David B. Reath, MD
Knoxville, TN (865) 450-9253
HKB Knoxville Staff

Dear Allergan: Keep Up the Valeant Fight

Allergan_Takeover_FightRecently, one of the hottest topics in both the worlds of aesthetic medicine and big business has been the attempts by the pharmaceutical company Valeant at a hostile takeover of Allergan. To date this has not been successful, but this fight is by no means over. And, it could have a major negative affect on you and me if this succeeds.

Now, let me start by professing my juvenile understanding of the world of big business and major investing. So, I will not discuss the major financial implications of this takeover. Instead, I will explain about how this proposed takeover might affect you.

Allergan is a giant. In the field of plastic surgery they provide breast implants, the Juvederm family of fillers, Botox (no other word needed), and Latisse. But what they have really done is advanced the science, and development of their current and new products. We all know that Botox is king when it comes to wrinkle relaxers. There are several other products out there, but Botox is as Coke is to soft drinks. This has been a great product from its inception, but Allergan’s ongoing research has discovered many new applications for it, such as the use in treatment of migraine headaches, or excessive underarm sweating.

Allergan’s hyaluronic acid filler (HA), Juvederm, was not the first one on the market. Restylane was. However the work done on the development of Juvederm has propelled it to the head of the pack. Juvederm XC arrived next which is a more effective (and comfortable) HA. And most recently Juvederm Voluma XC has been available. This product is a tremendous advance because it lasts longer and is used for adding volume to the face.

So what else has Allergan done for you? How about Latisse for eyelash growth? (And who knows what other areas of hair growth this may be adapted to.) Or cohesive get implants which we use a ton of? Or what about the highly cohesive shaped silicone gel implants used in breast enlargement and in breast reconstruction? How do they do this?

This is the crux of the matter. Research and development. Allergan has an insanely large research budget. Probably larger percentage wise than some other companies like Merck or Pfizer. But the difference is that Allergan’s research investment is paying off big time. It helps you, and it helps me. And Allergan’s devotion to research is something that sets it apart from the crowd.

Enter Valeant. This is a company that is obsessed with growth. Which means they are constantly looking for new acquisitions to fuel that growth. And, as I see it, they are focused on profit — as in short term profit. So, if they acquire Allergan they will be looking to maximize short term profit with little regards to long term investment in the company and long term growth which leads to long term profits.

The first thing to go could very well be Allergan’s popular patient loyalty program, Brilliant Distinctions. When Valeant bought Medicis (the maker of Restylane and Dysport) two years ago, the rebate program for users of these products disappeared fairly soon. This would be an inconvenience for all of us, but not necessarily a deal breaker. (As a side note, Valeant recently sold Medicis to pave the way for their bid to take over Allergan).

But what they would really go after is Allergan’s research budget. Expect that this would be slashed by at least two thirds. And this would essentially cap the pipeline of new products coming to us, and it would limit improvements of existing product lines. This would affect you. It would affect me. And, it would affect plastic surgery. None of these effects would be good, and none of us want this to happen.

Several months ago I spoke with some of the leading managers of Allergan at a plastic surgery meeting. They definitely do not want this takeover to happen. But, they acknowledged that this decision rests with the board of directors and what would be best for stock holders. We are very fortunate that on June 10, Allergan’s Board of Directors rejected Valeant’s most recent offer stating that it “substantially undervalued” Allergan. Further Allergan’s CEO David Pyott wrote that “The Allergan board must seriously consider the many questions around the sustainability of Valeant’s business model as they directly impact the total future consideration for our stockholders.” Translated to me this means that the Valeant modus operandi would halt the future growth and profitability of Allergan primarily by knee capping research and development.

Is this the end of Valeant’s hostile bid for Allergan? Doubtful. But from where I sit, right now the good guys are holding their own. For all of our benefits, let’s hope that they ultimately prevail and keep their company intact.

All the best,
David B.


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