A Brief History of Botox

Facelift in a Bottle
Allergan, the drug company that makes Botox, has a fresh glow.
FORTUNE
Monday, June 24, 2002
By Brian O'Reilly

It started in the late '90s as a rumor, then became a whisper, then a buzz. By last year every cosmetically correct woman on both coasts knew the secret. When you inject Botox--an obscure drug normally used to paralyze overactive muscles--into facial wrinkles, they disappear almost overnight. Federal regulators gave Allergan the okay to market Botox for cosmetic use a few weeks ago. If you missed the surrounding hoopla, you must have been camping in Tibet.

Allergan who? With all the fuss about Botox, it seems as if it would be hard to overlook the company that developed the stuff. But Botox's owner has never sought much attention. Allergan has generally been content to paddle the backwaters of the pharmaceuticals industry, selling little-known eye and skin drugs, some surgical devices, and a line of over-the-counter contact-lens cleaners.

Don't let that low profile fool you. Allergan (pronounced AL-er-gan) has also been one of the shrewdest and most successful of the specialty drug companies, with a clever approach to development and marketing that much larger companies can only envy. It has focused on two attractive submarkets: ophthalmology and dermatology. Because it is too small to attract much attention from pharma giants 20 times its size, Allergan has been left alone and has become the dominant player in those businesses--a strategy CEO David E.I. Pyott calls "Gulliver among the Lilliputians."
Resisting the lure of developing and mass-marketing blockbuster drugs is almost heresy in the pharma biz, but the approach has been a blessing for Allergan. It can buy promising compounds on the cheap from the giants, which rarely bother selling anything to just a handful of specialists. For example, Allergan licenses the rights to reformulate a popular antibiotic developed by Daiichi Pharmaceutical, a big Japanese company, as a topical medicine for eye infections.

A narrowcast marketing approach means that Allergan needn't spend a fortune on gargantuan sales forces calling on hundreds of thousands of internists and family practitioners. It can concentrate instead on a few thousand eye specialists and dermatologists in the U.S. and abroad. Pyott, a Scot with a lilting brogue, says that with just a few hundred salesmen worldwide, Allergan has the biggest eye sales force on every continent except Asia. It earns operating margins that rival those of the big guys, with net income of $262 million on sales of $1.69 billion last year.

Nothing in Allergan's history prepared it for the transformation of one of its oddest drugs into a glamorous sensation. Botox was developed in the 1970s by a San Francisco doctor looking for ways to correct crossed eyes, or strabismus. He found that injections of purified botulinum toxin (an often lethal poison commonly produced by the bacteria in improperly prepared canned food) paralyzed the overactive muscles that cause strabismus; this allowed other eye muscles to operate normally.

Allergan purchased the rights to the doctor's discovery in 1987, and started marketing Botox for strabismus and a similar condition that causes eyelid spasms after it received FDA approval in 1989. Over the next decade doctors found that Botox can treat other arcane conditions. The shots relax the painful neck contortions of cervical dystonia, as well as reducing the stiffness and tremors that often follow a stroke. The effect usually lasts for months.

Botox began to emerge from obscurity in the mid-1990s when doctors noticed something else intriguing: The drug's paralyzing properties seemed to greatly reduce frown lines and wrinkles in patients getting it for eye problems. A husband-and-wife team in Canada--she an ophthalmologist, he a dermatologist--did some experiments and reported the results to Allergan. As word of the Botox effect spread, more and more doctors began using it to relax the facial muscles that create eyebrow furrows, crow's-feet, and horizontal forehead lines. Allergan conducted clinical trials, which led to regulatory approval--and fame--in Canada last year and in the U.S. in April.

The early buzz and recent media splash have boosted Botox sales, but not enough to satisfy Allergan executives. For one thing, says Tom Albright, head of marketing, word of mouth didn't spread everywhere. Although high-glam places like New York, Los Angeles, and Miami took to Botox early on, Albright argues that doctors and patients in much of the nation's midsection still need enlightenment. He says that only 1% of Allergan's target audience of 5.5 million "aesthetically oriented people" (essentially, prosperous middle-aged women who have already visited a dermatologist) have used Botox for wrinkles.

Selling sensible Midwesterners on the joys of injecting poison to paralyze their foreheads requires a different approach than marketing glaucoma medicine--especially since health insurers won't cover cosmetic Botox. "If you have glaucoma [excess pressure in the eye], you have to go to the doctor," says Pyott. "Botox is elective. We want the experience to be marvelous. Like going to an expensive restaurant. If it's bad, you won't go back." So in addition to training doctors to inject Botox, Allergan is teaching them to design and decorate their offices to appeal to patients who want to be pampered. A new class of medicine men--"Botox cosmetic development managers"--will tell doctors what women really want while they are being inoculated against wrinkles. "If you decide there's something about your face, and you plan to spend your own money on it, you will have high demands and expectations," says Albright. "The patient should get favorable treatment and an aesthetically pleasant experience."