Final OK on Allergan Drug Boosts Shares

Allergan Inc., the pharmaceutical company best known for selling the wrinkle-banishing agent Botox, said Tuesday that it received long-awaited regulatory approval to market the first prescription treatment for dry-eye disease, a condition that affects an estimated 1 million Americans.

Shares of Allergan, which have been depressed for two years, jumped more than 10% on Tuesday, up $5.43, to close at $58.17 on the New York Stock Exchange.

Although not viewed as a blockbuster drug, Allergan’s new eyedrops, called Restasis, eventually could generate as much as $500 million in sales annually, the company said. Analysts said the medication would help the Irvine-based firm solidify its position as an industry leader in eye-care pharmaceuticals. Among its other top medications is Alphagan, which is used to treat glaucoma.

Allergan has stated that Restasis, which helps battle dry-eye disease by stimulating tear production, is more effective than currently available eyedrops and ointments sold over the counter. The company said it would begin selling the drops during the second quarter.

“It is a big a deal for them,” said Donald B. Ellis, an analyst who follows the specialty drug industry for Thomas Weisel Partners, a San Francisco-based merchant bank. Allergan is not expected to reap immediate benefits from the drug because of large marketing and other expenses to introduce the eyedrops, Ellis said, but the profit should start flowing in 2004.

Allergan will share some of the royalties generated by Restasis with Durham, N.C.-based Inspire Pharmaceuticals Inc. as part of a development and marketing agreement.

In the first nine months of this year, Allergan’s earnings before one-time charges were up 24% on a 19% rise in sales. Last year, Allergan reported sales of $1.7 billion, with eye-care pharmaceuticals accounting for about 43%. Its Botox sales in 2001 were $309.5 million.

Allergan has been waiting for the final regulatory go-ahead on Restasis since 1999, when the Food and Drug Administration gave it conditional approval. The agency overruled an advisory panel that rejected the drug as not being much more effective than over-the-counter medications. Monday’s final approval came after the FDA reviewed additional tests, the company said.

Lester J. Kaplan, the company’s president of research and development, said the approval of Restasis is the culmination of pioneering work in the field.

Dry-eye disease is characterized by chronic irritation and inflammation, caused by a decrease in natural tear production. Incidence of the disease, which in extreme cases can result in serious damage to the surface of the eye, increases markedly with age and after menopause in women.

The company has said Restasis is stronger and provides longer-lasting relief than over-the-counter drugs and also helps decrease inflammation associated with dry-eye disease.

Restasis includes the drug cyclosporine, which has until now been used mostly to help treat some cases of rheumatoid arthritis and to minimize the rejection of organs in transplant patients.

Clinical tests have shown that the most common adverse side effect of the drug is a burning sensation in the eyes.

Despite Tuesday’s run-up in Allergan’s share price, its stock still is down 20% for the year.