--Allergan to pay $958 million to acquire experimental drug
firm
--Addition of MAP's Levadex would build on Allergan's migraine
offerings
--Levadex will face competition from more cheaply-available
generic migraine drugs
(Updates throughout to add additional details, comment from
company and analysts, and updated stock price.)
By Joseph Walker
Botox-maker Allergan Inc. (AGN) doesn't want to be known as just
a pretty face.
The pharmaceutical firm famous for its cosmetic beauty products
has agreed to pay $958 million to purchase MAP Pharmaceuticals Inc.
(MAPP), an unproven firm whose migraine headache therapy faces a
crucial approval decision by the U.S. Food and Drug
Administration.
MAP Pharmaceuticals, of Mountain View, Calif., is seeking
approval for Levadex, a new version of an existing drug to treat
migraines. Allergan hopes that Levadex will complement its effort
to expand sales of its flagship wrinkle-drug Botox into medical
uses including headaches and bladder control.
The acquisition, Allergan's largest since its 2005 purchase of
breast-implant-maker Inamed Corp. for $3.4 billion, carries risks.
The FDA rejected approval for Levadex in March, citing concerns
about the drug's manufacturing process, though not its safety or
effectiveness, according to MAP.
The FDA accepted the company's revised drug application in
November, and the agency is expected to make an approval decision
by April 15.
Map shares recently surged 58.6% to $24.72, reaching an all-time
high. Allergan shares, up 16.8% in the last 12 months, fell 1.3% to
104.39%.
Allergan said MAP'S technology, which works like an asthma
inhaler, would ease consumption of the migraine drug
dihydroergotamine, which is predominantly administered through
intravenous injections. The company expects Levadex to eventually
generate $500 million in annual sales.
"Levadex has the potential of transforming the molecule from a
predominantly hospital-based therapy administered intravenously to
a home-based inhalation product," Chief Executive David E.I. Pyott
said in a conference call with equity analysts.
Allergan, which since 2011 has owned the rights to market
Levadex to certain doctors and 50% of U.S. and Canadian sales, said
it was confident that MAP had resolved the FDA's concerns and that
the product would be approved, a sentiment reflected in its
purchase offer of $25 per share, a 60% premium over the company's
closing price of $15.58 through Tuesday's close.
"We have been a partner of MAP from the very beginning; Our team
and their team have worked hand-in-glove, so we're very well
informed" about the approval process, Mr. Pyott said. He
acknowledged, however, that there was still uncertainty, as "until
we get our facts and emails from the FDA, nothing is done until
it's done."
If Levadex is approved, Allergan stands to increase its exposure
to physicians treating migraines, potentially improving sales for
both headache drugs. The company already had planned to expand its
Botox sales force in 2014 to target non-migraine-specialists and
"adding Levadex to the bag really improves the economics of the
operation," Mr. Pyott said.
Analysts said the combination of products would enable Allergan
to offer a soup-to-nuts offering with both Botox to prevent
migraines and Levadex to treat severe headaches when they
occur.
"MAP should solidify AGN's position as a leading migraine
company," Larry Biegelsen, a Wells Fargo analyst.
However, initial Levadex sales are likely to be slow in 2013,
the company said, and economic austerity measures in Europe could
complicate its uptake overseas.
The drug will have to compete with generically available
migraine pills that are cheaper, said David Amsellem, a Piper
Jaffray analyst. However, many patients suffer from nausea and are
unable to swallow the pills, he said.
Valeant Pharmaceuticals International Inc. (VRX) markets a nasal
spray form of the drug, but it has never generated significant
sales because of its poor taste and lack of promotion, Mr. Amsellem
said.
Allergan has paid MAP $80 million in upfront and milestone
payments since 2011. The merger enables Allergan to market Levadex
globally and to general practitioners.
During Wednesday's conference call, Allergan said MAP also had
two pre-clinical drug programs exploring the use of its inhalation
technology to treat Parkinson's disease and epilepsy.
MAP lost $12.6 million in the quarter ending Sept. 30, and had
cash and cash-equivalents of $114.2 million.
The acquisition, announced after Tuesday's close, demonstrates
Allergan's intention to expand its business beyond its core product
line of beauty drugs, including the skin-tightening Botox,
lip-enhancers and breast implants.
"One of the key drivers of Allergan's continued success is our
focus on medical specialties where we have extensive knowledge of
physician and patient needs, and can provide a broad portfolio of
products," Mr. Pyott said.
The FDA approved Botox, which is essentially a
muscle-contracting agent, for overactive bladders, or urinary
incontinence, earlier this month.
Botox was approved to prevent migraine headaches in 2010, and is
estimated to have generated U.S. sales of $130 million for that
indication in 2012, according to Mr. Biegelsen. Overall,
Allergan--which hasn't reported its fourth-quarter results
yet--projects up to $1.8 billion in total Botox sales for 2012.
The MAP deal was unanimously approved by the boards of Allergan
and MAP, and it should be completed in the first six months of this
year, the companies said.
Write to Joseph Walker at Joseph.Walker@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires