Scottsdale pharmaceutical company’s shares may take off
New Botox·like drug, pipeline products should boost Medicis
by Barry Cohen

Sometimes the best investment opportunities are right under our nose. Or in this case, in our surrounding communities. Therefore, from time to time The Desert Advocate will be profiling one of the many publicly traded companies whose headquarters are in the Valley.     

SCOTTSDALE – Although the share price of Scottsdale‑based Medicis (NYSE: MRX) has bounced around for the past five years, today it’s pretty much where it was in April 2001. But the company could be poised to soar, thanks to the strength of several marketed and pipeline products, including the Botox‑like drug Reloxin which was recently licensed from the French drug firm Ipsen.

“The Reloxin agreement with Ipsen gives us the continued confidence that Medicis will deliver growth from its pipeline,” said RBC Capital Markets Analyst Ken Trbovich, in a March 16 article in Forbes.com. “From a strategic perspective, details

regarding the acquisition of marketing rights for Reloxin should go a long way toward securing the long‑term growth prospects for the company.”

While Medicis has traded as high as $45 during the past five years, its recent share price was just over $32, up just $3 from April 2001. Even that slight gain topped the growth rate of the drug industry index. With generic competitors eating away at sales of many big‑name drugs of the large pharmaceutical companies, the drug index gained just less than five percent during the same period.

Reloxin promises to help boost Medicis back to highflier status. The company expects to submit the drug for Food and Drug Administration approval sometime this year, but Medicis CFO Mark A. Prygocki Sr., a 15‑year veteran of the company, refused to speculate when FDA approval would be received. When it is OK’d, Medicis will have a formidable challenger to Allergan, Inc.’s billion dollar drug Botox, the only botulinum toxin now licensed in the United States.

Reloxin and the Medicis drug Restalyne promise to form a powerful one‑two punch in the cosmetic pharmaceutical market. Restalyne, already on the market, is what’s known as a dermal filler, a gel of hyaluronic acid that is injected into the skin to lift up wrinkles or add volume to lips.

Reloxin, meanwhile, works by blocking the signals that would normally tell muscles to contract.  Without the signal, muscles relax. Thus, if an area of the body can’t move, it can’t wrinkle. “Kind of like pulling the plug on a toaster,” said Richard Anderson, M.D., head of the Anderson Plastic Surgery Center in Scottsdale.

According to Gary Monheit, an associate clinical professor of dermatology at the University of Alabama Medical Center, Reloxin may have a slight advantage over Botox. “The onset of action of Reloxin may occur earlier than Botox. I think Reloxin will become a strong competitor,” he added, noting that there is already growing acceptance in Europe.

Dr. Anderson said he doesn’t believe faster onset of action will be a major advantage for Reloxin. “With Botox, the major concerns of patients have been how fast it works, how long it lasts, cost and safety,” he explained. “For baby boomers it’s been a dream drug because it works, is safe and proven, and the complications are none.”

Dr. Anderson is looking forward to Reloxin’s approval, if only to provide competition for Botox. “Allergan is a company that doesn’t treat its customers well; its people can be quite arrogant,” he explained. “Medicis has quality representatives and nice people who are easy to work with and flexible. Reloxin will give plastic surgeons an alternative, and if it’s comparably priced or less expensive, a lot of us will give it a try.”

Even when Reloxin receives FDA approval, Allergan is confident of Botox’s ability to compete with the new drug. “We have had a long history of competition with Dyasport (Reloxin) in Europe and understand well how it compares to Botox,” said Caroline VanHove, a spokesperson for the Calif.‑based company. “Regardless of the company or drug, no other product will be able to match the safety, efficacy history and track record of Botox.”

While Reloxin and Restalyne have been gathering the headlines lately, they’re just part of the Medicis armamentarium. The company has a strong and well‑balanced line of dermatological, podiatric and aesthetics products that position Medicis to capitalize on the growing desire of both men and women worldwide to improve or enhance their appearance. Combating the signs of aging through therapeutic and cosmetic means has become a multi‑billion dollar business in the U.S. alone.

Valley residents, particularly in the more monied communities, are regularly bombarded with messages from plastic surgeons and dermatologists. Advertisements tout the advantages of looking younger and better, offering tummy tucks, Botox treatments, liposuction, chemical peels, breast enhancements, dermal abrasion and other procedures. Although the percentage of men seeking to have “work done” is growing, the primary audience remains women.

According to the American Society of Plastic Surgeons, in 2005 alone nearly 4 million Botox procedures were performed, more than nine of every 10 on women. Among age groups, “boomers” account for the largest percentage of cosmetic patients. However, even 19‑ to 34‑year‑ olds are getting the itch to improve their looks, as evidenced by the substantial growth of procedures among that group.

Vanity is an excellent business, acknowledges Prygocki, noting that Medicis is among the most profitable companies in the pharmaceutical industry. He emphasized the company strives to achieve an after‑tax return percentage in the high 20s every year. Absent special charges, he added, Medicis has hit this target in all but one of the past 10 years. In 2005, the company’s sales were nearly $328 million.

Society’s growing emphasis on appearance is profitable for health‑care providers, too. For instance, physicians can purchase a vial of Botox for about $500. One vial, in turn, can be used to treat a number of patients, who pay anywhere from $300 to $500 per treatment. As reported in MedPage Today, a medical news service for physicians, in 2005 surgeons billed $1.4 billion for Botox treatments. Not only is the treatment highly profitable, but physicians don’t have to negotiate with insurance companies because, like most elective procedures, Botox injections are paid directly by the patient.

The anticipated approval of Reloxin and other new products is forcing Medicis to vacate its leased headquarters at the northeast corner of Hayden Road and Via de Ventura for bigger space. When Medicis relocated to Arizona from New York City some 10 years ago, it had a 12‑person office. It has grown to 200 strong and is “busting at the seams,” according to Prygocki. With additional staff being added, Medicis is evaluating facilities in the Valley that can offer 150,000 square feet of space with an option to double that amount, if needed.

Reach the reporter at barry@thedesertadvocate.com