Allergan Waits to Exhale

Allergan (NYSE: AGN  ) announced today that the Food and Drug Administration issued a complete response letter for Levadex, an inhalable drug that treats migraines. The company had warning of the FDA's concerns -- which focused not on safety issues but on the drug's manufacturing process -- and has worked to address these problems.

What does this new CRL mean for Levadex's future?

Solving through acquisition
An inspection had turned up a quality issue at the Exemplar Pharma-owned facility that filled the Levadex canisters. So Allergan purchased Exemplar for approximately $20 million and installed its own people for better oversight. The CRL expressed problems with the manufacturing of the completed canisters, but Allergan says the company has already responded and awaits the FDA's review.

It wasn't the first manufacturing CRL that Allergan has received -- or the first acquisition in the name of pushing Levadex toward market. In January, Allergan inhaled its Levadex partner MAP Pharmaceuticals for about $958 million.

Now what?
The FDA will likely perform another inspection on Exemplar, but Allergan's still anticipating a decision in the fourth quarter of this year. Levadex won't suffer a large delay if that timeline holds true, and the setback shouldn't affect Allergen's 2013 revenues.

Levadex could still make it to market next year, joining Allergan's own Botox injection, which has approvals around the world for treating chronic migraines. Levadex won't become the first inhalable migraine drug to market -- Valeant's Migranal nasal spray has been out for years. But Allergan's drug has shown better efficacy.

Allergan can bide its time to approval with its successful approved products. These include the aforementioned Botox, with a predicted $2 billion in revenues this year, and the $870 billion prescription eye drops Restasis.

Foolish final thoughts
It seems that the FDA wants Allergan to iron out these last manufacturing problems before Levadex receives approval. Fortunately for investors, Allergan has other blockbuster products to rely on while this process finishes. And Levadex could end up finding a decent market of migraine sufferers looking for a convenient and effective treatment if it eventually wins approval.

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