December 2, 2012 7:11 pm

Allergan obesity business attracts buyers

By Alan Rappeport in Washington

Allergan’s obesity business has received dozens of inquiries from potential buyers in recent weeks, according to the company’s chief executive, who is looking to sell the struggling unit.

Best known as the maker of Botox, the injectable drug used to ease wrinkles, Allergan also produces Lap Band gastric devices, which constrict the stomach to reduce appetite and help obese people lose weight.

Although obesity is a building health worry in the US, the high cost of the procedure has made it difficult for obese people, who tend to be low-income, to afford Lap Bands. However, cosmetic Botox sales to wealthier consumers continue to thrive.

“Clearly obesity is getting worse and worse, but it comes down to reimbursement and given the way the demographic skews, in this economy a co-pay of $2,500 to $4,000 is a big investment,” David Pyott, Allergan’s chief executive, told the Financial Times, referring to the out-of-pocket expense that consumers face.

Mr Pyott said in a recent earnings call that the company was considering moving on from the obesity business. Sales have fallen off dramatically in recent years to about $160m this year.

“Assuming we get a reasonable price, it’s better to pull up anchor and move on,” Mr Pyott said.

The obesity business could be a fit for a surgical device company seeking a bolt-on acquisition or a private equity fund looking for a turnround target that generates cash. Analysts say the business could fetch between $500m and $800m, but that US device companies could be wary of facing the same problems Allergan has faced.

“They’ll have the same problem with potential legal issues, a slow market, and the necessity of having a pretty substantial marketing and sales force budget,” said Les Funtleyder, analyst and fund manager at Poliwogg. “But it would appear that the demographics for obesity are growing, so you would have a larger market over time.”

Last month, Allergan backed away from plans to market Lap Bands to teenagers after health advocacy groups voiced safety concerns.

Many patients have had infections or other complications from Lap Bands and the devices often have to be replaced or tightened over time. A 2011 study in the Archives of Surgery journal found that half of Lap Band patients have had to have the device removed.

Mr Pyott said that even if Allergan was able to stabilise sales of Lap Bands, they would still be a drag on the company, which historically generates 10 per cent annual sales growth. During its latest quarter, sales of Lap Bands fell nearly 25 per cent year-on-year.

Meanwhile, sales of cosmetic Botox have remained strong, even in austerity-stricken parts of Europe.

“People don’t actually want to be old and wrinkly, so they will avoid a lot of other purchases like clothes and vacations so there’s something left in the piggy bank for the next Botox treatment,” Mr Pyott said.

This article is subject to a correction and has been amended.

AdvId: 16244929 AdId: 12517489 CrId: 13408843489

Long term outlook results:

Conclusion Based on a follow-up of 54.3% of patients, LAGB appears to result in a mean excess weight loss of 42.8% after 12 years or longer. Of 78 patients, 47 (60.3%) were satisfied, and the quality-of-life index was neutral. However, because nearly 1 out of 3 patients experienced band erosion, and nearly 50% of the patients required removal of their bands (contributing to a reoperation rate of 60%), LAGB appears to result in relatively poor long-term outcomes.

Conclusion was taken from Long Term outlook from original article. Archives of Surgical Journal.

As more surgeons refuse to do gastric banding due to the incredible damage it causes and the alarming failure rate, the "business of banding"  is going to take an extreme nosedive. I would think Allergan would be smart enough to unload while they could. I'm just surprised any other business entity would think it's a sound financial decision. I suppose if the price is low enough, they're thinking they can turn it around through advertising. And, ya know what? It's worked so far... they have a damaging, subpar product and people are still believing the advertising, in spite of SO many of us giving warnings to the contrary.

Nicci, I had a ****ty day yesterday, and thought I would share it here in public with you, because I know you understand where I am coming from. I don't care that it has nothing to do with this particular subject, I just hope that it will help ONE person.

My band was removed over 19 months ago. My life is getting better, and my " Pain Days " are fewer, but the permanent damage the Lap Band has done to me, is well...permanenet. Yesterday was one of those horrific pain days where I said ( to myself ) that there was no way in hell I was going to live the rest of my life in that kind of pain.

Let me be very clear here, I am not suicidal, nor was I contemplating suicide, but I did not want to live in that kind of pain forever. I cried, and cried, and cried, until I became angry regarding a completely ( sort of ) unrelated incident, and I kicked a bedroom door in. Believe it or not, I'm proud of kicking that door in. I didn't know I could kick a door in,and on top of that I accomplished two things. I made a statement by kicking that door in, and I was distracted from the horrific pain by kicking that door in.

I do not recommend kicking doors in, as that could become costly to repair, I do however recommend documenting your pain and medication history as it pertains to the band, so that at times of horrific pain and confusion. You'll have a record that will speak for you, when you can't. It's aggravating, humiliating, and completely unnecessary to be treated as a drug seeker, when you're at the mercy of an E.R. doctor.

So true!  I was always taught when someone tells you who they are believe them. When Allergan tells you their success rate believe it.

Not to mention the government is investigating them for the high failure rate of the band. I'd be dumping it asap too. Not that they can weasel out of any damages that may be assessed in the future. It's not a money maker anymore and like you said I'd be surprised if anyone wants to buy it unless they are looking for a write off. Me thinks the Titanic is springing a leak, head for the life boats kids!!!!

I've been predicting for a couple of years now that the lap band will become obsolete in the US soon, and I think this supports my theory. Not great news for those of us in the lap band boat, but if Allergan ever admits to any knowledge of the poor success rates maybe there will be compensation for revisions if needed.

In the meantime, we all keep doing the best we can with the tool we have.

Been looking to find which band I got....not having luck. :(

Your Doc should have given you a card.  It tells what kind and size of band you have.  If you don't have one call and ask for one.  They can come in handy.