"While Revance's RT-002 and, to a less extent, Evolus, represent competition, we expect Botox will retain its market leadership," wrote Tsao in a Monday, Jan. 29, note. "Especially in the case of Revance, we expect new entrants to drive market expansion from current levels."
Tsao upgraded his rating on Allergan to overweight from equal weight and raised his price target to $230 from $220, saying Allergan's aesthetics business, which is led by Botox, "is undervalued at current levels."
Shares of Allergan closed at $187.30 on Monday, up 0.2%.
Barclays did a survey of 61 plastic surgeons and dermatologists and the findings validated Tsao's confidence in the durability of Allergan's aesthetics franchise, according to the note.
Botox's competitors include Galderma SA's Dysport and Merz Pharma GmbH & Co. KGaA's Xeomin. Galderma is a unit of Nestle SA.
Revance in December unveiled positive top-line results from two Phase 3 studies evaluating RT002 for the treatment of glabellar, or frown, lines. In the announcement, Newark, Calif.-based Revance said it believes that RT002, if approved by the U.S. Food and Drug Administration, would be the first neuromodulator that works for as long as six months.
Tsao wrote in the note that although he expects Botox's growth to slow based on RT002 taking market share, "we think Botox will continue to grow."
As for Evolus, the FDA gave a Prescription Drug User Fee Act (PDUFA) date of May 15, 2018 for the company's DWP-450 for the treatment of glabellar lines. The PDUFA date is the date by which the FDA plans to complete its review of an application.
Evolus is unlikely to be a real threat to Botox come May 15, unless it "comes at a meaningful discount to Botox," wrote Tsao. He added that Evolus' approval "could be delayed after disclosing manufacturing deficiencies identified during a pre-approval inspection."
In other Allergan news, Jim Cramer and the Action Alerts PLUS team on Monday downgraded Allergan's shares.
"Our preference was to see the stock's move, which has gone from the mid-$160's in late December to the upper $180s now, coincide with a fundamental announcement by management of either better than expected guidance or a meaningful acquisition," wrote Cramer. "This has not been the case."
He added: "The next catalysts relate to data point readouts in its migraine pipeline, and since there are never certainties with pipeline drugs, we would not be buyers at this current price level until we see execution and better than expected performance."
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