The TV series Nip/Tuck ended a six-year run last year, but in the real world the demand for cosmetic plastic surgery shows no signs of abating, with procedures growing 5% in 2010. The fact that people are more willing to dole out discretionary dollars for facial and body work is a good sign the recession is nearing an end.
Two companies continuing to capitalize on the demand for vanity fare are Medicis (NYSE:MRX) and Allergan (NYSE:AGN) — and their share prices reflect investor enthusiasm over performance and prospects.
Medicis recently hit a 52-week high of $32.09 and is up about 45% since July 2010. This growth is encouraging, although the company still has a way to go before reaching the $40 it traded for a little more than four years ago. After reporting big 2010 sales and profit increases, Medicis is being a bit more cautious in its outlook. For 2011, the company expects an operating earnings gain of 5% to 14% on a sales increase in the 4%-10% range.
Allergan, meanwhile, touched a 52-week high of $72 in mid-February before easing to below $70 amid the broader market selloff. The stock has come a long way since dipping below $40 just two years ago.
Medicis is smaller and more narrowly focused than its Irvine, Calif.-based competitor. Its products attack such aliments as fungal infections, rosacea, psoriasis, and dermatitis. The Medicis drug Liposonix targets tummy fat while Restylane corrects wrinkles and skin folds.
But it’s pimples that drive the company’s revenue, with treatments for the condition accounting for nearly 70% of its sales in 2010. Most of that came from the drug Solodyn, so it’s no surprise that the company picture brightened by the recent settlement with generic manufacturer Teva (Nasdaq:TEVA). It gives Medicis patent exclusivity on the drug until 2018, longer than had been expected
Unlike Medicis, Allergan is a big player in the eye care treatment business. Sales of those products account for nearly half of the company’s revenue stream.
In the aesthetics field, the company’s biggest seller by far is Botox, for treating those nasty frown lines. Botox had the market all to itself for a decade until Medicis won approval to sell Dysport. Since then, the companies have engaged in what’s likened to the Pepsi vs. Coke battle to prove their respective products are superior. Botox got a boost of sorts when Allergan received FDA approval to sell the drug for chronic migraine headaches.
Allergan also has products to treat acne, a line of dermal fillers, breast implants and several devices to treat obesity. With the large baby boomer population striving to look and feel younger, Allergan looks to be in a good spot. It would also make a nice addition to a larger pharmaceutical company and takeover rumors surrounding the company may be another reason investors are keen on the stock.
At the time of publication, Barry Cohen did not own shares in any of the stocks mentioned in this article.
