Allergan may shed obesity business, GSK a chairman

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Allergan may shed obesity business, GSK a chairman
Allergan may shed obesity business, GSK a chairman

Allergan's October 30 earnings call reflected a company whose fortunes are in flux. While reporting an almost 9% increase in Botox sales for the quarter, compared to the same period as last year, the company also mentioned it was contemplating shedding its lap-band business over concerns that the margins were slim and line extensions were unlikely.

“If we look at the general surgery market, where we are [at] present with Lap-Band, it's basically a one-product entry, and as we have looked at alternatives, that would take us deeper into general surgery, which would be fine. But usually those products are associated with lower gross margin than the ones we have,” Allergan's CEO David Pyott told investors.

The category has also been battered by Congressional scrutiny as well as attention from the Los Angeles Times following the deaths of obesity-surgery patients following surgery at clinics associated with a roadside 1-888-Get-Thin advertising campaign. Allergan stopped supplying the bands to these clinics earlier this year. Lap-Bands are among several types of surgeries used to help obese patients lose weight.

Pyott said the high point of Lap-Band sales was between 2006 and 2008 and the device no longer fits in at Allergan. Obesity interventions sales fell by almost $13 million, to $37.4 million, for the period ended September 30, when compared to the same period last year.

In contrast, the Botox franchise continued to inch upwards, with sales of the neurotransmitter rising. The drug is approved for therapies from migraine control to wrinkle smoothing. Pyott noted during the call that the company has trained 200 more physicians on how to administer the migraine injections since the last earnings call.

He added that branded and unbranded DTC campaigns are driving consumer traffic toward learning about use of the drug for chronic migraines. According to Pyott, the company also managed to increase its share of the aesthetics market in the US, but he noted that austerity measures are affecting European Botox sales.

He pointed out an unexpected twist in European sales, saying, “the therapeutic side has been a greater challenge in Europe than the issues we have with consumer spending on medical aesthetics procedures.” Executives also said they don't expect the eventual re-introduction of Merz into the marketplace to weaken Botox's standing. Merz is operating under constraints associated with a corporate espionage lawsuit.

Overall sales were up 6.1% for the quarter, to $1.4 billion.

GlaxoSmithKline announced Wednesday that its quarterly sales fell 5%, to $10.5 billion, compared to the same period last year. The company ticked off the challenges that continue to afflict the industry, such as European austerity measures and currency pressures.

The company saw double-digit sales drops in antivirals (18%), cardiovascular and urogenital (11%), metabolic (39%), dermatology (12%) and immuno-inflammation (15%), compared with the same period last year. Sales in rare diseases were $220 million, a 20% increase compared to the same period last year.

Respiratory sales were $2.8 billion, up 3% from the same period last year, with Advair sales growing 2% for the quarter compared to last year, to almost $2 billion. The company said generics were a major driver behind anti-virals' lackluster performance, citing Valtrex, which saw sales plummet 38% during the quarter to $84 million, a result of the  combination of generics in the US and Europe and price cuts in Japan.

Vaccine sales fell 14%, to $1.5 billion, largely due to the fact that Q3 2011 was really hard to beat – Japan's catch-up HPV vaccination program powered sales last year and the catch-up was largely complete by Q3 2012, leaving Cervarix sales with a relative loss, and sales fell 79% for the quarter compared to the same period last year. The company noted that Hep C vaccine sales were down 10% for the quarter, compared to the same period last year.

The company's earnings came a few days after GSK's chairman, Sir Christopher Gent, put the company on notice to set up a line of succession reported UK news source City AM. The company announced that Gent, who has been chair since 2005, expects to depart at some time within the next two-to-five years, said City AM. The former Vodaphone CEO was part of the search team which named Andrew Witty CEO in 2008.

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