Vanity, thy true name be Profits -- at least for Allergan. The company is a leading maker of eye care, skin care, and aesthetic products, including best-selling pharmaceutical Botox. Originally used to treat muscle spasms (as well as eye spasms and misalignment), Botox found another, more popular application in diminishing facial wrinkles. Allergan's eye care products include medications for glaucoma, allergic conjunctivitis, and chronic dry eye. Skin care products include treatments for acne, wrinkles, and psoriasis. Allergan also sells breast augmentation implants and the Lap-Band system used in weight-loss surgery. Its products are sold in more than 100 countries via direct sales and distributors.
The US is Allergan's largest market, accounting for more than 60% of sales.
Allergan's eye care segment, featuring such products as Alphagan, Restasis, and Refresh, comprises almost half of Allergan's product sales.
With a nod to vertical integration, Allergan manufactures most of its products, as well as the plastic parts and bottles used in its ophthalmic solutions. While it purchases most of its raw materials, it does brew up the botulinum toxin for its Botox products.
Sales and Marketing
The company targets its marketing efforts toward specialty medical practitioners and hospitals, as well as directly to consumers. It distributes its products through drug wholesalers and directly to hospitals, retailers, group purchasing organizations, and retailers.
Approximately 40% of Allergan's products are not reimbursable by governmental or other health care plans, meaning consumers must pay out of pocket for them. In theory this would make the company particularly vulnerable in times of economic uncertainty when consumers limit non-essential spending. And, to be cautious, during the worst of the economic recession, Allergan reduced its own expenses with selective workforce reductions and the closure of a manufacturing facility in Ireland. However, it never experienced a significant drop in revenues during those times. That said, while its sales remained steady, the company did see its income drop sharply in 2010 as a result of a legal settlement (to the tune of $609 million) following a US Department of Justice investigation into Allergan's sales and marketing practices with Botox.
To maintain a robust product pipeline, Allergan relies on a regimen of acquisitions and in-house development of its niche pharmaceuticals. It also has had success in discovering new uses for its existing drugs. Its glaucoma drug Lumigan stimulated eyelash growth, so the company ran it through testing and received FDA approval for that use. The drug was renamed Latisse and launched in 2008. As competition from other anti-wrinkle drugs ramped up, the company found new uses for Botox, including as a treatment for excessive underarm sweating, migraines, and urinary incontinence in adults with neurological conditions, such as spinal cord injury or multiple sclerosis. Allergan is still looking for new ways to apply Botox, including as a possible treatment for children with cerebral palsy or to alleviate post-herpetic neuralgia.
To share the cost of drug development, Allergan actively seeks out licensing agreements and partnerships. It currently has development agreements withMAP Pharmaceuticals (inhaled migraine treatment), Molecular Partners (retinal disease), and Serenity Pharmaceuticals (treatment for nighttime urinary incontinence). It also rakes in royalties from the licensing of its own products to other companies.
Mergers and Acquisitions
Acquisitions have plumped up the company's pipeline with potential new products and technologies. In 2013 Allergan agreed to acquire one of its development partners, MAP Pharmaceuticals, for some $958 million to gain full access to MAP's migraine treatment candidate (under review by the FDA).
To expand its range of skin care products, in 2012 Allergan acquired rival dermatology company SkinMedica for $350 million upfront and an additional $25 million if certain sales goals are met. The acquisition expanded Allergan's product portfolio with prescription treatments to reduce female facial hair and lotions to reduce the appearance of wrinkles. Following the transaction, SkinMedica operates as an independent subsidiary of Allergan, continuing to market its own offerings; SkinMedica will also eventually take over sales efforts on Allergan's Vivite and Latisse product lines.
Other recent acquisitions made by Allergan include its 2011 purchase of Vicept Therapeutics to gain its drug candidate in development to treat erythema (facial redness) from rosacea and its 2010 buy of Serica Technologies' cosmetic and reconstructive surgery unit, which brought in biodegradable scaffolds made from silk used in skin grafting, breast augmentation, and reconstructive surgery. – less