Nestle-L'Oreal faces Botox maker challenge in Europe

Botox faces its greatest challenge in the market to wipe the wrinkles off European foreheads when a Nestle SA-L’Oreal SA joint venture starts selling its own injectable skin treatment next month.

Azzalure, as the new product is known, will go on sale in the UK in “coming days,” said Francois Fournier, who heads L’Oreal and Nestle’s Galderma venture in Europe. France will follow, and Galderma aims to sell the treatment in all of Europe’s main markets by the end of 2009, he said in an interview at his Lausanne, Switzerland office last week.

Botox, made by Allergan Inc from a purified form of a deadly poison, has had few challengers since the 1990s, when doctors started using it to treat wrinkles. Sales last year were $1.3 billion, and the drug controlled 83 percent of the global market for neurotoxins that paralyze certain muscles or nerves, aiming to give patients a more youthful appearance.

Ipsen SA, the French drugmaker that granted Galderma the distribution rights for Azzalure, wants a piece of the action, and on April 30 got approval for sale of the treatment in the US under the brand Dysport.

Competition in the US and Europe “combined is going to put a dent in Allergan’s market share,” said Peter Bye, an analyst at Jefferies Group Inc. with a “hold” rating on the US company’s stock.

Azzalure is “a bit more of a threat.” He said Botox may lose 4 percentage points of market share in 2009.

L’Oreal, the world’s biggest cosmetics maker, teamed up with Nestle, one of its biggest shareholders, to create Galderma as a prescription skin-treatment business in 1981. The world’s biggest food company has said Galderma joined Hot Pockets sandwiches and Buitoni pasta among 29 Nestle brands with revenue exceeding 1 billion Swiss francs ($880 million) last year.

Botulinum Toxin
Irvine, California-based Allergan said it expects the decline in its market share to be “limited.”

“We have had many years to prepare for the arrival of Azzalure in Europe, and are neither surprised nor concerned about it,” Allergan spokeswoman Caroline Van Hove said by e- mail. “Competition is healthy, as it spurs market growth.”

Allergan has “great experience” competing with Ipsen’s product, which was approved in the UK in 1991 for movement disorders, Chief Executive Officer David Pyott said on a May 1 conference call.

He also said Botox will benefit from its large market share, as the US Food & Drug Administration has cautioned patients against switching between different varieties of toxin.

Azzalure is similar to Botox in that it uses a type of botulinum toxin to relax the muscles that cause wrinkles in the forehead. Like Botox, it was first used to treat muscle disorders before its application as a beauty treatment. It was approved in the UK for cosmetic use in March of this year.

Doctor Training
Galderma, whose main product is an acne medication, provides doctors with several days’ training to learn how to properly inject Azzalure, Fournier said.

“There is a very specific injection technique with our product, making the product even better in terms of efficacy and its safety profile,” he said.

Galderma has distribution rights to sell Ipsen’s drug for aesthetic uses in 40 countries, mostly in Europe and the Middle East. Ipsen will receive as much as 20 million euros ($27 million) on the achievement of certain “milestones,” the companies have said. Galderma also pays royalties to the Boulogne-Billancourt, France-based drugmaker.

Growing Aesthetic Market
The European market for all aesthetic treatments will probably grow 13 percent a year between 2009 and 2012, Galderma and Ipsen said in March. The global market was worth 5 billion euros last year, market researcher Medical Insight Inc says.

Growth in the industry hasn’t been completely smooth, as the recession prompts some people to save their money and live with their wrinkles.

Allergan’s Botox sales rose 0.7 per cent excluding currency movements in the first quarter, down from a 7.2 per cent pace in 2008. New rules may constrain Allergan as well. Last month, US regulators required makers of botulinum toxins to strengthen their label precautions.

“They’re going to have to operate in a much more difficult pricing environment, and market share will be coming down,” said Ken Cacciatore, an analyst at Cowen & Co in New York. Ipsen’s drug may eventually achieve a global market share of 30 per cent, “ faster than people expect,” Cacciatore said.

‘Breakthrough Product’
Fournier said Galderma will consider acquisitions to expand in injectable skin treatments, and aims to add products for use in the lower part of the face. Botox is mostly applied to patients’ foreheads and around their eyes.

“We are investigating and evaluating every opportunity that might help us to strengthen our position even more in dermatology,” he said. “Azzalure is really one of the pillars we’ll have in corrective and aesthetic dermatology.”

Galderma aims to start selling another injectable skin treatment developed by Symatese, a French drugmaker, in coming months, Fournier said. Galderma needs new products to achieve its goal of becoming a leading dermatology company, said Claudia Lenz, an analyst at Bank Vontobel AG.

A breakthrough product in a lucrative segment like Botox would be very welcomed,” said Lenz, who rates Nestle “buy.”

Galderma’s sales rose to ¤854 million in 2008 from ¤735 million in 2007, according to the company. Revenue, excluding currency fluctuations, gained 22 per cent.