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Financial Times / Biz - Money

Challenges to Botox threaten a market makeover

It is one of the world’s most recognised pharmaceuticals brands, but Botox — the wrinkle treatment beloved by celebrities and more — is starting to show signs of age. 

Allergan first won approval for the drug in 1989 and has held on to its dominant position despite the launch of competing neurotoxins, which are used not just for frown lines but medical conditions such as overactive bladders and migraines. 

Many doctors think rival products are inferior because the manufacturers have not alighted on Allergan’s “secret sauce” — a proprietary blend of the poisonous bacteria Clostridium botulinum, a human protein known as albumin and sodium chloride. 

Now a Silicon Valley biotech company is trying to squeeze Allergan with not one but two competing products. 

Revance is developing a cheaper copycat or “biosimilar” version of Botox, as well as a new neurotoxin that purportedly reduces the appearance of forehead wrinkles or “glabellar lines” for six months, versus three-to-four months for Allergan’s product. 

Last week, Revance announced it was teaming up with Mylan, the world’s largest generic drugmaker by market value, to develop the biosimilar product, prompting a sell-off in Allergan’s shares. 

The investor fear is understandable. Botox is Allergan’s best-selling product by far, generating $3.17bn of revenues last year and accounting for roughly 30 per cent of operating profits, according to Ronny Gal, an analyst at Bernstein. 

Dan Browne, chief executive of Revance, says no company has yet managed to develop a biosimilar version of Botox because it is “exceedingly challenging” to replicate the complex and secretive manufacturing process. 

That is why companies such as South Korea’s Medytox and Hugel, which are popular in their domestic market, have launched their own unique neurotoxins instead of trying to copy Allergan’s recipe.

In the US, Nestlé;’s Galderma unit markets a rival, known as Dysport, while Germany's Merz pharma sells a neurotoxin under the Xeomin brand. 

Both companies have a loyal following among some cosmetic patients, but neither has managed to make too much of a dent in the Botox powerhouse, which still has a market share in the region of 65 per cent. 

Mr Browne says his company has a unique opportunity to develop a copycat Botox because its raw ingredients come from the same source as Allergan’s. 

There’s been no innovation with this molecule in three decades, it’s extraordinary how little there’s been

Dan Browne, Revance chief executive

Analysts say a biosimilar Botox is unlikely to hurt Allergan’s cosmetics business, which predominantly sells to patients who pay for the product out of their own pockets, and who are willing to spend more on a proven brand. 

However, such a product could win a chunk of the Botox prescriptions written by medical professionals for conditions such as excessive sweating and certain muscular illnesses. Private and public healthcare systems foot the bill for these patients and are always looking for ways to cut costs. 

This “therapeutics” side of Allergan’s Botox business is growing at a faster clip than the cosmetics part and generates more revenue, pulling in $1.7bn of sales last year. 

“We see the impact in aesthetics as modest, as brands matter, but in therapeutics, the biosimilar will be in position to compete,” says Mr Gal, the Bernstein analyst. 

However, Revance also hopes to take Allergan on in the cosmetics space with another product — a novel neurotoxin codenamed RT002, which apparently lasts for longer than Botox. 

In two large clinical trials, the injections suppressed frown lines for six months, compared to up to four months for Botox. If a safety study goes to plan, the new drug could be on the market by the end of next year. 

Shares in Revance jumped when the trial data were published, and the company’s stock price has appreciated by 25 per cent over the past six months, giving it a market capitalisation of $1.14bn.

“There’s been no innovation with this molecule in three decades, it’s extraordinary how little there’s been,” says Mr Browne. 

He believes his company’s longer-lasting drug could expand the market for cosmetic neurotoxins by appealing to people who are put off by the need for more regular injections. 

Allergan is sceptical of the data from Revance’s trials, which it describes as “underwhelming”, and says it is doubtful that the US Food and Drug Administration will allow the company to include a six-month claim on its label. That would prevent Revance from marketing the product as a longer-lasting alternative to Botox. 

Analysts say a biosimilar Botox is unlikely to hurt Allergan’s cosmetics business

Mr Browne says: “Our confidence is that when we submit our [regulatory] application, we will get a longer duration on the label in the timeframe of 24 weeks versus 16 weeks or less for the existing players.”

He says he is surprised by how Allergan has tried to talk down RT002. The larger company took the unusual step of issuing a press release questioning the clinical trial data shortly after it was published. 

“Literally within minutes they were issuing a statement, they were calling all the analysts to proactively say that the data wouldn’t support a claim of six months duration,” he says.

Even if Revance does win the right to advertise RT002 as longer lasting, some think it could in fact make the product less popular among dermatologists, who might fear a drop in their earnings as a result of fewer patient visits. 

“Some doctors are not so happy about it — they do not like it because patients won’t come in as frequently,” says Joan Kron, a long-time beauty journalist and a leading authority on cosmetic surgery. 

Ms Kron doubts that Revance will be able to win much business from Allergan: “Once you’re Botox you have such a tremendous power in the name, so this product has to be absolutely spectacular to steal enough market share.”

Before RT002, Revance had been developing a neurotoxin gel that was intended to be wiped on without the need for an injection. 

Ms Kron says such a product would have been a “slam dunk” given the number of would-be customers who are scared of needles but the product flunked clinical trials, prompting the group to switch focus to an injectable. 

“Now it’s just another toxin and we’ve already had those — they didn’t do all that well,” she says. 

One person familiar with the Botox business says Allergan has been trying to develop a wipe-on version too but has experienced difficulties and that the company is working on several other next-generation neurotoxins dubbed “Botox 2.0”. 

Bill Meury, chief commercial officer of Allergan, says Botox is “an iconic brand [and] a multibillion-dollar business”, but that the company must work to boost the number of aesthetics customers. 

“We have only scratched the surface of the market, penetrating fewer than 10 per cent of consumers,” he says. 

Allergan’s shares suffer after mis-steps

The threat to Allergan’s Botox business comes at a difficult moment for the drugmaker. 

Investors and analysts say the company has struggled to regain its mojo since the Obama administration torpedoed a $160bn takeover of the group by Pfizer almost two years ago. 

During the past six months, investors have been selling stock, wiping about a third off the value of the company’s shares. Now its market capitalisation languishes at $52bn — less than half what Pfizer was willing to pay. 

The company’s mis-steps include its attempt to protect sales of another drug, a dry eye treatment, by transferring the patents protecting the medicine to a Native American tribe in an attempt to shield the intellectual property from a legal challenge. 

The unsuccessful ploy damaged the company’s reputation and undid previous attempts to take a lead on responsible drug pricing by publishing a “social contract” that pledged to limit annual increases. 

And last week the US Food and Drug Administration delayed a decision on whether to approve an Allergan drug known as Esmya, used for a type of benign cyst that grows on the wall of the womb. 

The delay came after regulators in Europe — where the drug is already approved — decided to review the medicine amid concerns it could cause liver damage. 

Seamus Fernandez, analyst at Leerink, notes that Brent Saunders, chief executive of Allergan, has previously “highlighted the success of Esmya as core” to the success of its women’s health franchise. 

Mr Fernandez predicts investors will intensify calls for the women’s health division to be sold or spun off.