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.
Allergan demonstrated confidence in the drug's chances for
success with its offer of $25 per share for MAP, a 60% premium over
the company's closing price of $15.58 through Tuesday's close.
If Levadex is approved, Allergan stands to increase its exposure
to physicians treating migraines, potentially improving sales for
both headache drugs.
"MAP should solidify AGN's position as a leading migraine
company," Larry Biegelsen, a Wells Fargo analyst, said Wednesday.
"Given that peak sales for MAP's lead product, migraine compound
Levadex, could reach [$250 million to $500 million], the valuation
seems reasonable to us."
Map shares surged 59.3% to $24.82, an all-time high, in
premarket trading. Allergan shares, up 18.3% in the last 12 months,
rose 0.2% to $106.
Allergan already owns the right to market Levadex to brain and
pain specialists in the U.S. and Canada through a 2011 licensing
deal with MAP, to which it has paid $80 million in upfront and
milestone payments. The merger enables Allergan to market Levadex
globally and to general practitioners.
Allergan will hold a conference call Wednesday at 11 a.m. EST to
discuss the deal, where the company is likely to face questions
about why it needed to acquire MAP when it already owns the rights
to much of its potential sales.
Investors also will want to hear why Allergan thinks MAP's only
drug, Levadex, an orally-inhalable version of a drug currently
available by injection or nasal spray, is worth such a high
purchase premium.
MAP lost $12.6 million in the quarter ending Sept. 30, and had
cash and cash equivalents of $114.2 million.
Allergan said in October that it would seek a sale of its
weight-loss device unit, Lap-Band, after consumer credit pressures
caused sales to fall 25% in the third-quarter. Allergan said at the
time that it would seek to make an acquisition to offset any
dilution from a Lap-Band sale, which has not yet been
announced.
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," Chief Executive David E.I. 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
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