Allergan Bought Itself an Exciting Opportunity in ForSight

 | Aug 11, 2016 | 11:30 AM EDT
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This commentary was originally sent to Action Alerts PLUS subscribers at 10:35 on Aug. 11.

This morning, Allergan (AGN) announced the silver-pearl acquisition of ForSight VISION5, a novel eye care therapy for glaucoma and chronic dry eye disease. The transaction falls right in line with the company's explicitly stated focus on targeting "stepping stone" deals that continue to build on leadership positions in the company's core therapeutic areas that will support long-term growth.

More importantly, the strategic need for innovation in glaucoma treatment is clear and sizeable: as of 2010, over 60 million people globally were living with glaucoma (per National Eye Institute), with 80 million estimated by 2020 (given aging population and current demographic trends). Currently, the eye care community, both patients and doctors (Ophthalmologists/Optometrists) alike, have expressed clear unmet need for innovation in eye care solutions that are safe, effective, and easy to apply.

Around 85% of patients and 80% of doctors recommend ForSight's technology in Phase II trials, with 90% of trial patients electing to continue their therapy after six months (vs. around 50% for existing daily drop solution). Therefore, we view the $95 million upfront payment as quite reasonable on the surface, especially given Allergan's existing leadership within the eye care market, powerful ecosystem of doctors, patients, prescribers and insurers and world-class brand equity. Layer on its proven ability to commercialize innovative therapies and we emerge excited by the opportunity.

Currently, the most common treatment for open-angle glaucoma is via eye drop therapies that were approved most recently in the 1990s. Although the current therapies are the best available options in the marketplace, with excellent safety profiles and decent efficacy, the benefits end there; patients either don't or can't take the drops, with less than 50% still using them a year into the payment and 60% unable to administer the drops properly. The high frequency (twice a day) and difficulty of use have left room for greenfield market opportunity.

Enter ForSight's ocular ring technology, which is a safe and effective alternative product that rests on the surface of the eye (under the eyelids). It is inserted by eye doctors in a non-invasive manner and releases the medication gradually over six months (once inserted, the patient isn't even aware of the scheduled, extended-release doses).

Last year, ForSight announced Phase II results, comparing its novel therapy with twice-daily timolol eye drops, which demonstrated higher and more sustained efficacy (in terms of a meaningful reduction in intraocular pressure vs. the control), along with equivalent safety. Most importantly, approximately 90% of the subjects felt comfortable wearing the ring, with 90% retaining inserts for another six months without clinician assistance; 85% of patients recommend insert, and 80% of doctors surveyed prefer insert to drops. Mutually beneficial, indeed.

Allergan is a leader in eye care, and is committed to not only retaining but advancing existing leadership through investments (whether internal or external) in products highly-complementary to the company's ongoing portfolio, and development programs that are shifting glaucoma treatment towards dropless therapies. It stays ahead of its competitors by identifying game-changing secular innovations early on, determining the market leader (assuming Allergan is not), investing in the future and securing its lead before competitors do the same. The end product involves developing, commercializing and progressing next-generation solutions that enhance its product ecosystem.

We appreciate Allergan is aligning its strategic vision with its use of capital. Not only does this help further enhance its world-class core therapeutic capabilities, but it helps engender trust through consistency of its messaging and subsequent execution.

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