A New Wrinkle for an Old Drug

Apparently, sometimes you can teach an old drug new tricks. On Thursday, Allergan (NYSE: AGN  ) announced that its drug Botox succeeded in two pivotal studies testing its ability to prevent migraine headaches. The stock ended the day up more than 10%.

Even drugs used for cosmetic reasons have to be approved by the Food and Drug Administration, and Botox is no exception. The FDA approved Botox as treatment for frown lines between the brows in 2002, after it had been used for many years as a therapy for eye and neck muscle disorders.

The top-line results Allergan released from two phase 3 studies showed that Botox reduced the number of days that chronic migraine sufferers experienced headaches. Putting a little damper on these results, in one study, Botox failed to reduce the absolute number of headaches that migraine sufferers experienced. Allergan said that the FDA is more concerned about whether a drug helps with migraine days more than just with the absolute number of migraines suffered. In the other study, both the number of days and the number of headaches were reduced.

Many patients use compounds like GlaxoSmithKline's (NYSE: GSK  ) Imitrex or Merck's (NYSE: MRK  ) Maxalt to treat their acute migraine headaches. Other compounds, like Forest Labs' (NYSE: FRX  ) Namenda, used for Alzheimer's disease, are also sometimes used off-label to treat migraines.

Even with other migraine treatments on the market and generic competition taking a chunk out of some of these branded drugs' sales, compounds like Imitrex and Maxalt raked in $1.37 billion and $470 million, respectively, in 2007. More importantly for Botox's migraine potential, neither of these other compounds is approved to help with chronic migraines, which is the indication that Allergan is going after with Botox.

Allergan's 2007 revenue from Botox grew 23% to $1.2 billion. The additional approval would only boost Botox's sales. Allergan still has to file a marketing application with the FDA, which it plans to do by mid-2009. Approval could be as soon as late 2009.

Because Allergan's shares have fallen for most of this year, approval would give some relief to long-term investors.

GlaxoSmithKline is an active Income Investor pick. Try any of our Foolish newsletters today, free for 30 days

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has an A+ disclosure policy.


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