FTC Eye on Allergan Expansion : SmithKline Beckman Purchase Barred
For the second time in less than a year, SmithKline Beckman Corp.’s plan to expand and diversify its Irvine-based eye and skin care division has failed.
The Philadelphia drug giant said Tuesday that the Federal Trade Commission has blocked its proposed purchase of the contact lens division of American Optical Corp.--an acquisition that would have given SmithKline’s Irvine subsidiary, Allergan Pharmaceuticals Inc., an estimated $25-million share of the soft contact lens solution market.
Last fall the company tried to enter the market by purchasing International Hydron Corp. of New York. But that $160-million deal fell through within a month when the two companies could not agree on final sale terms.
David MacCallum, a senior technology analyst at Hambrecht and Quist, said Tuesday, “Allergan has marched to the altar twice and has been unsuccessful both times. This will make it somewhat more difficult for Allergan to extend its position into the soft lens solution market as aggressively as it could have.”
MacCallum said that soft lens solutions make up the fastest-growing part of the contact lens solution business, with about $240 million in revenues in 1984.
“Allergan was about to acquire a $25-million piece of that market,” he said. MacCallum said 13 million Americans wear soft contact lenses, and another 5.6 million wear other types of contact lenses. Allergan officials have said the biggest challenge to the company’s 35-year history of growth comes from the extended-wear contact lens market. They said extended-wear lenses have begun to cut into Allergan’s sales because customers clean the lenses less often and therefore buy less solution.
Looking for Growth Avenue
Reacting to the FTC’s decision to reject the American Optical acquisition, Norris Battin, Allergan’s vice president for business development, said, “We’ll continue to look for opportunities to grow . . . . We will continue to specialize in businesses that relate to the health of the eye.”
Battin would not say what other companies Allergan and its parent company, SmithKline Beckman, are considering. He said he assumed the FTC--which routinely performs federal antitrust reviews of all such sales--disapproved the Allergan deal with American Optical because Allergan already has a presence in the business.
“Maybe we would have had more than we should have had, in the FTC’s eyes, in terms of the lens-care product market share,” Battin said.
FTC officials were unavailable for comment Tuesday.
