AGN’s gross margin on Botox is approximately 90%, according to the company’s own disclosures. Why so high? Although Botox manufacturing is far from simple, the production process used by AGN has not materially changed since it was developed at the University of Wisconsin in the 1970s.
I think you’re unduly bearish about AGN’s business prospects during the next couple of years. Yes, there will be new competition for Botox, but AGN will likely maintain the dominant market share. Moreover, AGN is much more diversified than it was a few years ago. The company used to be just Botox and eye drops, but now it has a wide array of product lines, many of which consumers pay for out of pocket.
All told, I think AGN is a good core holding in the mid-cap pharma space for the next year or two, and I wouldn’t be surprised if one of the pharma giants made a run at it. Regards, Dew
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