Allergan in Another Development Deal
Allergan Inc., continuing its strategy of hooking up with companies to develop eye and skin therapies, said Tuesday that it plans to invest $9 million with a tiny California company to pursue treatments to prevent blindness.
The Irvine drug and medical devices company’s partnership with Sugen Inc. of Redwood City is the third such deal Allergan has lined up in the last four years with biotech firms in a bid to fuel sales growth amid intense competition from its giant drug industry rivals.
Analysts say the strategy of investing in technologies developed elsewhere suits a company whose research and development budget is dwarfed by those of its major competitors. In addition, Allergan’s own efforts to develop new drugs have had mixed results.
Allergan earned $72.5 million last year as sales topped $1 billion for the first time, but the company is so overshadowed by many of its competitors that it faces a long-running struggle to keep up, analysts said. That’s one reason the company explored a possible merger earlier this year with the London-based giant Pharmacia & Upjohn, they say.
Allergan called off the merger in May, saying the two couldn’t agree on terms. Rumors that the deal might be revived have recently subsided, analysts say. In 1992, Allergan launched a joint venture with La Jolla biotech company Ligand Pharmaceuticals Inc. to develop a treatment for Kaposi’s sarcoma, a complication of AIDS. Last year, Allergan also invested $2 million in an Australian company that has developed a possible treatment for psoriasis.
In its new partnership with Sugen, Allergan is investing in technology that may be used to inhibit growth of excess blood vessels in the retina, a condition that can cause loss of vision in diabetics and certain other adults.
Under the deal, Allergan is purchasing $4 million of Sugen’s common stock at $20.88 a share. The Irvine company promises to buy stock worth $3 million in its partner’s next stock offering. In exchange, Allergan gets exclusive rights to develop Sugen technology for treatment of eye ailments.
For Sugen, the deal provides more needed cash to fuel its research effort. Sugen tried to raise $60 million in a public offering last spring but canceled the deal when its stock dropped to about $12 a share from $14 in Nasdaq trading. Allergan stock closed Tuesday at $37.125 a share, down 50 cents, on the New York Stock Exchange.
