Allergan: FDA Approves Broading Of Lap-Band Label

Citigroup has published a research report on Allergan Inc. AGN after the FDA voted in facor or broading the lap-band label to include lower BMI patients. In the report, Citigroup writes "We expect the Lap-Band label to be expanded to include patients with ≥30 kg/m2 Body Mass Index (BMI) + comorbid conditions, like diabetes (vs. ≥35 kg/m2 on current label), & patients with ≥35 kg/m2 BMI w/o comorbid conditions (vs. ≥40 kg/m2 on current label). We expect initial uptake in lower BMI patients to be influenced by an anticipated expansion of NIH & gastrointestinal medical society guidelines, which currently recommend laparoscopic intervention only in the higher BMI patients. We see Lap-Band sales growth driven by macroeconomic factors, label expansion to lower BMI patients & younger patients (adolescent indication decision upcoming). The most significant commercial opportunity for AGN's Lap-Band is in the reversal of type-2 diabetes in overweight patients. We model an 8% decline for AGN's Lap-Band franchise in ‘10E to $236M vs. AGN's $230M-$240M range. We conservatively assume Lap-Band doesn't return to positive growth until 2012E. Our model assumes 2014E Lap-Band sales of $269M (+1% '09-‘14E CAGR)." Citigroup maintains its Buy rating and $82 price target. Allergan, Inc. closed Friday at $68.80.