(Bloomberg Gadfly) -- After a year of share-price misery, Allergan PLC finally got a boost on Tuesday. Better-than-expected fourth-quarter results and positive trial data for a migraine drug helped Allergan shares rise in early trading -- a genuine achievement in the current market environment.
But generic competition looms for its second-best-selling product Restasis, which will hurt sales this year. Allergan still needs to prove it knows where the sales floor is and that it can rapidly return to growth.
It's been tough for investors to trust Allergan lately. Wall Street analysts have repeatedly ratcheted down their earnings forecasts, curbing what may have been over-optimism about the longevity of older medicines and the outlook for newer products.
Allergan's relatively conservative 2018 guidance is an effort to overcome that trust gap. And the release of migraine-drug data may help investors focus on the future rather than the ugly present.
But the benefits of Allergan's migraine program are distant and uncertain. The firm is one of many trying to launch similar drugs in the next few years. At least two competitors will likely hit the market this year, while Allergan's drug, ubrogepant, likely won't launch until 2020.
Allergan's drug can be swallowed, while those of four potential competitors must be injected; that may help it carve out a niche. But ubrogepant may not be quite as effective as other medicines. Liver issues have plagued this class of drugs in the past. And Biohaven Pharmaceutical Holding Co Ltd. is expected to release trial data on its own orally administered migraine drug shortly.
The drug's trial success is certainly good news that came earlier than expected. It may bolster the market's confidence in Allergan's sometimes chancy R&D decisions. Investors can look forward to more data from the migraine drug and other pipeline products. But none of that will do much to lessen the sting of potentially losing billions of dollars in sales of Restasis and other medicines this year.
It's one thing for investors to know the blow is coming. It will be another when they actually start seeing year-over-year sales declines for the first time in years.
There are other nice things happening at Allergan. Botox is still a juggernaut. Anti-psychotic drug Vraylar has blockbuster potential. Recent acquisitions aimed at bolstering the firm's medical aesthetics division seem to be paying off.
But 2018 is about bottoming out for Allergan. Until that process is complete, it is likely to have a hard time getting investors to consistently look on the bright side.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.
To contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.net.
©2018 Bloomberg L.P.
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