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Botox maker takes shot at a new field

Allergan's purchase of Esprit would include rights to a treatment for urinary incontinence.

September 20, 2007|Lisa Girion | Times Staff Writer

Irvine-based Allergan Inc. -- which is testing its beauty drug Botox as a tonic for overactive bladders -- plans to buy Esprit Pharma Inc. and its U.S. rights to a urinary incontinence drug.

Allergan said Wednesday that it had agreed to pay $370 million in cash for Esprit, which sells the incontinence drug Sanctura under a U.S. license from Indevus Pharmaceuticals Inc.

Esprit would be Allergan's first major purchase since 2005, when it acquired Inamed Corp. With that buy Allergan picked up a line of breast implants; Juvederm, a dermal filler that is used to fill in the creases that frame the mouth; and entree into the obesity surgery market with an adjustable stomach-shrinking device known as the Lap-Band.

Allergan's expanding girth has served up profit. Second-quarter net income increased to $138 million, or 45 cents a share, from $74 million, or 24 cents a share, a year earlier.

Explaining the Esprit deal, Allergan Chief Executive David Pyott said in a conference call with analysts that it reflected the company's "commitment to build portfolios of products with differentiated profiles in core specialty markets where there is a high unmet need and significant growth potential."

Privately held Esprit, based in East Brunswick, N.J., said it expected revenue from its sales of Sanctura and one other drug to reach up to $48 million this year, and Allergan said it could achieve peak annual incontinence-drug revenues of up to $400 million a year.

U.S. regulators recently approved a once-a-day version of Sanctura -- Sanctura XR -- that showed fewer dry-mouth side effects in testing than the twice-a-day version. Sanctura XR "will become a rather substantial product around the end of this decade," Pyott said.

Allergan is in late-stage clinical trial testing of the use of its blockbuster Botox, which paralyzes nerves with a form of botulinum toxin, for the treatment of overactive bladder problems. Botox is one of the few agents under study for treating a condition that affects 33 million Americans. The number of sufferers is expected to increase significantly as the population ages.

Lazard Capital Markets analyst Alex Arrow said the deal made sense.

"The clear underlying reason for the acquisition, in our view, is to prepare for Allergan's likely 2009 approval of Botox for the same indication," he said in a note. "Esprit comes with 160 [sales] reps, a number which Allergan is likely to expand."

Lazard has a "buy" on Allergan, indicating expected returns over the next 12 months of 15% or better.

Allergan shares closed at $63.03, up 1.3%, on the New York Stock Exchange.

Best known as a beauty treatment, Botox injections smooth eyebrow furrows and crow's feet. Originally developed for the treatment of eye flutters, it also is used for other medical purposes, including neck spasms.

Allergan also is testing Botox as a treatment for a noncancerous type of prostate growth that can interfere with urination and is one of the most common diseases among men, affecting about 10 million Americans.

The Esprit acquisition is subject to an antitrust review by the Federal Trade Commission and is expected to close by the end of the year.

Allergan said the acquisition would marginally dilute 2008 earnings but would pay off later. It maintained its forecast for growth next year in the upper teens.


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