Allergan’s investors fretted Tuesday over strong data from a potential Botox competitor. But the way analysts see it, there’s not much to worry about.
For one, there’s simply “not much evidence that there is a need for more/better toxins in the aesthetic market,” Bernstein’s Ronny Gal wrote in a note to clients, adding that “when it comes to mass luxury, most of us still run in branded sneakers and eat branded ice cream.”
Of course, he notes, doctors are in a position to sway their patients if they decide they want to make more money by using cheaper rivals. Patients, however, “are often informed (and would be sensitive to the idea that the doctor uses a cheap alternative to fatten his/her margin)” he figures.
And with Botox already lining doctors’ pockets—they buy the product for $110 per injection, mark up the price by double, take 10 minutes to inject and walk away with $220 per patient, Gal notes—it may not be worth the hassle to switch products in the first place.
Leerink Partners’ Seamus Fernandez agreed in his own note to clients, pointing out that “the cash-pay bundle of aesthetics products that Allergan offers is a significant barrier to entry” for its future rivals. The Dublin drugmaker discounts its products as a group, which is an especially attractive proposition for physicians who rely on the company’s other products, including its implants. “Losing the bundled discounts would hurt,” Gal wrote.
With that in mind, Fernandez and his colleagues believe that realizing the full sales potential of RT002—a Revance hopeful that this week aced two phase 3 studies—“likely would require the agent to be in Allergan’s hands.” The much bigger threat, as they see it, would be a long-acting therapy for migraine, where Botox also competes—or a buyout of Revance by a major global player such as Galderma that can better play at Allergan’s level.
And unless that latter scenario plays out, Revance and other wannabe Botox challengers, such as Evolus and Hugel, will still need to raise some major dollars in order to make a dent in Allergan’s market share. Revance, for one, has just $153 million in the bank with a $25 to $30 million burn rate each quarter, Gal reminded investors—and it costs at least about $60 million to compete in the top half of Botox’s market.
“Near term money raise for the near term entrants will probably be a bit of a hard sale,” he wrote.