Buy Allergan Puts as Botox Meets Competition
Buy to open the November 16, 2018 put on Allergan (NYSE: AGN) with a strike price of $185 at $6.50 or lower. Symbol (AGN181116P185)
Allergan hit a home run with its 2010 approval for Botox in migraine treatments.
Botox accounts for 21% of sales and is Allergan’s fastest growing drug franchise. Botox is used for both cosmetic use and therapeutic use for migraine prevention.
Therapeutic Botox (for the migraine indication) now makes up ¾ of Botox sales and is growing several hundred basis points faster than cosmetic (grew 16% vs. 11% for cosmetic Botox). To date, Botox has had little competition in the therapeutic market.
That is changing rapidly. I expect Allergan to report a slowdown in Botox sales when it reports earnings in late October.
A recent approval and launch of a more convenient migraine drug by Amgen (NSDQ: AMGN) should put a dent in Allergan’s Botox sales.
In addition, Teva (NSDQ: TEVA) just announced this morning the FDA’s approval of its AJOVY injection for the preventive treatment of migraines in adults.
Allergan hosted an investor event on Friday to discuss its portfolio of cosmetic drugs, which failed to impress investors. I was unsure how this meeting would be received so waited until today to post the trade. This means the stock is down but does remove one element of upside risk in the stock.