Allergan's pipeline in a drug, Botox could keep new marketing twists coming

Botox is more than just a blockbuster product these days. It's a lure for would-be Allergan ($AGN) buyer Valeant Pharmaceuticals. And it's one of the few drugs that Valeant ($VRX) thinks is worth some significant R&D investment.

But why? Botox has been on the market for more than two decades. Its 2013 sales amounted to almost $2 billion, up 9% year over year. It so dominates its market that it's been called "the Scotch tape of toxins." Why wouldn't Valeant--which is typically apathetic toward R&D spending--simply let it ride its current growth wave?

Because Botox owes its growth to an ever-expanding list of indications, and an ever-expanding marketing effort to push those new indications. And it's a wide field: From the reps and DTC campaigns supporting its most high-profile use as a wrinkle fighter, to the sales folks who target urologists, touting its ability to treat spastic bladder in neurology patients.

More indications could be to come, as Allergan CEO David Pyott is fond of pointing out. Analysts see $3 billion in sales by 2017. Those include cosmetic and medical uses; as The Wall Street Journal points out, the drug's medical side is responsible for more than half its sales, and medical sales grew by 17% last year, compared with 8% for the cosmetic side.

So, like other multiuse drugs before it--Roche's ($RHHBY) Avastin, AbbVie's ($ABBV) Humira, Johnson & Johnson's ($JNJ) Xarelto--Botox could be called a pipeline in a drug. To Valeant CEO J. Michael Pearson's credit, he appears to recognize that. "We'll try to get as many indications as we possibly can," Mr. Pearson said of Botox in April, when announcing his $47 billion takeover bid. "The big valuation driver is Botox."

Allergan CEO David Pyott

If Allergan wins its fight to remain independent, it will be able to continue pursuing the Botox development it has started, including work toward indications in juvenile cerebral palsy, premature ejaculation, even depression (which appears to be exacerbated by frowning, no kidding). Botox marketed to psychiatrists? That's a sales-team expansion waiting to happen.

Would Valeant keep socking hundreds of millions into Botox development? The company says it will update the world next week on its R&D plans for Allergan. It "believes in line extensions," a spokeswoman told the WSJ. Pyott is skeptical (as he is of the buyout). "In the long term, there would be many [new Botox uses] that would just not happen," he told the paper.

- read the WSJ story (sub. req.)