Allergan seeks bigger market for Lap-Band weight-loss device
Allergan Inc.’s ideal customer is visibly aging and overweight — and has the money to do something about it.
The Irvine company has become a darling of Wall Street by playing to Americans’ obsession with health, and their vanity, by marketing products such as wrinkle-erasing Botox, Natrelle breast implants, Latisse eyelash lengthener and the Lap-Band weight-loss device. Its stock has soared 186% over the last decade.
But with the market for the Lap-Band leveling off in a sluggish economy, the company has turned to the Food and Drug Administration for help: It wants to increase the pool of potential customers by making the stomach-banding surgery available to less-obese people.
More than 600,000 people worldwide have had Lap-Band surgeries since 1993 — a number that could rise dramatically if Allergan gets FDA approval to expand its use.
Loosening the rules would allow millions who are now ineligible for the surgery to lose weight and reduce their risk for life-threatening conditions such as high blood pressure, heart disease and diabetes, Allergan Chief Executive David E.I. Pyott said. The company estimates that lowering the weight requirement would expand its Lap-Band customer base to 42 million people, up from 15 million now.
“In the U.S., we have an obesity epidemic.… One-third of people are obese, even severely obese,” Pyott said.
Critics, including the top public health official in Los Angeles County, say Lap-Band surgery is an extreme, risky measure that should be considered only after diet, exercise and other less-invasive strategies have failed. Dr. Jonathan Fielding, director of the L.A. County Department of Public Health, said the proposed new rules would make 2 million additional people eligible for the Lap-Band in the county.
Many Lap-Band patients in Europe had severe complications over time, including band erosion, slippage or leakage, according to a study published in the medical journal Obesity Surgery. The procedure has been performed overseas for 17 years for medical purposes. It received FDA approval in 2001.
“With a nearly 40% five-year failure rate … [banding] should no longer be considered as the procedure of choice for obesity,” said the report.
Allergan, a 60-year-old company founded by a Los Angeles drugstore owner, has grown from a firm that produced allergy medicine — hence the name — to one of the largest pharmaceutical companies in the world. It moved from allergy medication to developing drugs to treat eye diseases, such as glaucoma, an area that generates the majority of its revenue.
Still, much of its recent growth can be attributed to Botox, a toxin that temporarily paralyzes facial muscles. Marketed for years as a way to fix crossed eyes and twitching eyelids, the product was launched as a cosmetic treatment in 2002 to ease the appearance of wrinkles. Sales exploded. Allergan forecast that 2010 Botox cosmetic sales will come in at a record $1.4 billion.
While Botox sales grew even during the recent recession and unemployment epidemic, Lap-Band revenue has been sluggish. Sales of Allergan’s obesity intervention products — mostly Lap-Band — fell more than 4% for the first nine months of last year to $182.4 million. That’s just a fraction of Allergan’s projected 2010 revenue of about $4.8 billion.
Allergan blamed the recent downturn in Lap-Band sales on the economy in its most recent earnings report, noting that “substantial patient co-pays associated with these products and government spending restrictions” had scared away potential customers. The surgeries typically cost about $20,000, depending on the surgeons and hospitals involved, according to several websites promoting the procedures. Most insurance companies cover a portion of the cost.
The Lap-Band is a silicone band that is surgically implanted around the upper portion of the stomach, creating a small pouch that holds a limited amount of food so that patients feel full despite eating less. It is allowed only for people who are severely obese and meet strict body-weight requirements. It is not intended for cosmetic purposes.
Allergan received some encouraging news in December when an FDA advisory panel voted 8 to 2 to recommend that the weight requirement be lowered. Under the current guidelines, a person who is 5 feet 10 inches without a serious health issue would need to weigh 278 pounds or more to qualify. That requirement would drop to 243 pounds under the relaxed rules that Allergan is seeking. For people with conditions including diabetes and high blood pressure, the new threshold would be 209 pounds, down from 243 pounds.
Although the recommendation is not binding, the FDA typically follows the advice of its advisory panels.
The FDA panel’s recommendation came despite the objections of Stephanie Quatinetz, a New York attorney whose 27-year-old daughter, Rebecca, died in 2009 after Lap-Band surgery at New York University’s Langone Medical Center. Quatinetz told the panel to consider studies that have found that stomach-banding surgeries can have significant side effects, including infection, dehydration, vomiting or pain. These symptoms sometimes don’t surface until years later.
“Let’s talk about the risks. Do the benefits outweigh the risks? I would say no,” said Quatinetz, who has filed a wrongful-death lawsuit against Allergan and the doctors who installed her daughter’s weight-loss device.
Los Angeles County’s top public health official also voiced concern about the Lap-Band. Fielding wrote to the FDA in December to complain about promotional billboards that claim: “Diets fail! The Lap-Band works!”
“Misleading advertisements erode the ability of the majority of the public, who are currently either overweight or obese, to fairly consider alternative weight-management options,” he said in the letter.
In February, 33-year-old Norwalk resident Ana Renteria died just days after Lap-Band surgery. The Los Angeles County coroner’s office attributed her death to complications from the surgery and referred the matter to the Medical Board of California for review. Renteria is the second person to die after Lap-Band surgery in Los Angeles County, coroner’s records show.
Allergan’s Pyott said the Lap-Band procedure had helped thousands of people lose weight and lead healthier lives.
“Over long periods of time, the number of people who die from a Lap-Band procedure is about 1 in 2,000,” a lower death rate than gastric bypass surgeries, he said. “I can never make the statement, ‘It’s totally safe,’ because things happen.”
Efforts to grow the potential customer pool for the Lap-Band follows one of Allergan’s most tumultuous years.
In September, the corporation pleaded guilty to a misdemeanor criminal charge in federal court in Atlanta and agreed to pay a $600-million fine to the federal government for promoting Botox as an off-label treatment for migraine headaches before the FDA had approved it for such use. That fine and other one-time expenses caused the company to post a loss of $670 million for its third quarter, which ended Sept. 30.
One month later, after paying the fine, Allergan received the long-awaited approval for Botox to be used as a treatment for migraines.
Regardless, Allergan’s consistent growth has made it a favorite on Wall Street, said Louise Chen, a Collins Stewart analyst.
The company’s success has fueled repeated rumors that it was an acquisition target, including reports in 2009 that GlaxoSmithKline was an interested buyer. But Allergan, which employs more than 8,000 people around the world, remains on its own.
“We produce a lot of growth and a lot of results. That’s why they like us,” Pyott said.
