What's the world's best pharma market? To Allergan's CEO, that one's easy

Brent Saunders
Allergan CEO Brent Saunders sees the aesthetics field's cash-pay quality as a big advantage.

What’s the best pharma market in the world? According to Allergan CEO Brent Saunders, it’s no contest.

On last week’s second-quarter earnings call, he gave that title to medical aesthetics, an area where Allergan’s leadingand growing fast.

“It's high-quality, it's cash-pay, it's global,” he said, offering the caveat that “obviously I have a biased opinion.” But that bias aside, he also sees reason to believe the trend has staying power. “We are just at the initial stages of market development in the U.S. and almost every market in the world. So we have very high conviction around the sustainability,” Saunders said.

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“If penetration rates in the category were 30% or 40% or 50%, you might think that growth rates over time would moderate, but they're not,” commercial chief Bill Meury added. Instead, they’re between about 5% and 10%, he said, and Allergan’s business “is balanced” between previous aesthetics customers and new patients.

That mix “is pretty characteristic of a market that's in growth mode,” Meury said.

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It wasn’t all that long ago that Allergan decided to exit another area where it was considered a leader: generics. It sold off that unit for $40.5 billion to Teva in 2015, exiting a market that's grown much tougher since. Thanks in part to serious price erosion, Teva’s market cap has plummeted below the price it paid to acquire that business. Allergan, meanwhile, has used some of its new cash to bulk up in aesthetics, in February unveiling a $2.47 billion deal for body contouring leader Zeltiq.

So far, the Dublin drugmaker’s aesthetics investments seem to be paying off. Allergan’s body contouring business “is starting to accelerate following an increase in salesforce effort and advertising,” and “system placements are at an all-time high,” Meury said, noting that “the growth prospects for this business and the market are excellent.”

The rest of the aesthetics portfolio didn’t look too shabby in the second quarter either, with cosmetic Botox jumping 13% over the year-ago period and the Juvederm line of fillers leaping 18%, excluding foreign exchange effects.

RELATED: Can Allergan's spruced-up aesthetics lineup shake off 'meh' Kybella growth?

That’s not to say there isn’t a laggard in the bunch, though. Chin-fat buster Kybella stayed flat, and Meury admitted it was a product that needs “some work right now.”

While in January Saunders touted 2017 as Kybella’s breakout yearYear 2 is pivotal to the launch of a medical aesthetic product,” he told investors at the J.P. Morgan Healthcare ConferenceMeury was singing a different tune on the conference call.

“The fat reduction market is still in the early innings, and it's a market we're committed to for the long term,” he cautioned shareholders. “Remember, it took the facial injectable market five to seven years to develop.”

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