Will Botox Sell Like Viagra?

Everyone knows that Botox injections are a good way to minimize wrinkles. Up until now however, the drug has never been approved for cosmetic uses. All that may change if Allergan, the product’s manufacturer, has its way, according to a recent article in Business Week.

Botox has been on the market to treat crossed eyes and excessive blinking since 1989, and it was approved to treat cervical dystonia, a neuromuscular disorder that’s characterized by severe neck pain, in December, 2000. But perhaps its most common application — which the company won’t talk about or comment on — is to temporarily smooth wrinkles. Analysts estimate that the drug’s use for cosmetic purposes by plastic surgeons and dermatologists makes up some 30% to 50% of its total sales, which are estimated at $300 million worldwide in 2001.

Last year, Allergan, which sells mainly skin- and eye-related drugs and products, applied for Food & Drug Administration approval of Botox to treat eyebrow furrow. If the FDA acts this year, Botox could become “the Viagra of 2002,” said Greg Gilbert, a Merrill Lynch analyst. The agency never comments on approval timetables.

Until the FDA decides, Allergan can’t advertise or market Botox for cosmetic uses. But ever since the drug was discovered to have wrinkle-reducing effects, nobody has stopped doctors training themselves in its use. This kind of “off-label,” or unapproved, use is supported by FDA so long as the practice is grounded in good science. Meanwhile, news of the substance’s effects have been widely covered, especially in women’s magazines.

An approval for the product’s cosmetic use would likely boost Allergan’s shares, which are trading at around $73, giving the company a price-to-earnings ratio of about 42. The stock price looks pretty affordable, considering the earnings disappointments and lack of growth among other drugmakers, says Buckingham Research analyst David Buck, who recently upgraded the stock to a strong buy.

Mr. Buck expects earnings growth to be 22% for the year, higher than Allergan’s target of 20%. The prospect of Botox being approved to treat brow furrows also prompted him to raise his estimate of the drug’s sales growth to 27%, up from 25%.

“The real opportunity is in [states] between the coastlines. That [market] won’t really grow until you get a trained sales force promoting Botox,” says Don Ellis, a Thomas Weisel Partners analyst who covers Allergan. His firm recently interviewed 100 plastic surgeons, most of whom, he estimates, are located on the coasts. Of those surveyed, 69% reported using it and most were increasing their patient base every month, Mr. Ellis said.

Botox is a neurotoxin that acts on the nervous system. When injected, it relaxes the muscle, which makes the skin over the muscle appear smoother. Most patients get touch-up injections every few months as the drug’s effects wear off. Some 1.1 million injections for cosmetic purposes were performed in 2000 (the latest year for which figures are available), according to the American Society of Aesthetic Plastic Surgery (ASAPS), an increase of 120% from the previous year.