Allergan hits skids on probability of early Restasis generics

Allergan is eyeing some early generic competition for its $792 million drug Restasis. The FDA says it won't need a clinical trial for approval of copycat versions, meaning the treatment for chronic dry eye could face cheaper rivals years earlier than previously expected.

Analysts downgraded Allergan's stock ($AGN) on the news, and shares plummeted by 12%. Deutsche Bank's David Steinberg slashed his price target to $98 from $113, saying, "We believe the probability of generic Restasis is now at least 50% over the near/medium term, up from 5% previously."

Leerink Swann is even more pessimistic, putting that probability at 65%. Analyst Seamus Fernandez figures that generics could hit within 24 months, slashing Restasis sales by up to 15%, or about $280 million. Meanwhile, Cannacord Genuity's Randall Staniky noted that the Restasis news is far from the only thing hitting Allergan these days; the company's shares are down 29% since April, when the FDA declined to approve its new inhaled migraine treatment Levadex. And last month, the company scrapped plans for two late-stage studies of a vision-loss drug, DARPin.

Allergan says it has responded to the FDA's worries about Levadex, which centered on problems at a manufacturing plant where the inhalers are filled. It's not the first time Levadex has come up against barriers at FDA; last March, FDA waved off the drug because of worries about its manufacturing. Allergan acquired Levadex along with MAP Pharmaceuticals for $958 million in January.

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