Specialty Pharma Focus: What Would a Combined Valeant Pharmaceuticals and Allergan Be?By
Valeant Pharmaceuticals International’s approximate $53-billion takeover bid to acquire Allergan continues to be a key focus in the specialty pharmaceutical market.
Valeant Pharmaceuticals International publicly began its efforts to acquire Allergan in April 2014, a move that Allergan has repeatedly rejected, and the two companies continue to do battle. The most recent issue involves the scheduling of an Allergan shareholder meeting to consider Valeant’s unsolicited takeover bid. Much attention has been given to the moves by the companies in asserting their positions, but what about the underlying fundamentals? DCAT Value Chain Insights (VCI) examines the product, R&D, and manufacturing positions of the companies.
Allergan’s product positions
Allergan, headquartered in Irvine, California, focuses on two principal segments: specialty pharmaceuticals and medical devices. The specialty pharmaceuticals segment produces a broad range of pharmaceutical products, including: ophthalmic products for dry eye, glaucoma, inflammation, infection, allergy and retinal disease; Botox for certain therapeutic and aesthetic indications; skincare products for acne, psoriasis, eyelash growth and other prescription and over-the-counter (OTC) skin care products; and urologics products. The medical devices segment produces a broad range of medical devices, including: breast implants for augmentation, revision and reconstructive surgery and tissue expanders; and facial aesthetics products.
In 2013, Allergan reported sales of $5.339 billion in its specialty pharmaceuticals segment and $858.3 million for medical devices. Within its specialty pharmaceuticals business, eye care products accounted for 54% or $2.890 billion, and Botox/neuromodulators accounted for 37% or $1.982 billion. As part of an ongoing effort to improve efficiency and productivity, Allergan Inc. announced as part of its second-quarter 2014 earnings release that it will execute a restructuring in 2014 under which the company will reduce its workforce by approximately 1,500 employees, or approximately 13% of its current global headcount and eliminate an additional approximately 250 vacant positions. All pharmaceutical research and development programs in the clinic will continue, and any reductions in discovery programs will not impact approvals within the strategic plan period.
In its earnings statement, Allergan said that it recently completed a global review of its structures and processes, portfolio of research and development projects and marketed products, and its geographies in an effort to prioritize the highest value investments. As a results of that review, Allergan said it will restructure its operations and processes in the remainder of 2014 to deliver annual pre-tax savings of approximately $475 million in calendar year 2015. The savings will come from efficiencies and reductions in spend across the commercial organization, general and administrative functions, manufacturing and the research and development organization. Allergan said it will achieve these synergies by focusing resources on the highest value opportunities, streamlining its organizational structure, simplifying processes and interfaces, optimizing site footprints and enhancing strategic sourcing of goods and services.
For the second quarter ending June 30, 2014, Allergan reported $1.827 billion in product net sales and total sales of $1.864 billion. Total product net sales increased 15.9% compared to total product net sales in the second quarter of 2013. Total specialty pharmaceuticals net sales increased 13.2% or 13.7% on a constant currency basis, compared to total specialty pharmaceuticals net sales in the second quarter of 2013. For the full year 2014, Allergan says it expects total product net sales between $6.9 billion and $7.050 billion, excluding any future anticipated revenue from the transition services agreements related to the sale of the obesity intervention business, which includes total specialty pharmaceuticals net sales between $5.865 billion and $5.975 billion.
In terms of its product position in specialty pharmaceuticals, Restasis (cyclosporine ophthalmic emulsion) 0.05% is the company’s best-selling eye care product and according to Allergan, is the largest eye drop by value worldwide, the largest prescription ophthalmic pharmaceutical by sales value in the United States, and the first, and currently the only, prescription eye drop to help increase tear production in cases where tear production may be reduced by inflammation due to chronic dry eye. Allergan launched Restasis in the United States in 2003, and it is currently sold in approximately 40 countries.
The Lumigan (bimatoprost ophthalmic solution) product line is the company’s second best-selling eye care product line. Lumigan 0.01% is a topical treatment indicated for the reduction of elevated intraocular pressure in patients with glaucoma or ocular hypertension. The Alphagan (brimonidine tartrate ophthalmic solution) products are the company’s third best-selling eye care product line. Alphagan P 0.1%, Alphagan P 0.15%, and Alphagan P 0.2% are ophthalmic solutions that lower intraocular pressure by reducing aqueous humor production and increasing uveoscleral outflow.
Bausch & Lomb, Inc., a division of Valeant, is one key competitor in the eye care pharmaceutical market. Other competitors are Akorn, Inc., Novartis/Alcon, Abbott Laboratories, Roche/Genentech, Merck & Co., Pfizer Inc., Regeneron Pharmaceuticals, and Santen Seiyaku
As a single product, Botox (onabotulinumtoxinA) is Allergan’s top-selling product, accounting for 32%, 32%, and 31% of the company’s total consolidated product net sales (specialty pharmaceuticals and medical devices) in 2013, 2012, and 2011, respectively. Botox was first approved by the US Food and Drug Administration (FDA) in 1989 for the treatment of strabismus and blepharospasm, two eye muscle disorders, and Botox Cosmetic was first approved for certain aesthetic use in 2002. For the year ended December 31, 2013, therapeutic uses accounted for approximately 54% of Botox total sales and aesthetic uses 46%.
On a competitive basis, Botox was the only neuromodulator approved by the FDA until 2000, when the FDA approved Myobloc (rimabotulinumtoxinB), a neuromodulator currently marketed by US WorldMeds. In 2009, the FDA approved Dysport (abobotulinumtoxinA) for the treatment of cervical dystonia and glabellar lines, which is marketed by Ipsen, and Valeant Pharmaceuticals, which acquired Medicis Pharmaceutical Corporation in 2012. In 2007, Ipsen granted Galderma, a joint venture between Nestle and L’OrÃ©al Group, an exclusive development and marketing license for Dysport for cosmetic indications in the European Union, Russia, Eastern Europe and the Middle East, and first rights of negotiation for other countries around the world, except the United States, Canada, and Japan. In 2009, the health authorities of 15 European Union countries approved Dysport for glabellar lines under the trade name Azzalure. In 2011, Ipsen and Syntaxin engaged in a research collaboration agreement to develop native and engineered formats of botulinum neurotoxin. In 2012, Ipsen and Galderma broadened their existing relationship for Dysport by renewing the sole distribution partnership in Brazil and Argentina, forming a new partnership in Australia, and entering into a co-promotion agreement in South Korea. In 2013, Ipsen announced that Health Canada granted a marketing authorization for Dysport for the temporary improvement in the appearance of moderate to severe gabellar lines in adult patients younger than 65 years of age; Medicis Aesthetics Canada, a division of Valeant market Dysport for aesthetic use Canada. In 2013, Ipsen acquired Syntaxin and announced an intention to develop and market a Dysport Next Generation product indicated for glabellar lines and cervical dystonia. In 2013, Galderma also announced an intention to develop an advanced formulation of botulinum toxin for use as a proprietary muscle relaxant. In July 2014, Valeant Pharmaceuticals completed the sale to Galderma of all rights to Restylane, Perlane, Emervel, Sculptra, and Dysport owned or held by Valeant for $1.4 billion pursuant to a previously announced agreement with Nestle S.A, which had earlier acquired Galderma.
In addition, Merz’s botulinum toxin product Xeomin is currently approved for therapeutic indications in most countries in the European Union as well as Canada and certain countries in Latin America and Asia. Xeomin was approved by the FDA in 2010 for cervical dystonia and blepharospasm in adults previously treated with Botox. In 2011, Xeomin was approved for glabellar lines in the United States and Korea. Mentor Worldwide LLC, a division of Johnson & Johnson is conducting clinical trials for a competing neuromodulator for glabellar lines in the United States. In 2013, Valeant entered into a five-year collaboration agreement with Mentor. Revance Therapeutics is currently in a Phase III clinical development program for a topically applied botulinum toxin type A (BoNTA) for the treatment of crow’s feet lines in the United States. Revance has also indicated that it plans to initiate an additional Phase III clinical trial for this indication in Europe by early 2015.
Allergan R&D and manufacturing
Allergan’s research and development efforts for its ophthalmic pharmaceuticals business continue to focus on new therapeutic products for retinal disease, glaucoma, and chronic dry eye. In 2011, the company entered into a license agreement with Molecular Partners AG under which it obtained exclusive global rights in the field of ophthalmology for AGN-150998, a Phase II proprietary therapeutic DARPin protein targeting vascular endothelial growth factor receptors under investigation for the treatment of retinal diseases. In 2012, it expanded that relationship with Molecular Partners AG by entering into two separate agreements to discover, develop, and commercialize proprietary therapeutic DARPin products for the treatment of serious ophthalmic diseases. The first agreement is an exclusive license agreement for the design, development and commercialization of AGN-151200, a potent dual anti-VEGF-A/PDGF-B DARPin, and its corresponding backups for the treatment of exudative age-related macular degeneration and related conditions. The second agreement is an exclusive discovery alliance agreement to design and develop DARPin products against selected targets that are implicated in causing serious diseases of the eye. In 2013, Allergan completed an analysis of data from the randomized controlled Phase II trial for AGN-150998 comparing two doses of the anti-VEGF DARPin and Lucentis (ranibizumab), which suggested some product differentiation but did not support directly moving to Phase III. The company completed enrollment in the third stage of its Phase II study to more completely assess safety and efficacy and to guide the potential Phase III study design. Earlier this year, Allergan received approval from the FDA for Ozurdex (dexamethasone intravitreal implant) as a new treatment option for diabetic macular edema in adult patients who have an artificial lens implant (pseudophakic) or who are scheduled for cataract surgery (phakic). Ozurdex is a sustained-release biodegradable steroid implant. It received EU marketing approval earlier this month. .
Neuromodulators. For Botox and Botox Cosmetic, the company is focused on expanding the number of new indications and country licenses for the approved indications for Botox, including idiopathic overactive bladder, chronic migraine, adult movement disorders, juvenile cerebral palsy, osteoarthritis pain, premature ejaculation and depression while also pursuing next-generation neuromodulator-based therapeutics, including a targeted neuromodulator for use in post-herpetic neuralgia. In addition, the company is seeking to enhance biologic process development and manufacturing. In 2011, the FDA and Health Canada approved the company’s fully in vitro, cell-based assay for use in the stability and potency testing of Botox and Botox Cosmetic. In 2012, Allergan received positive opinions for this assay in Europe for Vistabel, Vistabex, and Botox. In October 2013, it received a Positive Opinion from the Agence Nationale de Sécuritédu Médicament et des Produits de Santé for use of Vistabel for temporary improvement in the appearance of moderate to severe “crow’s feet lines” seen at maximum smile, either alone or when treated at the same time as glabellar, or frown, lines seen at maximum frown in adult patients. It has secured national licenses in 19 countries of the European Union as well as Norway and Iceland.
In January 2014, Allergan completed a license agreement with Medytox under which it acquired the exclusive rights, worldwide, outside of Korea with co-exclusive rights in Japan, to develop and, if approved, commercialize certain neurotoxin product candidates currently in development, including a potential liquid-injectable product. In March 2013, Allergan also acquired MAP Pharmaceuticals and is seeking to advance the commercialization of Levadex, drug to treat migraines. Levadex is a self-administered, orally inhaled therapy consisting of a proprietary formulation of dihydroergotamine using MAP’s proprietary Tempo delivery system, which has completed Phase III clinical development for treating acute migraine in adults. In July 2014, Allergan received a Complete Response Letter (CRL) from the FDA for its new drug application (NDA) for Semprana (dihydroergotamine), formerly referred to as Levadex, which is being developed as an acute treatment of migraine in adults. In the CRL, the FDA acknowledged that Allergan has made improvements in the canister-filling process. The two specific items listed in the CRL are related to specifications around content uniformity on the improved canister-filling process and on standards for device actuation. There were no issues related to the clinical safety and efficacy of the product. Allergan received draft labeling from the FDA for the product in June 2013. Allergan plans to meet with the FDA and says it will work to fully address these issues to the satisfaction of the FDA. The company estimates that the next FDA action will occur by the end of the second quarter of 2015.The company is also collaborating with Serenity Pharmaceuticals on the development and commercialization of Ser-120, an investigational drug in clinical development for the treatment of nocturia, a urological disorder
Manufacturing. Allergan manufactures the majority of its commercialized products in its own plants located at the following locations: Westport, Ireland; Waco, Texas; San José, Costa Rica; Pringy, France; and Guarulhos, Brazil. It produces clinical and commercial supplies of biodegradable silk-based scaffolds at a leased facility in Medford, Massachusetts and human fibroblast material in an owned facility in Houston, Texas. It also conducts operations related to the filling of aerosol canisters in a leased facility in Fall River, Massachusetts. Third-parties manufacture a small number of commercialized products for the company. The company is a vertically integrated producer of plastic parts and produces its own bottles, tips, and caps for use in the manufacture of its ophthalmic solutions. Additionally, it ferments, purifies, and characterizes the botulinum toxin used in Botox and produces human fibroblast raw material for products associated with the 2012 acquisition of SkinMedica. It purchases other active pharmaceutical ingredients from third parties as well, according to the company’s 2013 annual financial filing.
Valeant is a specialty pharmaceutical and medical device company that develops, manufactures, and markets branded, generic and branded generic pharmaceuticals, over-the-counter products, and medical devices (contact lenses, intraocular lenses, ophthalmic surgical equipment, and aesthetics devices). In developed markets, its focus is mainly in eye health, dermatology, and neurology therapeutic classes. In emerging markets, its focus is primarily on branded generics, OTC products, and medical devices. In 2013, the company reported revenues of was $5.8 billion. Key recent acquisitions in 2013 were the acquisition of Bausch + Lomb for $8.7 billion as well as other smaller acquisitions: Obagi Medical Products, Inc. (a company specializing in topical aesthetic and therapeutic skin-health systems), Natur Produkt International (a specialty pharmaceutical company in Russia), and certain assets from Eisai Inc. (US rights for Targretin (bexarotene) capsules and Targretin(bexarotene) gel 1%, used to treat skin problems arising from cutaneous T-cell lymphoma). In addition, in January 2014, the company acquired Solta Medical Inc., a company that designs, develops, manufactures, and markets energy-based medical device systems for aesthetic applications and also agreed to acquire Precision Dermatology, a company specializing in dermatology and topical products.
On a manufacturing basis, the company operates 38 facilities. Its headquarters and one of its manufacturing facilities are located in Laval, Quebec. It has US-based manufacturing facilities in Rochester, New York; Irvine, California; Greenville, South Carolina; St. Louis, Missouri; Tampa, Florida; and Clearwater, Florida. Outside the U.S., it owns or have an interest in manufacturing plants or other properties in Poland, Ireland, Germany, France, Italy, Canada, China, Mexico, Brazil, Serbia, and Vietnam.