Allergan Inc. is considering selling its Lap-Band weight-loss
unit amid rapidly declining sales and a swarm of negative publicity
about patient deaths and a criminal investigation of one of its former
Word of the potential sale came the same day Allergan
disclosed that Lap-Band revenue fell for the fifth consecutive quarter.
Sales from weight-loss products fell to $37.4 million during the third
quarter, down 25% from last year and 53% from its peak four years ago.
It marks a major turnaround for a product that delivered annual sales of $296 million in 2008 for the Irvine company.
exploring strategic options for the obesity intervention business, as
the sales dynamics do not fit the profile of a high-growth company like
Allergan," David E.I. Pyott, the company's chairman and chief executive,
said Tuesday during a conference call with analysts. "Vigorous
management of our portfolio businesses has always been integral to our
The Lap-Band is a silicone ring that is surgically
implanted around the stomach to discourage patients from overeating and
help them lose weight. Allergan, which also sells wrinkle-reducing
Botox, eyelash lengthener Latisse and a host of ophthalmological
pharmaceuticals, acquired the Lap-Band when it bought Santa
Barbara-based Inamed in 2006.
The company said this year that it
would no longer sell the device to a key customer, the surgery centers
affiliated with the 1-800-GET-THIN ads that used to blanket Southern
California freeway billboards, radio, television and the Internet.
move came after the deaths of five patients after surgeries at the
clinics and amid investigations by the Los Angeles Police Department and
California's Department of Insurance. It also followed a warning by the
Food and Drug Administration that the 1-800-GET-THIN ads were
misleading because they failed to adequately disclose risks of the
The Times reported this month that the FBI and FDA were
conducting a criminal investigation of the businesses affiliated with
1-800-GET-THIN and the brothers who lawsuits say own the company,
Michael and Julian Omidi. An attorney for the Omidis said he did not
expect the investigation would lead to criminal charges.
plunge in Lap-Band sales is among the reasons behind Allergan's decision
to sell the unit, said Tim Lugo, an analyst who covers Allergan for
William Blair & Co.
"I guess maybe we shouldn't be surprised,
given the issues they've had," Lugo said. "It's a drag on growth. Any
time you can sell off a unit that's a drag on growth, I think that would
be a great idea."
Lap-Band sales have declined for several
reasons, among them competing weight-loss surgical procedures. One
surgery called sleeve gastrectomy has been growing in popularity, even
though it is more invasive than the Lap-Band, requiring the stomach to
be cut open and stapled so it holds less food. The procedure cannot be
reversed, as the Lap-Band can.
Allergan said this month that it had withdrawn its application for approval to market the Lap-Band for overweight teens.
company had sought permission from the FDA to promote Lap-Band
surgeries for adolescents as young as 14, and it has been conducting
clinical trials on teenage patients. A spokesman for Allergan said it
pulled that government application this year as part of a routine
evaluation of its business priorities.
Allergan released a
statement Tuesday that said it was confident about the long-term
prospects of its weight-loss business but believed "the best potential
for future development and clinical advancement may exist outside the
In addition to Lap-Band, the company markets Orbera, a
balloon that is inserted into the stomach and inflated to make patients
feel full sooner and eat less.
Difficulties with the Lap-Band
business come amid otherwise promising results for Allergan. The company
said Tuesday that its total third-quarter revenue increased 6% to $1.4
billion. Botox sales were up 9% year over year to $432 million.
remain upbeat about Allergan, noting that the Lap-Band amounts to a
fraction of the company's total sales. Botox sales continue to grow as
the drug has proved to be an effective treatment for migraine headaches
as well as wrinkles.
"I would definitely say it's one of the
highest quality companies," Lugo said. "They have very good management.
They're also not facing a lot of generic risk, which a lot of other
companies are. Allergan, with Botox being their main driver of growth,
is relatively immune to that right now."
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