Allergan, J&J face off in obesity market

Allergan, J&J face off in obesity market

	Published : Sun, 14 Oct 2007 21:03 By : Agencies Print this Story

NEW YORK (AP) - The recent approval of Johnson & Johnson's Realize gastric band has stepped up competition in the surgical weight-loss market, which until now has been dominated by Allergan's Lap-Band.

The Lap-Band and Realize are adjustable gastric bands, which are surgically implanted around the stomach to help severely obese adult patients lose weight by forcibly limiting food intake. This procedure presents an alternative to more invasive gastric bypass surgery, commonly known as stomach stapling.

Analysts predict the Realize will cost about the same as the Lap-Band procedure, roughly $12,000 to $20,000. In what could be a fierce battle for market share, some analysts see the companies eventually splitting the market.

Irvine, Calif.-based Allergan, which also makes Botox, acquired the Lap-Band with its 2006 purchase of Inamed and has so far faced no competition in the U.S. market. But on Sept. 28, J&J's Ethicon Endo-Surgery Inc. unit said the Food and Drug Administration cleared its Realize band, ending Allergan's honeymoon a few months earlier than expected.

J&J plans to launch Realize in December; analysts hadn't expected approval until the end of the year or early 2008.

Another player in the space should contribute to increased usage of gastric banding, currently an underpenetrated market. About 15 million people in the U.S. are morbidly obese, but only 1 percent of those eligible currently undergo weight-loss surgery, according to the American Society for Metabolic & Bariatric Surgery.

Analysts believe there is so much opportunity in the weight-loss surgery market that the companies' combined efforts may in fact help each other. Direct-to-consumer marketing campaigns by Allergan and J&J should raise awareness of the gastric banding procedure in general, and greater insurance reimbursement could help boost the market for gastric banding procedures to $1 billion in 2011 from just $320 million in 2007, says Wachovia analyst Larry Biegelsen.

Lap-Band's market entrenchment, wider global use and established insurance coverage may help it fend off competition for now. But by 2011, J&J will gain 50 percent market share, Biegelsen said in a recent note to clients.

Allergan has prepared for the competition, kicking off a public relations campaign featuring Muhammad Ali's daughter Khaliah and releasing a new Lap-Band version in June. Allergan also is studying a next-generation gastric band device, called EasyBand.

Dr. Michel Murr, a bariatric surgeon in Florida, said in a recent Jefferies & Co. conference call that use of the Lap-Band in his practice is up to 30 percent from 5 percent just a few years ago. Still, 60 percent of the weight-loss surgeries he performs are gastric bypass procedures.

Further diversifying itself from its rival, Allergan is evaluating the device in teens, something J&J isn't currently planning. If the FDA does approve gastric banding for teens, the Lap-Band could lead in satisfying the projected high demand.

'I think J&J will always be behind Allergan,' said Leerink Swann analyst Gary Nachman. 'If Allergan gets approval in kids and gets insurance coverage to comply, then Lap-Band would absolutely have an edge over the competition.'

But the propriety of marketing gastric bands to teens could be an issue.

The procedure can cure obesity, doctors say, but there's a lack of long-term studies and, as with any major surgery, the risk of death. Insurance companies and doctors may prefer to give medically supervised diet, exercise and behavioral modification programs a longer chance to take effect in children, rather than recommend such a procedure.