Executives
Jim Hindman - Senior Vice President, Treasury, Risk and Investor Relations
David Pyott - Chairman of the Board and Chief Executive Officer
Jeffrey Edwards - Executive Vice President, Finance and Business Development, Chief Financial Officer
Dr. Scott Whitcup - Executive Vice President, Research and Development
James Barlow - Senior Vice President and Corporate Controller
Joanne Bradley
Analysts
Frank Pinkerton - Banc of America Securities
David Buck – Buckingham Research Group
Peter Bye – Jefferies & Company
Gregg Gilbert – Merrill Lynch
Ronny Gal – Bernstein Research
Gary Nachman - Leerink Swann
Larry Biegelson - Wachovia Capital Markets
James Kelly - Goldman Sachs
Allergan, Inc. (AGN) Q1 2008 Earnings Call May 7, 2008 9:00 AM ET
Operator
Hello and welcome to the Allergan first quarter 2008 earnings call. Following today's presentation, there will be a formal question and answer session. Today's conference call is scheduled to conclude at 9:00 a.m. Pacific time.
To ensure that we are able to accommodate questions from as many participants as possible, we ask that each of you limit to a maximum two questions. (Operator instructions) At the request of the company, today's conference is being recorded. If anyone has any objections, you may disconnect at this time,
I would like to introduce today's conference host, Mr. Jim Hindman, Senior Vice President, Treasury Risk and Investor Relations. Sir, you may begin.
Presentation
Jim Hindman
Thank you Tonya. Good morning. With me for today's conference call is David Pyott, Chairman of the Board and Chief Executive Officer, Jeff Edwards, Executive Vice President, Finance and Business Development, Chief Financial Officer, Dr. Scott Whitcup, Executive Vice President Research and Development and Jim Barlow Senior Vice President and Corporate Controller.
Before we move ahead I would like to remind you that certain statements that we will make in this presentation are forward-looking statements. These forward-looking statements reflect Allergan's judgment and analysis only as of today and actual results may differ materially from current expectations based on a number of factors affecting Allergan's businesses.
Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made in this conference call webcast we refer you to the disclaimer regarding forward-looking statements that is included in our first quarter 2008 earnings released which was furnished to the SEC today on Form 8K as well as our filings with the SEC referenced in that disclaimer.
We will follow up with question and answer session of this call with a short listen only segment where we will provide additional miscellaneous information that relates to our business. Under regulation FD in order to be able to discuss this information freely during the quarter we must be sure that it is in the public domain.
This conference call and accompanying webcast are being simultaneously broadcast over the internet with replays available for one week. You can access this information from our website at www.allergan.com At this point I would like to turn the call over to David Pyott.
David Pyott
Thanks Jim. Good morning ladies and gentleman. This was the quarter where we really demonstrated the strategic value of product diversity and global presence with very strong pharmaceutical sales growth and international growth offsetting some domestic softness in the elective cash pay product lines.
As a corporation, Allergan posted a robust sales increase of 23% in dollars and 18.5% at constant currency with both the pharmaceutical and medical device businesses growing at exactly the same rate of 23%.
Sales outside the United States expanded at a superb rate of 31% in dollars with the device businesses growing even faster than the pharmaceutical portfolio. Building on the synergies of a full facial aesthetic product line and a greater number of approved therapeutic indications internationally, BOTOX sales in the first quarter grew at double the rate at constant currency internationally than in the US
Internationally, BOTOX has maintained its market share. This points to the marginal impact of weak US consumer spending on our US growth rate. Regarding earnings, adjusted diluted earnings per share were $0.53 marking an increase of 15% over the first quarter of 2007.
These results were generated as we continued to invest vigorously into the long-term performance of the company with a massive increase of 32% in R&D spent to $183 million and also a 27% hike in SG&A expenditure.
These latter numbers are on an adjusted basis with the reconciliation's to GAAP numbers being laid out in our press release. To demonstrate the value of our R&D, we look forward to unveiling new programs and progress at our R&D day on Wednesday June 4.
Regarding the BOTOX headache program we can report that the randomized double mask portion of both Phase III studies has been completed. The last patient visits for the open label portion of the studies will complete mid-summer and we expect to release the data from the entire headache program by the end of the summer.
SG&A expenditure climbed versus Q1 2007 as we have the first time costs of our new urologics franchise with SANCTURA and SANCTURA XR have further expanded our facial aesthetic sales force in the US and in Asia and created a dedicated US sales force for physician dispensed skin care, focused currently on Vivite and also in preparation for our launch of a Clinique line later in this year.
In terms of sales force builds that occurred during the course of last year and which now lead to a large year-over-year increase, we need to reference the dramatically expanded sales team for LAP-BAND and also an addition of a second glaucoma sales team in Europe in 2007.
Furthermore, we increased our overall expenditures on direct to consumer advertising and ran campaigns for our key brands, RESTASIS, BOTOX, JUVEDERM, NATRELLE and LAP-BAND.
In the case of NATRELLE and JUVEDERM, spending in the first quarter of 2007 as a base was negligible. In Q4 of last year we estimate that our global markets continued their rapid growth of the following rates, bariatric obesity and intervention products at 51%., dermal fillers at 42%. , neuromodulators at 17%, breast aesthetics at 26%, ophthalmic pharmaceutical products at 10%.
Several of these markets, in terms of their growth, actually accelerated versus the year-over-year rates in Q3. Nevertheless, given our sales results and those of some of our competitors who have already reported, it would seem that the elective cash pay markets have in the US over the course of the first quarter decelerated given economic conditions.
Now commenting the performance of the individual businesses. We are particularly pleased with the very high growth being produced in our largest business, ophthalmic pharmaceuticals, which accounts for almost half of the company sales. In the quarter sales increased 22.1% and still a strong 17.4% at constant currency with growth being driven by a broad range of products, RESTASIS, the ALPHAGAN family including COMBIGAN, LUMIGAN, GANFORT, OPTIVE, the REFRESH range of artificial tears and the ACULAR franchise.
RESTASIS continued its continued spectacular growth trajectory with an increase of 28% in dollars and at constant currency over the first quarter of the prior year and is in fact now the second largest ophthalmic drug of value in the United States.
Furthermore, our overall glaucoma franchise grew a tremendous 24% year-over-year driven by the successful launch of COMBIGAN in the US and the roll-out of COMBIGAN and GANFORT around the world.
In the US we are securing important managed care formulary listings for COMBIGAN, both in commercial and Part D plans. It is encouraging that COMBIGAN has provided incremental growth to the base ALPHAGAN business, which continues to grow double digits in the US and Asia Pacific.
Uptick of GANFORT, particularly in Europe, is strong with GANFORT's market share now surpassing that of COMBIGAN. And GANFORT has also caught up with DuoTrav in the top five European Union markets despite being launched some time later.
In Thailand, LUMIGAN was selected as the only prostaglandin analog in the national list of essential drugs and this list also includes ALPHAGAN. COMBIGAN was also launched in the quarter in Thailand.
In April, GANFORT was launched in Brazil. Another key driver of growth has been our artificial tears franchise led by the successful introduction of OPTIVE in many key markets in all regions of the world.
OPTIVE and the REFRESH family of products grew 25% versus Q1 of 2007. OPTIVE was just launched in Brazil with very strong sales out of the gate. In the US we have just started shipping REFRESH eye itch relief to retailers, this product is generic ketitofen which fills the gap in our OTC product line and now represents a new opportunity after generic Zaditor from Novartis became available.
Performance in ophthalmic pharmaceutics relative to competition has been gratifying. In 2007 for the sixth consecutive year, Allergan has been the fastest growing global ophthalmology company with continuous market share growth all of this as per IMS Global.
Worldwide in the first quarter, we have been the fastest growing company in almost all of the major global markets. In the US we are pleased that are market share in the first quarter per bona is now at a record level of 29.5%. We have continued to garner more market share gains than any other competitor.
In the OTC market for artificial tears, as measured by IRI, OPTIVE is performing very well. In the urology field we registered sales of approximately 23.5 million for SANCTURA and SANCTURA XR.
We are pleased with the acceptance of SANCTURA XR by urologists based on its unique product profile and low incidence of dry mouth. We realized that managed formally listings would be a critical element of our launch plan. To date we have about 70% coverage of lives in Tier 2 or Tier 3 in both Part D and commercial plans.
In order to speed patient uptake and physician prescribing we have launched a Smart Card that can be swiped at pharmacy to obtain a multi-week supply of samples. So far our launch uptake is in line with that of ENABLEX commercialized by Novartis in collaboration with P&G Pharma.
Turning to BOTOX, growth has slowed from the 24% worldwide growth recorded in Q4 year-over-year to 18% in the first quarter versus Q1 of 2007 or this rate expressed in constant currency is 13.5% with all of the slow down in growth rate attributable to the United States.
The international business maintains its very high growth rate across all regions of the world, which is encouraging for several reasons. First of all, BOTOX continues to grow extremely strongly in those markets where we have multiple competitors and secondly it would appear that the US slow down is a reflection of weak consumer spending behavior.
As you well know, we suffered from several inaccurate media reports questioning the strong safety record of BOTOX in the US, but these were then picked up on virtually a worldwide basis.
Over the last 19 years we have sold 18 million vials worldwide with a low incidence of serious adverse events. We believe that BOTOX is a resilient brand. Examining our competitive set, it is interesting that BOTOX has maintained a steady global market share at 85% since at least 2001 with recent market entrants taking share from the prior players.
In April, VISTABEL the name for BOTOX cosmetic in Europe was approved in Ireland, which thus completes the approval process across all 29 members of the European Union, plus other small countries in the European economic area.
In Europe, we believe that BOTOX is continuing to gain market share in both the cosmetic and therapeutic segments relative to Dysport given our superior product characteristics and commercial deployment.
Historically Dysport has enjoyed disproportionate success in Russia and certain Eastern European markets as we had not directed any meaningful resources to these countries. Since late 2007 Allergan has dramatically stepped up its activities in these new frontier markets.
TAZORAC. Sales of TAZORAC and our physician skin care products were essentially flat in the quarter. We are however pleased with our co-promotion agreement with Stiefel Laboratories and believe this will have a positive effect on sales as we contend with competition from Galderma and Medasys.
Moving on to dermal fillers, sales at $53.1 million was sequentially lower than in Q4, consistent however with normal seasonal patterns. Year-over-year sales in Q1 increased 23.5% in dollars and 16.3% at constant currency. Sales of collagen products continue their steep decline as they are eclipsed by JUVEDERM, and newer hyaluronic acid products.
In accordance with my remarks for BOTOX, it appears that US market growth has slowed but the JUVEDERM continues to pick up market share and is approaching the sales level of Restylane and Perlane.
We continue to invest to grow the filler market both through classical DTC advertising and through public relations activities such as our partnership with the US Tennis Association and product endorsement events at key tournaments by Tracy Austin and Lindsey Davenport.
In Europe we are extremely pleased with a very strong uptake of JUVEDERM with lidocaine which has become a key component of our overall portfolio with very high growth rates and also a likely stimulation of the marketplace.
We are now working to register this excellent product in all the key markets outside Europe. In March, we launched JUVEDERM in Hong Kong, Hungary and Poland. In April, at the Anti-Aging World Congress in Paris we showcased Veluma [ph], our innovative volumizing filler.
During the course of 2008 we expect to see sales expanding strongly in our newer markets in Asia and Latin America. Based on weak sales of Restalin and family of product sales reported by Q-Med at 1% year-over-year excluding shipments to North American, it is clear we are rapidly gaining market share internationally.
Now over to breast aesthetics. Sales were $78.5 million marking an increase of 13% in dollars and 8.5% at constant currency. Once again we see a tale of two cities with the US market being impacted by the economy and showing weak sales growth contrasted by all of our international regions registering double digit sales growth even though we do not have over there the benefit of the value pick-up from saline to silicone.
In the US our competitor has probably gained back some market share as they have been willing to discount prices by way of deals with free goods. We have held firm on our pricing policies and have continued to present our full range of products and commitment to exceptional service to our plastic surgery customers.
In order to facilitate affordability, we have entered into a partnership with Care Credit, and unit of GE, whereby Care Credit offers financing of our elective surgery procedures at preferential financing rates. Internationally we are realizing the full benefits of the integration of the breasts aesthetics business into our overall aesthetics operations.
So summarizing the situation in the medical aesthetics business, it is clear there has been an impact to the economy in the US but a continuation of high growth in Europe, Canada and Australia boosted by some exceptional growth opportunities in emerging markets void by the booming economies in Asia, Latin America and Eastern Europe, which of course affords us interesting prospects.
Also, given the diversity and scale of our businesses, it is clear that the more challenging market conditions in the US will unequally impact us versus some of our smaller aesthetically focused competitors. In the meantime, Allergan will continue to focus on execution of our plans so that we will enter the next growth cycle with even greater strategic differentiation.
Regarding the health business sales grew 36% versus the first quarter of 2007 with sales slowing in the US given the entry of Ethicon with their realized band and some impact to the US economy on the cash pay portion of our business, which is approximately a third of the total.
Regarding reimbursement we were able to secure major new coverage with TriCare and also Texas Medicaid as well as a number of commercial plans. Internationally, sales continue their strong growth trend, particularly in Canada and Australia and in the nascent the markets of Latin America.
In the US we are pleased to have entered into a relationship with Cavidean [ph], which should permit us to develop new customers and increas access to the LAP-BAND procedure over the course of the coming months.
Ethicon's market activities so far have been limited to proctoring a limited number of surgeons. This has nevertheless taken out a number of bands that would have historically been sales for Allergan.
In the first quarter we have continued to invest heavily into a new LAP-BAND TV commercial and have continued our public relations activities. Clearly this market continues to offer great long-term growth opportunities.
I would now like to pass over to Jeff Edwards who will comment on our performance from a financial perspective.
Jeff Edwards
Thanks David and good morning to all of those on the call. As David has already addressed, Allergan's sales performance during the first quarter continued to show a strong growth trend despite the impact of worsening of economic conditions in the domestic market.
Allergan's diversification of businesses across therapeutic and consumer-oriented segments between cash pay and reimburse products and between domestic and international operations continues to pay dividends.
Although the slowing economy is touching certain areas Allergan's businesses, less than 20% of Allergan's overall business is influenced by the US economy as it relates to consumer spending. During the first quarter our diversified business has generated robust top-line growth and allowed the company to overachieve our earnings per share guidance.
Once again, Allergan's high quality earnings performance was generated while we continue to invest heavily into the long-term growth of the company. For the first quarter adjusted diluted earnings per share were $0.53 marking a 15.2% increase over 2007 results for the same quarter.
This strong performance was produced in the face of significant launch related expenses for both SANCTURA XR and COMBIGAN in the US. A reconciliation of all of the adjustments to GAAP earnings is set out in our earnings release.
Consistent with the comments I made in the Q4 2007 earnings call, Allergan invested heavily in SG&A during Q1 to support the launch efforts behind SANCTURA XR and COMBIGAN as well as the continuing promotions selling and marketing investments supporting BOTOX cosmetic, JUVEDERM, LAP-BAND, the NATRELLE collection of breast implants and a robust portfolio of glaucoma and ophthalmic products.
Adjusted selling and general administrative expenses were 45.3% of product net sales for the quarter, totalling $481 million, a $102 million increase over Q1 2007. It is important to note that these investments have continued to generate favorable financial returns with respect to Allergan's performance and are consistent with our strategy to make meaningful investments in support long term growth of the company.
Additionally, the significant SG&A investments provide Allergan with a certain level of financial flexibility as they include a significant component of variable cost that can be adjusted if necessary based on the rate of return observed as well as other economic factors.
Excluding the affects of non-GAAP adjustments in amortization of acquired intangibles, Allergan's Q1 2008 gross margin of 83.5% increased 110 basis points when compared to prior year.
Both the Allergan pharma Q1 gross profit margin and the medical device Q1 gross profit margin contributed to this improvement as the gross profit margin of both businesses increased versus Q1 2007.
On an ongoing increase in the mix of newer higher margin products as well as cost benefits generated from greater manufacturing efficiencies, especially with our medical device products where the driver is generating these year-over-year gross margin improvements.
With respect to spending in the R&D area the company's adjusted R&D investment ratio was 17.2% for the quarter as Allergan continued to make significant commitment to R&D spending in both pharma and medical device businesses.
Allergan's ingested R&D spending for the quarter totalled $183 million, a $45 million increase over the first quarter of 2007. Phase III and/or FDA filings involving LUMIGAN 0.01%, POSURDEX, Triveras [ph], BOTOX for headache, BOTOX for neurogenic OAB, and next generation ACULAR and ZYMAR programs are amongst the many later stage products driving this significant investment.
Likewise, Allergan is making meaningful R&D investments within the medical device area in support of a variety of new technology products and ongoing support of our breast implant follow up study.
With respect to our balance sheet Allergan's consolidated net worth increased to approximately $3.83 billion at the end of March 2008 from approximately $3.47 billion at the end of 2007.
Consolidated Allergan sales - day sales outstanding was 49 days consistent with March of 2007 while consolidated Allergan inventory days on hand was 124 days. At the end of the first quarter Allergan's cash and cash net of debt positions totalled approximately 1.105 billion and a negative $539 million respectively.
2008 operating cash flow after Cap-Ex was approximately $14 million for the quarter, which compares to $84 million in the first quarter of 2007. Cash flow was primarily impacted by growing accounts receivable although it is important to note that our DSO level at quarter end is consistent with a year ago March level at 49 days.
Exceptional top-line sales growth, strong foreign currency levels versus the US dollar and certain other timing related matters impacted the growth in accounts receivable. Although not a significant increase, the growth in inventory levels had an impact on cash flow generation.
Several key inventory initiatives drove this increased inventory investment. The company's desire to hold increased safety stocks of certain product lines to ensure prompt and reliable delivery, the company's need to build appropriate levels of inventory in both the health and dermal filler area relative to the levels of inventory in Q1 2007, the need to address the recent launches of SANCTURA XR and COMBIGAN, and the need to begin to address the transfer of breast manufacturing operation from Arklow, Ireland to Costa Rica.
During the quarter, Allergan utilized approximately 93.1 million to acquire 1.5 million shares through its open market share repurchase program. Regarding guidance for 2008 it is clear that our commitments to a well devised and executed investments continues to pay dividends as Allergan is raising full year 2008 adjusted diluted earnings per share guidance between $2.55 and $2.59, which represents growth between 17% and 19%.
All other guidance provided on the Q4 2007 earnings call remains unchanged. Based on current sales trends, Allergan expects the full year sales for breast aesthetics, obesity intervention and the SANCTURA franchise to trend towards the lower end of the guidance ranges that were provided to you on the Q4 2007 earnings call, while full year sales of RESTASIS, the ALPHAGAN franchise and the LUMIGAN franchise are expected to trend toward the top end of these guidance ranges.
For the second quarter of 2008 Allergan estimates product net sales in the range of 1.13 billion to 1.16 billion and diluted earnings per share of $0.62 to $0.63 excluding non-GAAP adjustments. 2008 has begun another strong performance year for Allergan. It is evident that our pharma business continues to produce superb results across both our newer products and our traditional core products.
While there appears there appears to be a slight slow down in our medical device business compared to the truly exceptional growth levels observed in 2007, this business continues to generate very sound results.
Furthermore, the somewhat modest slow down in the medical device business has a limited impact on Allergan's overall financial performance as a function of our broad and diversified base of business.
Allergan prides itself on its disciplined approach toward making target investment decisions that have yielded strong results. This approach is generally directed towards producing favorable outcomes over longer periods of time.
This said, we do have the latitude to make interim adjustments to these spending levels and expect to continue to yield strong top and bottom line results for the remainder of the year.
So with that Operator, we would now like to open the call for questions.
Question-and-Answer Session
Operator
Thank you. Our first question comes from Frank Pinkerton of Bank of America. Sir, your line is open. Mr. Pinkerton.
Frank Pinkerton - Banc of America Securities
Thanks. Sorry. Can you hear me?
David Pyott
Yes.
Just some quick questions on BOTOX please. Can you provide the contribution that US headaches sales would provide to BOTOX. Can you just go over quickly the inclusion criteria for the headache study that will report out later this summer?
And then finally, can you compare those inclusion criteria potentially to some of the higher subscribers or higher users of BOTOX, than that, you know, have historically used it there on the headache side. Thank you.
David Pyott
Well let me answer the question regarding current sales of US headache. Regarding all of our areas, we attempt to answer that question by survey and we strongly believe that BOTOX headache sales in the US today are in fact even smaller than those of BOTOX for hyperhidrosis. So you can see it's a very small part of our overall franchise in the United States. In terms of the clinical questions, I'll turn it over to Scott.
Scott Whitcup
In terms of the clinical trials design, what we've disclosed. The trials involve patients with chronic daily headaches, so these are patients who have headaches. About half of the month, most of those headaches tend to be migraine-type headaches.
You'd think that this is the severe end of the spectrum but there are actually, you know in the 10 to 15 million patients in the US range with this type of headache. So we think that for the people who are out there using BOTOX for headache is a big part of the market that they're currently treating. In terms of inclusion and exclusion criteria, the other thing that we've said, if you look at the Phase II study, they are very heterogeneous.
People were allowed to take escape medications, prophylactic medications and that confounded the trial. In the Phase III trials we presented patients coming in on prophylactics and very carefully monitored escape medications as part of the protocol. We think that optimizes our chance for success of the trial.
Frank Pinkerton - Banc of America Securities
Thank you.
Operator:
Our next question comes from David Buck with Buckingham Research Group. Your line is open.
David Buck – Buckingham Research Group
Thanks. For the first question on BOTOX is just the cash paid business. David can you give sense of what you think may have changed in the last three months in terms of I guess the resistance of your products to the consumer slow-down and can you give a sense of why you're actually comfortable keeping the guidance at 12.6, 16% plus growth for this year, with Europe potentially slowing down later in the year. Thanks.
David Pyott
Well, I think the first part of your question relates to probably cosmetic and therapeutic. While we're very pleased to report that both the franchises are growing strongly worldwide. In terms of resistance to slow-down, I suspect what you're asking there was how we were to think about the impact of consumer behavior spending changes.
I think it's quite clear looking at both our internal data and all the surveys that we can access, some through the south side, that the greatest impact appears to be on the breast segment augmentation business.
Just because it's the highest single out-of-pocket number. Secondly, probably fillers and thirdly, BOTOX. In terms of, regarding our guidance, I think it's clear in our thinking that there's great performance in terms of ex-US performance.
Europe is an important market, but of course don't forget other markets that I referenced, like Asia, Latin America, Eastern Europe. We see great growth everywhere. And of course, I should always remind you that BOTOX is a collection of franchises.
People see it as a unitary product, but we do have twenty indications approved around the world, all growing at different speeds, and all at different levels of penetration. So it's very natural that everybody goes to the one that one knows i.e., aesthetic. And one can forget all the other ones.
David Buck – Buckingham Research Group
Okay. And just one quick one for Jeff. What was the reason for the sequential increase in DSO's and for the right price increases during the quarter?
David Pyott
Okay So if you look at this on a historic basis, David, you'll see that Q4 is always quite a bit lower than Q1. That is just the nature of our business. So let me explain a few things. Why our DSO, well you know.
DSO isn't up. It's 49 days year to year, so March to March. '07 to '08, it's 49 days. In fact, it's below our budget at levels. Not that that's meaningful to you, but it's actually favorable to budget. Currency effects caused an increase in receivables.
Obviously business growth needless to say the launch COMBIGAN and SANCTURA , but the thing we really focus on is a year-end management of in-channel inventories. We watch very carefully what in-channel inventories are with wholesalers and then more difficult, but we do it as well, we watch very carefully in-channel inventories at the retail level.
Wholesalers don't really spec as much as they used to. As a consequence of the agreements we have in place. But certainly retailers continue to do that. So we watch very carefully at year-end how much we ship and as such has an impact on DSO or receivables.
In the first quarter, once we have a better sense for what's sitting with the retailers and what's sitting with the wholesalers, you tend to see an increase in receivables as a consequence of increased shipping levels. So that's why you see these changes from Q4 to Q1.
Also, we're not going to spend a lot of time talking about it, but we do have some interesting new programs available in the US relating to the aesthetics business, that has had a minor impact on receivables growth as well.
David Buck – Buckingham Research Group
Okay. So you're giving bear terms somewhat.
David Pyott
Well, I'm not going to say what we're doing.
David Buck – Buckingham Research Group
And then, price increases for the quarter?
David Pyott
Yes. There was a price increase of I recollect, I'm just checking my numbers here, it was 4% and we took that on the first of January for BOTOX. And the new price was 525 and then there were a couple of other price increases for the eye care range on the 19th of January. And that included also Tazurac and Nevage [ph]. Okay?
David Buck – Buckingham Research Group
Okay. And the magnitude of those?
David Pyott
Oh, well, I mean there's a long range, you know, on the low end would be 0, 5%, 7%, 8%, those kinds of numbers.
David Buck – Buckingham Research Group
Okay. Thank you.
Operator
Our next question comes from Peter Bye with Jefferies & Company. You may ask your question.
Peter Bye – Jefferies & Company
Thanks guys. You know the upside here is maybe people start focusing on the [inaudible] business. A couple of questions on the Care Credit deal. How do you account for that? I guess it's a 200 basis point give-back for the fee that the Care Credit gives along their eight little program? Does that come off against revenue? Or do you book that in COGS or SG&A or if they use Natrelle on the implants?
David Pyott
It has absolutely no impact in that all we are is the facilitator. So it's all third party. I very much liked your comment on the ophthalmic business given that it's almost half our business. Based on the normal range of questions, you'd think it's about 5% of our business.
Peter Bye – Jefferies & Company
I know, I hear you on that front. The other one, just following up on a question earlier about sort of what changed in the last three months, I think maybe a little bit more complete answer. Just, I think what they're alluding to a little bit was that in January you see not a whole lot of impact and now there is more of an impact.
Is it, you know, you think the economy's decelerated that much in the business, or there's a lag effect. The Newsweek article and that sort of press impact it? We didn't see a whole lot of at ASAPS [ph] but I'm just wondering how much maybe you think that's contributing a little it or sort of over-emphasizing on the economy and that's also contributing. Any quantification would be helpful.
David Pyott
Right. Well I think first of all on the economy, it's always difficult, and I'm sure even if hypothetically one were working at the Federal Reserve looking at one or two or three weeks worth of data trying to interpret tends.
I think they're looking back on, you know now it's four months of the year, the signs were, you know, in the general economy, we could read the newspapers like everybody else but we really couldn't see it in our business.
I think also every year we have a little bit of turbulence around year-end because historically we've taken price increases, particularly for BOTOX early in the year. That being said, presumably the same people act in the same way every year in terms of do they stock up their fridges a little bit.
Well, maybe. Also post price increase we allow a limited buy-in relative to a physician's purchases for a very short period of time. So it's a very clear algorithm where there's fair treatment on the same basis for all our customers.
So that happens every year but it does create turbulence in the first couple of weeks of the year. I think then the other issue you addressed was this ridiculous publication first of all in the Journal of Neurosciences which then got picked up by Newsweek.
And it really is quite outrageous when one thinks that first of all, this study was in rodents, whereas our consumers are humans. We have 3,000 peer review publications on BOTOX. Based on our calculations, it would appear that the Italian researchers used about 150 times more amount of drug and it wasn't even BOTOX, it was lab-grade product.
We can think back to maybe you know the infamous Florida incident. You know, Thanksgiving four years ago. And then the final part is that their essay is unvalidated and we attempted to secure information on that essay and the researchers were unable or unwilling to share that information with us.
Anything we've done, and of course I would submit that there are a couple of people in our vine that know something about botuline and toxins for the last 20 years, we have never seen anything in this direction
Though clearly in the next weeks and months we have a whole series of plans for publications in scientific literature. We've already submitted, and it's already on-line, a letter of rebuttal to the Journal of Neurosciences and we have a whole stream of activities planned. I should probably stop with that moment.
If you want to know any more I'd be delighted to go into them. I think also one other great factoid, is when we go back through our epidemiology database, and of course, we know have almost 19 years of experience, we have sold as I reference 18 million vials since the beginning. And if we look at serious adverse events for cosmetic, it's one in 20,000 patient years. So, thinking about y journey home this evening, I'm absolutely terrified.
Peter Bye – Jefferies & Company
Well, I hear you on the clinical relevance and we get that from clinicians. It was just simply do you think it impacted patient perception and people asking for it or not?
David Pyott
Well, based on our surveys, very much at the margin. And hence why at the margin we can see some reaction in the surveys we've done and hence why we're going to be taking action to put the real facts on the table.
Peter Bye – Jefferies & Company
I appreciate it. Thanks Dave. I'll jump back in queue.
Operator
Our next question comes from Gregg Gilbert with Merrill Lynch. You may ask your question.
Gregg Gilbert – Merrill Lynch
Thanks. My two questions up front. First, on implants David, how would you characterize procedure growth in the US as well as patients' willingness to pay up for silicone versus saline? And secondly, on SANCTURA XR, do you have any plans to partner the product for the part of primary care that you're not going to directly? Thanks.
David Pyott
Okay. First of all on procedures. Obviously we will follow with great interest when Mentor reports because then we still won't know everything but we'll have a better divining rod in terms of our sales plus theirs.
Our assumption is that there has probably actually been a decline in augmentation procedure volume of course, being offset by the value pick-up from saline to silicone. In terms of the mix, we are very much in line with our plans, but we have the sense that in the last couple of months the rate of migration to silicone has somewhat slowed down and it appears that it's again economically driven versus anything else.
Because of course, silicone does come at a price premium relative to a saline augmentation procedure. And then finally on SANCTURA XR as we discussed on the call we had when we acquired Esprit Pharma.
In fact, we do as a company with our sales force deployment visit the top destiles [ph] of the GPFP space. So we have a very good measure of our sales, not only in urology channel but also the GP channel.
Unknown speaker???
David, if I could sneak in one big picture follow-up here. Along the lines of over-focused on the cosmetic side of the business. Does the sale of the Alcon stake at the multiple that was paid affect your thinking on how best to unlock value over time in Allergan?
David Pyott
Well, of course this is like provoking somebody who perceives themselves as a consummate marketer. So I think it's useful given that I have great experience of dealing with Swiss people. And Swiss people are very good business people, they're very tight-fisted which of course I have a lot in common with, given my own ethnic heritage.
And I think it's a real good reminder to say what is the value of a fast-growing eye care specialist company where money is actually passing hands? And I think it will be useful for investors to think about our valuation, given that almost half of our sales are ophthalmology.
And I've also attempted to state as great a company as Alcon is, and we really do respect them as a very valid and excellent first-class competitor. For the last six years we've been growing faster than anybody else in ophthalmic pharmaceuticals.
I would have though somewhere in the PE valuations that should have a marginal value. I think also our expenditure and R&D in terms of overall intensity is another factor to be considered. And of course, now
I have Scott sweating a little bit in front of me, but I'm just joking, because he's well prepared. We're looking forward to showing you some of the new goodies in Dr. Scott's Aladdin's Cave. Right?
Operator
Our next question comes from Ronny Gal with Bernstein Research. You may ask your question.
Ronny Gal – Bernstein Research
Good morning guys. Thank you for taking my call. A couple of questions. First, on SANCTURA, was the 24 million including some sort of a channel-sale or is it essentially a baseline from what you can grow the product? And second, can you talk a little bit more about the bariactric business and it's getting a little bit light there versus my thinking.
David Pyott
Which was the last question? Which business Ronny?
Ronny Gal – Bernstein Research
Bariatrics. LAP-BAND
David Pyott
Oh. The LAP-BAND. Okay. Fine. Well, first of all, on SANCTURA XR. We started selling that in the very first days of the year. So clearly within that 23 million odd because obviously some was base sales of SANCTURA there is an element of first-time wholesale orders.
So, clearly once one has stocked all the various warehouses then we have to generate the prescriptions not to bring down an excessive level of inventory but it's just the normal process of then getting into the selling mode.
You second question on LAP-BAND. I think there is probably two things going on if I look at the US business. As I referenced, the activities from Ethicon so far have been fairly mute.
But even though they've been proctoring those are still units that would have accrued to us in the whole had they not been on the marketplace. And secondly of course, with roughly a third of our mix being cash pay and you can think, you know, a range of cost would be probably $14,000, $16,000 you know, that's a fairly large outlay and in these times some people may take longer in terms of actually deciding they're going to go and get the procedure.
Ronny Gal – Bernstein Research
Yes. And if I may sneak one last one. Your projections— do they include an assumption of a further slow-down in the United States or a slowdown in Europe. Essentially are you picking a date as May 7th and projecting a slowdown, economic slowdown continuing?
David Pyott
Well, of course if we were perfect clairvoyants on the economy I could probably make a lot more money on Wall Street than wasting my time sitting at Allergan. I think you know as a company that we have always taken fairly cautious views of things, so that we do not get ourselves into difficulties. And I think at the end of the day it really goes back to my initial opening remarks.
The great strategic value in this company is that we are not dependent on one single franchise. We have many, many different franchises all of which have been contributing to growth. And I think by the time this year comes to an end, we will probably end up saying 2007 was the spectacular year for medical devices. This year will be more the year of pharmaceuticals again.
So I see it swings around about. And one thing offsets another. One region offsets another. And we try and take account of all those different elements to the mix as we roll up our forecast internally. And then of course once we have done our own numbers, then we think about how we should give good guidance to the investment community.
Ronny Gal – Bernstein Research
Thanks, guys.
Operator
Your next question comes from Gary Nachman with Leerink Swann. Your line is open.
Gary Nachman - Leerink Swann
Hi, good morning. First on COMBIGAN, it is not cannibalizing as much ALPHAGAN as I thought, and the shares coming more from Cosopt it seems. Why is that, and do you think that is going to change over time?
David Pyott
Maybe I will answer it form a marketing point of view and then maybe Scott is of course the ophthalmic expert. You know, not just a scientist, but an ophthalmologist can give some extra thoughts.
So, as I referenced in my opening remarks, even when you take COMBIGAN out of the analysis, we still have double digit growth in base ALPHAGAN, both in the United States and Asia. Now, why is that?
I think in many markets ALPHAGAN has a tremendous following. It was the primary adjunctive product that was established. I was reflecting the fact this morning, why isn't that the case in Europe? Well, in Europe, interestingly, there has been an even faster uptake on GANFORT, whereas of course GANFORT by definition does not exist in the US or Canada.
So we don't have side by side internal competition not only for detailing time but also the choice being offered to the ophthalmologist. We just have one choice less. Maybe Scott can add some clinical color to what he thinks is going on.
Scott Whitcup
Yes, sure. I think a couple of things. One is that there is still a group of ophthalmologists who like adding a single drug at a time, and for those physicians, they will continue to use ALPHAGAN first, and so I think there is an ALPHAGAN following that maintains itself.
Second, one of the benefits of taking a long time to hit the FDA hurdle is that we had great clinical trial data comparing COMBIGAN to Cosopt. And so there is another side of the ophthalmologists who like combination drugs and Cosopt was sort of the only combination drug in the US
So those ophthalmologists, we now have data both on the efficacy side and the tolerability side that COMBIGAN is a great choice, and I think that is why a lot of that sales have picked up from Cosopt. Great clinical trial data. Good evidence-based medicine to use COMBIGAN.
David Pyott
Two things actually about it. One is we see very little counter detailing activity from Merck in the US so this is a case of invasion with no opposing forces, really. And it is interesting, thinking back to Europe, where I was commenting how GANFORT is doing very well, there, even better than COMBIGAN. Today in Europe, in the top five markets, six combinations account for 28% of the prescriptions.
And we still have got some ways to go on that in the United States. And clearly it is driven by compliance. All ophthalmologists know, the patients will claim that they are religiously following the regimen, but reality may be somewhat different.
Gary Nachman - Leerink Swann
Okay, that is helpful. And Jeff, given the strong performance of this franchise in the first quarter, the full year benefit you guys have given of 350 to 380 million, it looks fine, I know you said it would be at the high end of that range, but is there something that would cause it to climb? In the back half of the year? I just want to be clear on that.
Jeffrey Edwards
You know, I think David's comments earlier reflect our point of view, and that is, we are going to be cautious. We are going to be careful with what we share. To the extent we see certainty in our ability to take that number up, on a later call we will do that. But for now, the only change in guidance is what we told you. High end.
Gary Nachman - Leerink Swann
Okay. And David, on the flip side, I guess LUMIGAN is a little bit weaker than I thought, and what is happening there? Is it the whole category that you diverted some resources to COMBIGAN, and if that is the case, then are you thinking maybe of adding some more resources back to LUMIGAN at some point?
David Pyott
No, I think LUMIGAN certainly doesn't stick out in my mind as tracking very much in line with our plan. Also, we have very full deployment in terms of our sales forces on the ground, and the current detailing pattern and distribution is working very well as is reflected in the numbers and as I referenced in the record US market share that we enjoyed in Q1.
Gary Nachman - Leerink Swann
Okay, and lastly for Scott, please update us on the projects that he had as of the date of filing had that changed at all?
Scott Whitcup
Yeah, we are still on schedule. We expect our trial data to be available probably late this year. We are still tracking some time around academy or a retina meeting, thereabouts, to disclose the data. And approval is basically what we stated before, which is extremely late this year, probably early next year.
Gary Nachman - Leerink Swann
Okay. Thanks.
Operator
Larry Biegelson with Wachovia, you may ask your question.
Larry Biegelson - Wachovia Capital Markets
Hi; thanks for taking my question. Two quick ones and then a BOTOX question. Could you please quantify total stocking in the quarter? You alluded to COMBIGAN earlier. But was there — total stock in the quarter. F/X benefit in the quarter to EPS and then I'll pause for a second before asking my BOTOX question.
David Pyott
Well in terms of stocking, there was nothing extraordinary going on at all. Because COMBIGAN was launched just after Thanksgiving, and as I referenced earlier, for the launch of SANCTURA, clearly we had to fill the warehouse, the wholesale channel. And then of course you can follow that through into retail pharmacy stocking, because we started detailing the product XR around the very first few days of January. Otherwise there was nothing unusual going on at all.
Larry Biegelson - Wachovia Capital Markets
Sorry, I meant to say SANCTURA not COMBIGAN. And on that — on FX?
Jeffrey Edwards
We don't generally talk about FX impact on the bottom line because it is part of the aggregate P&L management process, and it is very very difficult to track all the way through to the bottom line. To the extent that we can give you a precision-based number, we may consider it. But it is impossible to do, and I said, it is really an aggregate P&L management process from the top to the bottom, with or without currencies. So— but that is the way we have treated it in the past and that is the way we will continue to treat it in the future.
Larry Biegelson - Wachovia Capital Markets
Okay. On BOTOX, it looks like your US growth slowed to about 10% in the quarter from over 20% in 4Q 07. Can you tell us if the deceleration was greater for cosmetic or therapeutic? What does this say about February and March, given that you said you saw no impact through January it suggest that there was single digit growth in February and March to me, and lastly what are you seeing in April? Further deceleration or stabilization? Thanks.
David Pyott
Well, first of all, in terms of both cosmetic and therapeutic I made the remarks that both franchises are performing strongly. Clearly, in my quote as well as my prepared remarks, the fact that BOTOX is growing at double the rate in constant currency ex-US and in the US talks about the strength of the franchise worldwide.
Now in terms of pulling the months apart, you have to be very careful, here, because first of all I made the remark, every year in January there is some turbulence in the numbers, because people are either anticipating that there will be a price increase in early January, and then maybe they bought some stuff in December. Other people are waiting to get their last chance to buy at the old price in January.
Then we have our incentive for our representatives always in the middle month of the quarter. So, surprise, surprise, usually the middle month tends to be the high one. And the last one of the month tends to be lower. So you have to be very careful when one — you know, as we look at all our data internally, to see what's going on.
And hence my rather— remarks about— I imagine when you mentioned that the federal reserve looking at tons and tons of data, you have to be careful what interpretations you are making. In terms of your question regarding April, I would say that we see continuing trends as we saw in the first quarter. And more than that, I am not in a position to make any further remarks.
Larry Biegelson - Wachovia Capital Markets
Continuing trends— just so I understand it, that is— well, stabilization or further slowing. Because it looks like it was slowing. So is that what you meant by continuing trend? David?
David Pyott
I said continuing trends as of the first quarter. I think this is really frankly— I appreciate your intensity of inquiry, but I think really when I think about our company as a whole we are down to really marginal numbers in a company with over 4 billion in sales. And where half of our company is ophthalmology, and we get so few questions on that.
If I blew your numbers on Restasis I get no questions, yet if there is a difference of $2 million in BOTOX people are either dancing in the streets or ready to drown their sorrows with whiskey. I do not get it.
And also the fact that this is a worldwide franchise and also not just BOTOX Cosmetic. It has 20 indications approved around the world. So I have attempted to answer your question by saying we see the overall continuation of the Q1 trend continuing into April.
Jeffrey Edwards
Tanya, do we have time for one more question, please?
Operator
Jim Kelly of Goldman Sachs, you may ask your question.
James Kelly - Goldman Sachs
Great, thank you very much. My question is on SANCTURA XR. I wanted to ask about the smart card program and those samples that are generated I believe you said at the pharmacy level. Do those end up showing in prescription trends?
And I was just trying to get a little color on I believe Jeffrey you talked about things coming out the high and the low end of guidance, SANCTURA XR was one of the products that could potentially come into lower end of guidance. I just wanted a little more color around that, given that this quarter was strong, albeit that the stocking was helpful. Thank you.
David Pyott
Okay, maybe I'll answer all that. In terms of samples, clearly if we provide samples at the physician level, that is one way to do it. So the patient carries the samples home and by definition then does not fill the prescription at the pharmacy. Another way to do it is what we did with the smart card, really in addition, to try and facilitate start is to have effectively free samples dispensed at the pharmacies.
So that is negative to prescriptions, clearly. But we know from our market research that it takes a certain number o f samples to get somebody firmly established on the drug and then buying the product, so to speak, reimbursed typically through their managed care plan or they could in theory also be on Medicare or Medicaid.
And in terms of I think the question on guidance, we have given a guidance number, which I just want to check, is 70 to 100 million. And as Jeff said in his remarks, do not take it to the extreme. But we were trying to give an overall picture of things that are closer to the top of the range versus the lower end of the range, and this one for SANCTURA in the range of 70 to 100 is further to the lower end.
Jim Hindman
We would like to thank you for your participation today. If you have any further questions, Joanne Bradley, Emil Schultz and I will be available immediately following the call. Joanne will now take five minutes to give you market share data.
Joanne Bradley
Thank you, Jim. The following market share data we are providing is Allergan's good faith estimate based upon the best available sources of data such as IMF as well as Allergan's income estimate. The market share and growth rate information [inaudible] total are trailing 12 [inaudible] as of the end of December 2007. The market for ophthalmics is approximately 11.5 billion, growing at a rate of 12 %, and Allergan's market share is 16%.
Market for glaucoma approximates 4.6 billion growing at a rate of 8%. Allergan's market share approximates 18%. The market for ocular allergy approximates 1.1 billion growing at a rate of 6%. Allergan's market share approximates 5%.
The plain ocular anti-infective market is roughly 1 billion, growing at a rate of 6%, and Allergan's share is 13%. The market for ophthalmic nonsteroidal noninflammatories is about 360 million, growing at a rate of 14%, and Allergan's market share is 37%.
The artificial tears market, inclusive of ointments, is approximately 1.1 billion, growing at a rate of 10% and Allergan's share is 22%. The US topical market for acne and psoriasis is roughly 1.7 billion, and an annual growth rate is 8%, and Allergan's market share is 6%.
The top 10 markets for neuromodulators are roughly 1.2 billion growing at a rate of roughly 18%, and BOTOX has approximately a 92% market share. The worldwide market for neuromodulators is roughly 1.5 billion, growing at a rate of roughly 23%, and BOTOX has approximately an 85% market share.
The worldwide market for facial filler substance aesthetic products is roughly 670 million, growing at a rate of roughly 39%, and Allergan Medical has approximately a 30% market share. The US market for facial filler substances aesthetic products is roughly 330 million.
The worldwide breast aesthetic market aesthetic and reconstructive is roughly 770 million, growing at a rate of roughly 22%. Allergen has approximately a 39% market share. The US breast aesthetics market is roughly 390 million, and Allergan has around a 45% market share.
The worldwide bariatric surgery market for band and balloon segments only is roughly 320 million, growing at a rate of roughly 50 to 55%, and Allergan has approximately 80 to 85% market share. And that concludes our call. Thank you.
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