AbbVie’s $63B Allergan buyout offer depends on Botox growth. But will it last?

An enduring medical aesthetics franchise, led by wrinkle-fighter Botox, is one of the key reasons AbbVie is shelling out $63 billion for Allergan. That drug has again pulled off a sales jump, though a slower growth rate suggests a tough game ahead.

Botox as a cosmetic product racked up $252.4 million in second-quarter sales in the U.S. and $175.8 million elsewhere, representing year-over-year increases of 6.7% and 10.7%, respectively. And Botox as a therapeutic for migraine, muscle spasms and other indications also added a 3.6% expansion in worldwide sales, to $545.8 million.

However, that 6.7% U.S. cosmetic growth was quite a bit smaller than the 16.7% Botox posted in the first quarter, even though it still marks a quarter-over-quarter increase of $22.9 million. Allergan didn’t provide any explanation for the wrinkle in momentum, but an additional competitor in town may have something to do with it.

Evolus recently launched its own neurotoxin, Jeuveau, in the U.S. at the list price of $610 per 100-unit vial, a small premium over Botox. Unlike other drugs covered by insurance, doctors buy wrinkle lifters directly from drugmakers at a discount off the list price. That means a higher price on Jeuveau could translate into higher profits for doctors.

While the California company has yet to report its second-quarter numbers, the drug’s licenser, Daewoong Pharmaceutical of South Korea, unveiled that its second-quarter neurotoxin sales to the U.S. were 15.3 billion won ($12.6 million), Cantor Fitzgerald analyst Louise Chen wrote in a Friday note to clients.

Jeuveau is largely considered a much tougher rival for Botox to fend off compared with other existing challengers, such as Galderma’s Dysport and Merz’s Xeomin. And Evolus and Daewoong have had eyes on the clear market leader from the beginning. In a head-to-head phase 3 trial against Botox, Jeuveau showed it worked as fast and as well as the Allergan drug, according to data published in April ahead of Jeuveau’s official launch.

Doctors also have a generally positive view toward the newcomer, different surveys by analysts have shown.

Evolus first made Jeuveau available on May 15 through a customer experience program and launched a #NEWTOX social media campaign. Among 18 dermatologists and seven plastic surgeons Chen’s team recently polled, about one-third said one reason for switching to Jeuveau is free product in the trial program, while head-to-head data, higher profits and better service, as well as the ability to break from the Allergan bundle of other aesthetics products were all cited. Yet very few said they will switch back to Botox once the trial period ends.

In some cases, doctors noted the demand for Jeuveau even outstripped their supply. "In fact, the vast majority of patients came in asking for Jeuveau," Chen said in a June note. "This underscores our view that social media has leveled the playing field for advertising, and competitors cannot outspend Evolus on promotion."

Two earlier polls by RBC Capital Markets’ Randall Stanicky also showed "potential for greater than expected acceptance of Jeuveau." Doctors in one survey said they expected to switch 43% of patients over to Jeuveau.

Meanwhile, Botox is also under pressure in its medical indications, especially in migraine, amid the recent launches of CGRP inhibitors. While Botox hasn’t seen much decline in the face of existing CGRP injectables, Biohaven Pharmaceuticals' rimegepant could soon become the first oral CGRPto hit the scene. Alder BioPharmaceuticals’ intravenous drug eptinezumab is also set to steal some share. Fortunately, Allergan has its own oral countermeasure, as its ubrogepant is expecting an FDA decision by the end of the year.

Botox's performance is a key component of AbbVie’s reasoning behind its $63 billion buyout offer, which is aiming for diversification as its megablockbuster Humira drops. After all, Botox makes up about one-fifth of Allergan sales.

Elsewhere in Allergan’s portfolio, body contouring therapy CoolSculpting plummeted 27.1% in the second quarter compared with the same period last year, to $78.9 million. Eye drug Restasis also decreased 2.3% in the U.S., to $310.9 million. Antipsychotic drug Vraylar hauled in $196.1 million in the second quarter, up 36.4% over the prior quarter. And it recently nabbed a new nod from the FDA to treat depression in bipolar disorder.

All told, Allergan's second-quarter revenues reached $4.09 billion, down less than 1% over last year and ahead of Wall Street expectations. Looking ahead, Allergan said it sees 2019 revenues of $15.4 billion to $15.6 billion, up from the previous range of $15.1 billion to $15.4 billion.