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DewDiligence

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Re: DewDiligence post# 18533

Wednesday, 11/16/2005 12:01:16 AM

Wednesday, November 16, 2005 12:01:16 AM

Post# of 251707
Allergan's Inamed Bid Reflects
Boom in Cosmetic Treatments ’

[Finally, an article that addresses the botulinum angle of this buyout offer. However, my thought in an earlier post that AGN wanted to quash IMDC’s Botox competition is clearly wrong, according to the statement here by AGN’s CEO, David Pyott. (Unless, of course, Pyott is just blowing smoke.)]

http://online.wsj.com/article/SB113210722243998502.html

>>
By RHONDA L. RUNDLE
Staff Reporter of THE WALL STREET JOURNAL
November 16, 2005

The bid by Allergan Inc. for Inamed Inc. upset Inamed's merger pact with Medicis Pharmaceutical Inc. and ignited a scramble in the field of cosmetic treatments -- a corner of the medical world that is pushing into the mainstream as more people buy services that make them look and feel better.

Allergan yesterday made a $3.2 billion bid for Inamed, maker of medical devices such as breast implants. The offer was higher than a $2.6 billion agreement Inamed signed in March with Medicis. Many saw Allergan as the eventual winner because of its richer offer and deeper resources.

"We don't imagine that Medicis will be all that aggressive in upping their bid," said David W. Maris, an analyst at Banc of America Securities. Medicis, based in Scottsdale, Ariz., said in a statement that it remains confident that Inamed shareholders will see the superior value in a Medicis-Inamed combination. Inamed declined to comment immediately.

The scramble is evidence of growing demand for cosmetic treatments that once were seen as a vanity niche. "The marketplace is trying to align itself in the most logical way to serve the needs of this huge group of baby boomers who are nearing 60 and who represent a huge demographic source of clients for their products," said Bruce Cunningham, professor of plastic surgery at the University of Minnesota in Minneapolis.

Aesthetic medicine and cosmetic plastic surgery, once served by small pharmaceutical and medical-device companies, are starting to overlap and become big business. This growth is drawing the attention of bigger, more diversified companies. Giant drug makers such as Johnson & Johnson and Pfizer Inc. are eyeing aesthetic medicine as a promising growth area, especially in dermatology, analysts said.

Plastic surgeons are discovering that treatments historically provided by dermatologists help build a loyal clientele. A patient who tries a Botox shot to erase one wrinkle, may return four months later for more injections. Eventually, they might get a brow lift, or maybe breast implants. "Cosmetic surgeons see many patients as a lifetime revenue stream and the more things you can sell them the better," said Mr. Maris.

This convergence is changing the way that device makers and pharmaceutical companies view each other. "Inamed is a company we've been watching for a long time," David E.I. Pyott, Allergan's chief executive officer said Monday night after unveiling his company's bid. Inamed, mainly a device maker, is a fraction of Allergan's size, based on revenue, but offers the specialty pharmaceutical company an entrée into breast augmentation and obesity intervention, with leading products in those areas.

Importantly, Inamed is developing a dermal filler, Juvéderm, that would complement Allergan's blockbuster Botox treatment. Botox shots temporarily smooth wrinkles around the eyes, while dermal filler shots temporarily treat the lines and folds around the mouth and chin. Allergan has been looking to acquire or license a dermal filler. "We know every single product world-wide -- it's quite clear that Juvéderm" is one of the most promising, Mr. Pyott said.

"Everybody wants that one-two punch" in the facial-aesthetics market, said Alexander Arrow, an analyst at Lazard Capital Markets. Inamed is the closest to getting that combination because Juvéderm and a Botox-like product -- Reloxin, licensed from the European pharmaceutical group Ipsen for cosmetic use in certain markets -- are both in its pipeline, the analyst said. Medicis, which boasts the dominant dermal filler, Restylane, has been eager to acquire Reloxin to fill a void in its cosmetic portfolio.

Allergan, based in Irvine, Calif., said that if its Inamed bid succeeded it would relinquish Reloxin rights to avoid any possible antitrust concerns over a concentration of both Botox and Reloxin in a single company's hands. Analysts predicted a flurry of interested buyers for Reloxin rights, including J&J, Pfizer and Galderma, a joint venture between Nestlé SA and L'Oréal SA. [I have my doubts because Reloxin is not as good a product as Botox.]

The analysts said that interest might be particularly strong at J&J, which launched Renova, the first prescription cream proven to reduce facial wrinkles, a decade ago. The company also has an international skin-care franchise in its Neutrogena brand. A company spokesman said "we prefer not to comment on speculation."

It's possible that Inamed's shareholders will decide that the company is worth more than the $84 a share that Allergan is offering. The Santa Barbara, Calif., company has outperformed expectations in recent months, analysts said. Sales of its Lap-Band device for obesity treatment, an alternative to gastric-bypass surgery, are growing at a 30% annual clip. Sales of Inamed's saline breast implants are also doing well, even as many women wait for the Food and Drug Administration to rule on the company's application to sell silicone-gel implants.

Mr. Maris suggested that Medicis might be a bidder for Reloxin if it loses Inamed, or it might make an offer for a rival breast-implant maker, Mentor Corp., also based in Santa Barbara.
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