Making Botox Both Medicine and Cosmetic

By BARNABY J. FEDER
David E. I. Pyott, 53, became president and chief executive of Allergan in 1998 after spending his earlier management career in the nutrition subsidiaries of Novartis and Sandoz. The stock stood at $15.74 and the company was best known for its contact lens care solutions.
Allergan, based in Irvine, Calif., spun off the lens care and eye surgery businesses into Advanced Medical Optics in 2002. Since then, its identity has been increasingly linked to Botox, its branded delivery system for minute doses of a bacterial toxin that can paralyze muscles for several months. Thanks to Botox’s growing portfolio of cosmetic and medical applications, Allergan has forecast Botox sales this year of up to $1.16 billion.
But the company also makes a range of pharmaceuticals for various eye and skin care products. Wall Street has applauded the company’s strong growth and strategic moves like the $3.4 billion acquisition last year of Inamed, which made Allergan a leader in silicone breast implants and implants to treat obesity in addition to giving it Juvéderm, a new injectable gel for combating wrinkles. Yesterday, the stock closed at $114.47, down $2.79. Mr. Pyott discussed these recent developments. Following are excerpts:
Q. How should we think of today’s Allergan?
A. We’re seen as a biologics company because of Botox. Our valuation is in line with Genentech. But we are a very small version of Johnson & Johnson in many ways. Wall Street likes that a third of our business is discretionary spending. It’s a hedge against Medicare and insurers tightening their coverage.
Q. You started out viewing Botox strictly as a medical product, right?
A. Yes. Dr. Alan Scott was treating crossed eyes and fluttering eyelids, which is how we got into the business. We thought we’d get $5 million in worldwide sales. Fortunately, we got that wrong.
Q. Botox’s medical sales will top $500 million this year. How does the medical market work?
A. Twenty indications have been approved in various countries. Cervical dystonia (a neck muscle disorder that pulls the head out of position) is the biggest approved medical use in the U.S. Excessive sweating — that’s hyperhidrosis — is another interesting application, which affects eight million people in the U.S. The price per vial for medical and cosmetics is the same almost everywhere in the world but you need 300 to 400 units to treat spasticity in a leg or arm, compared to 20 to remove a crease between the eyes.
Q. But far more people are now getting Botox for cosmetic purposes and that segment is growing faster, right?
A. Last year, worldwide, Botox use accelerated in cosmetics by 32 percent. Botox for therapeutics grew 17 percent. In the short term, cosmetics will become more than 50 percent of the use. But it could swing back at the end of the decade. We are working on headache relief and bladder control for people with spinal cord injuries. We’re looking at 2009 for approval on the headache and 2011 for bladder control.
Q. People have been opening storefronts in shopping centers for Botox treatments. Is misuse a concern?
A. Patients should receive their treatments in an appropriate medical setting from people who are well trained. If you are just looking for a simple removal of the crease between the eyes, most people can do that. If you are looking to change the shape of the eyebrows, it requires a very precise weakening of six or seven muscles and that’s where you need an expert.
We heavily discourage — we even mandate — that our sales people don’t go to places like spas. We will supply to anyone who can establish their credentials as a medical professional. If it’s someone new, we make sure they have a valid license through a state medical society.
Q. Isn’t the huge amount of money spent on Botox for cosmetic purposes — and your other products like dermal fillers and breast implants — a horrifying sign of misplaced priorities in American society?
A. This is a worldwide phenomenon wherever there is a buildup of wealth. The cosmetic use comes out of the entertainment budget.
Q. So how reliant are you on the state of the economy?
A. People ask and I have to tell them it doesn’t seem to have much effect if you look back to what happened after the Internet bubble burst. We go down to households with $50,000 but most have a lot more than that.