Allergan plc (AGN - Get Report) may face pressure to do significant deals amid news that another competitor to Botox is in the works, according to a stock analyst.

Mylan NV (MYL - Get Report) and Revance Therapeutics Inc. (RVNC - Get Report) said after the market close on Wednesday, Feb. 28, they have linked up to develop and commercialize a proposed biosimilar or copy of the drug, which has both therapeutic and cosmetic indications.

"We think Allergan [management] must now prepare for the prospect of a viable global biosimilar and make pre-emptive plans to diversify its business into other verticals rather than focus primarily on its international cosmetic build-out," Mizuho Securities USA LLC analyst Irina Koffler said in a note.

Koffler thinks Allergan "may now be pressured to pursue transformative transactions."

Allergan's recent M&A activity included its deal in February to acquire Elastagen Pty. Ltd., which is developing injectable aesthetics products, for up to $260 million.

The company's deals in 2017 included its acquisition of Zeltiq Aesthetics Inc., the medical technology company behind the body-contouring CoolSculpting System, in a $2.5 billion deal completed in April. It acquired Keller Medical Inc. in June and signed a deal to buy biopharmaceutical company Repros Therapeutics Inc. for 67 cents per share, or $26.5 million, in December.

Despite the recent activity, Allergan chairman, president and CEO Brent Saunders on a conference call last month said, "It's most likely that 2018 will be a relatively boring year for Allergan on the M&A front."

News of the Botox biosimilar sent Allergan's shares slumping 3.8% to $148.40 on Thursday afternoon. The stock has declined 9.3% in 2018.

"Though this biosimilar is a longer-term risk, it may create an immediate overhang on Allergan's reimbursed therapeutic franchise and its future outlook," Koffler said.

Botox Therapeutic, part of Allergan's neuroscience and urology offerings, is used for the treatment of chronic migraine and bladder dysfunction, among other conditions. It had U.S. sales of $1.38 billion and international sales of $357.5 million in 2017.

As for the cosmetics side of things, "we are less concerned about cosmetic pressure because we aren't expecting Mylan to invest in a dedicated sales force, but we still expect these fears to weigh on the stock," Koffler added.

Botox Cosmetic, which resides within Allergan's medical aesthetics unit, generated $812.2 million in the U.S. and $557 million internationally last year.

An Allergan representative said via email that the Botox brand is "tested and proven for nearly 30 years with over 12 indications" and noted that Allergan's research and development investment "includes potential future indications for Botox and Botox Cosmetic as well as next-generation neurotoxins."

Terms of the biosimilar collaboration call for Mylan to make a $25 million upfront payment to Revance plus potential milestone payments and sales royalties.

"Through this deal Mylan was able to secure the 'Botox halo' for a mere $25M upfront payment, in our view," Koffler wrote.

Based on her understanding of the collaboration, Mylan and Revance "may pursue both cosmetic and therapeutic indications with their product," Koffler said.

Word of the Botox biosimilar comes as no surprise. "Among biologic products, [Botox] is a juicy target," Piper Jaffray & Co. analyst David Amsellem said, pointing to Botox's underlying sales and underlying addressable market.

Asked how the Botox biosimilar might impact Allergan, Amsellem said: "The underlying market continues to grow. That won't change. What will change is the pricing environment if there is competition, and that's where it could make it difficult for Allergan to grow sales at levels seen historically."

In addition to its biosimilar collaboration with Mylan, Revance is working on its own product, RT002, that will compete with Botox.

Newark, Calif.-based Revance in December unveiled positive top-line results from two Phase 3 studies evaluating RT002 for the treatment of glabellar, or frown, lines. In that announcement, 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.

Revance expects to complete a long-term safety study, Sakura 3, in the second half of this year, and if the study is a success, the firm intends to submit a biologics license application in the first half of 2019.

Another upcoming competitor to Botox Cosmetic comes from Irvine, Calif.-based Evolus Inc. (EOLS) , which recently became a publicly traded company. The FDA plans to complete its review of Evolus' application of DWP-450 for the treatment of glabellar lines by May 15.

At present, Botox Cosmetic competes with Galderma SA's Dysport and Merz Pharma GmbH & Co. KGaA's Xeomin. Galderma is a unit of Nestlé SA.

Shares of Mylan were up 2.6% to $41.36 on Thursday afternoon, while Revance's shares had fell 2.9% to $30.05. Evolus' stock declined 4.1% to $11.60 and shares are down 3.3% since its initial public offering on Feb. 8.

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