Allergan beats on Botox boost, but can migraine sales withstand CGRP rivals?

Allergan has been working on a plan to hive off its women’s health and infectious disease units—much to the chagrin of some investors who were hoping the company would embrace a more drastic strategy to turn itself around, like a wholesale breakup.

But CEO Brent Saunders brushed off suggestions that the company isn’t doing enough to drive growth, and his confidence got a bit of a boost with the company’s third-quarter results.

Allergan reported $3.9 billion in revenues for the quarter, in line with analysts’ estimates. Earnings per share minus one-time costs came in at $4.25, beating the consensus estimate of $4.04. The strong sales were driven by products like wrinkle-reducing blockbuster Botox, which brought in $879.8 million for the quarter, up 14% year over year and easily beating the average estimate of $847 million.

Botox saw strong growth in demand for newer therapeutic uses, like treating migraines, Allergan reported. This despite the fact that the product has run up against tough competition of late, with the recent approvals of three drugs that are part of the new class of migraine drugs known as CGRP inhibitors.

Novartis and Amgen were first out of the gate with Aimovig, and they recently rolled out a major ad campaign for the product. The prospects for Aimovig improved significantly earlier this month when Express Scripts agreed to cover it.

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Still, some analysts are clearly worried about the new competition in migraine, including one who asked during the post-earnings conference call whether there's any hope that Botox will be used widely in combination with the CGRP drugs. Bill Meury, Allergan’s chief commercial officer, replied that only about 6% of patients taking Aimovig are also receiving Botox—and it will be difficult to get that number much higher.

“If the market is going to move to adjunctive treatment, there’s going to need to be data produced and then a fairly strong health-economic argument made” to persuade insurance companies and pharmacy benefits managers that pricey combos are worth the expense, Meury conceded.

That said, nearly half of Aimovig patients were “new to the market,” and only about 1% were switched to the drug from Botox, Meury said. “I think to a certain extent Aimovig will expand the market and could be a gateway for Botox,” Meury said. Granted, the reverse could be true, too, “but I like the way the market is setting up for Botox and the CGRPs,” he said.

Wall Street has been looking for growth in Allergan’s newer aesthetic products, like the CoolSculpting fat-freezing system, which Allergan picked up in its acquisition of Zeltiq last year. But sales in the third quarter were flat year over year at $107 million, “surprisingly so,” said Bernstein analyst Ronny Gal in a video he posted for investors. He had expected sales of $134 million.

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When asked during the conference call whether pricing would continue to be a drag on sales, Meury advised that investors shouldn’t consider it to be “a long-term headwind,” and that Allergan expects sales of consumables to pick up next quarter. Placements of the system have risen 50% year over year since the Zeltiq acquisition, so “any discount that we’re providing on systems to drive placements” shouldn’t be seen as a negative, he argued.

Investors have high hopes for a few of Allergan’s pipeline candidates, including its own CGRP contenders, atogepant and ubrogepant. Positive data from a phase 2/3 study of atogepant over the summer helped give the company’s stock a boost. It’s also testing a long-acting treatment for macular degeneration, abicipar, but analysts have plenty of concerns about the company’s ability to show that the therapeutic effects of the drug will last a full three months without causing undue inflammation.

As for those selloffs, Allergan did take one small step to slim down in August, when it sold a portfolio of medical dermatology products to Spain’s Almirall for $550 million upfront. The company is shopping the anti-infectives business around itself, and it handed the task of divesting the women’s health business to an outside adviser.

Saunders said during the call that the divestitures aren’t progressing quite as well as he had hoped.

“I will tell you we have received now the preliminary expressions of interest for some of these businesses, and they are below what I believe the value of these businesses are,” he said.

And what if the company doesn’t get what it thinks those assets are worth? In response to that question, Saunders said the company may take them off the market and then put them back on the block at a later time.

“We need to make sure we get the right price given the dilutive effects,” he said.