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Allergan Inks Deal with Medytox

Zacks Equity Research

Allergan, Inc. (AGN) has entered into a licensing agreement with research-based biopharma company, Medytox, Inc.

Under the terms of the agreement, Allergan will make an upfront payment of $65 million to Medytox. In return, Allergan will gain exclusive global rights (excluding Korea) to develop and commercialize certain neurotoxin candidates currently in development. The candidates include a liquid injectable.

Apart from the upfront payment, Allergan may end up paying up to an additional $297 million (up to $116.5 million on the achievement of development milestones and up to $180.5 million on the achievement of commercialization milestones) and royalties on product sales.

Medytox mainly focuses on the development of botulinum toxin products.  The company currently has a marketed botulinum toxin product (Neuronox) in its portfolio and is also working on a next generation botulinum toxin product.

This deal, which will close once government approval is received, is in line with Allergan’s efforts to expand its pipeline. Allergan already has a strong presence in the neuromodulator market thanks to its key drug, Botox (onabotulinumtoxin A). Botox is a major contributor to Allergan’s top line. First half 2013 sales came in at $970.9 million, up 12.9% from the year-ago period. Allergan expects Botox sales of $1.94 billion - $2.00 billion in 2013. Allergan is working on expanding Botox’ label and recently received approval for crow’s feet lines.

Allergan currently carries a Zacks Rank #3 (Hold). Although we believe Allergan’s presence across different segments will help maintain growth, we remain concerned about the generic and competitive challenges being faced by the company.

Currently, companies that look well-positioned include Roche (RHHBY), Bayer (BAYRY) and Novo Nordisk (NVO). While Roche is a Zacks Rank #1 (Strong Buy) stock, Bayer and Novo Nordisk are Zacks Rank #2 (Buy) stocks.

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