEMPT study, which was conducted to evaluate the safety and efficacy of the drug for the said indication. The study consisted of two trails and enrolled 1,384 adults across 122 study sites in North America and Europe. The data from the trails showed that after 24 weeks, patients treated with Botox experienced a significant decrease in the number of headache days along with a reduction in the number of headache hours as against patients taking placebo.
Botox is already marketed for the treatment of muscle stiffness, eye muscle problems, neck pain due to cervical dystonia and severe underarm sweating. Moreover, Botox Cosmetic is used to remove moderate to severe frown lines between the eyebrows in adults.
Allergan, which is expected to report its third quarter financial results on November 1, expects Botox sales to range from $1.36 billion to $1.39 billion in 2010.
Our Take & Recommendation
From a fundamental standpoint, we are enthusiastic about the future of Allergan. Although the company is facing significant challenges in the form of slowing sales due to the global economic weakness, European Union pricing pressure, safety issues surrounding the use of Botox, and increased competition, we think Allergan will be able to overcome these and return to its historical mid-to-high teens earnings growth trajectory from 2011.
We consider Allergan to be one of the premier specialty pharmaceutical companies in the world. Allergan has been active on the acquisition and collaboration front over the past few years. We believe these acquisitions and collaborations will provide the company with the opportunity to drive growth in its existing business as well as venture new areas. Allergan’s presence across different segments and geographical regions should help maintain decent growth going forward.
Currently, we have a Neutral recommendation on Allergan, which is supported by a Zacks #3 Rank (short-term Hold rating).
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