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Experts weigh benefits, risks of Allergan-Inamed merger


Dr. Narurkar
National report — A $3.2 billion merger of Botox-maker Allergan and breast-implant maker Inamed would ultimately benefit cosmetic surgeons, an Allergan official says.

The two companies signed a merger agreement in late December, and the deal was expected to close in January.

The combined franchise "would offer an interesting and unique mixture of complementary products and services within the medical aesthetics market that would meet a wide variety of patient needs," said Douglas Ingram, Allergan executive vice president, general counsel and secretary, at press time.

But one industry analyst says the proposed deal could lead to potentially higher prices for dermal fillers, and could create anti-competition concerns.

Allergan, based in Irvine, Calif., filed an unsolicited offer for Inamed, headquartered in Santa Barbara, in November. Inamed officials said Allergan's offer was superior to an earlier, $2.6 billion takeover bid by Arizona-based gel implant maker Medicis Pharmaceutical Corp. Medicis withdrew its offer Dec. 13.

Regulatory concerns

To ease regulatory concerns over the Allergan buyout, Inamed agreed to cancel its license to the experimental botulinum toxin product Reloxin, which is similar to Allergan's Botox. Pending approval of the merger, the rights to Reloxin were to revert to its developer, the French drug company Ipsen Ltd., according to news reports.

One physician believes the merger of the two companies, if approved, may spell discounts on aesthetic products.

"I'm hoping that if one buys certain amounts of Botox, one will get certain reductions in filler prices," says Vic A. Narurkar, M.D., who practices in San Francisco, is president of the American Society of Cosmetic Dermatology and Aesthetic Surgery (ASCDAS) and assistant clinical professor of dermatology at the University of California, Davis, Medical Center.

Opinions mixed

Still, analysts had mixed opinions of the outcome of the Allergan-Inamed talks at press time.

A Nov. 15 Allergan press release noted that Allergan would acquire Inamed's BioEnterics Lap-Band system, a minimally invasive surgical device for treating obesity, that Allergan considers "a key growth driver" in this rapidly expanding market.

The Lap-Band product grew at a rate of more than 30 percent in 2005 and will grow 36.9 percent in 2006, according to Alexander Arrow, M.D., CFA, medical technology analyst for Lazard Capital Markets.

That performance, as well as similar success for Inamed's breast implant business, may mean Inamed shareholders ultimately are "more likely to decide that the current Allergan offer is insufficient, and either remain independent, or hold out for a potential better offer from Allergan or some other suitor," Dr. Arrow says.

Allergan's offer for Inamed came amid a November 2005 attempt by California-based breast implant-maker Mentor Corp. to take over Medicis for $2.2 billion. Medicis initially rejected that offer.

"Nothing in Mentor's attempted purchase of Medicis should have any impact on our acquisition (of Allergan) one way or the other, and it has no bearing on our analysis," as the overture to Inamed was not a defensive maneuver, Mr. Ingram says.

Growing market

Regardless of the Allergan deal's fate, the consolidation maneuvers in the aesthetic sector represent the desires of Allergan, Mentor and Medicis to participate in high future growth in the breast implant market when silicone wins federal approval, as well as in the growing market for dermal fillers and the $1 billion botulinum toxin market, says John Calcagnini, senior medical device analyst, CIBC World Markets Corp.

"These products carry above-average revenue growth, high margins and have a high growth outlook with regard to demographics," he says.

Mr. Calcagnini and Mr. Ingram offer differing views of the competitive landscape if the Allergan deal if approved.


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