Medicis Squeezed in Vanity Pharma Death Match vs. Allergan and J&J

(MoneyWatch)  Medicis may find itself on the losing side of the vanity pharma death match now that Johnson & Johnson has waded in with what will soon be a full suite of silicone breast implants, wrinkle fillers and botulinum toxin line smoothers. J&J on Monday agreed to acquire implant maker Mentor Corp for $1.07 billion. Mentor is developing two more dermal fillers and a Botox competitor, called PurTox. Neither franchise is yet approved by the FDA. The acquisition adds to J&J's existing vanity pharma portfolio which it started in September with Evolence, a wrinkle filler.

The significance of J&J's move is that the three companies (except Medicis) now have competing products in the three major vanity pharma categories. Here's the competitive matrix:

Company	Toxin	Filler	Implant
Allergan	Botox	Juvederm	Natrelle
Medicis	Reloxin	Restylane	None
J&J	PurTox	Evolence	MemoryGel

With doctors and patients now able to choose between three competitors across all three categories, it can mean only one thing: a race to the bottom, price-wise, is about to begin.

Early signs are that Medicis is least-well positioned to win this commodity fight. It's the smallest company (it lost the Inamed breast-implant maker acquisition bidding war to Allergan a couple of years ago).

J&J is starting from furthest behind in this race. Mentor's sales are actually the only one of the three currently in decline. Here's the sales picture:

• Mentor (now J&J) Q2 2009 sales: Flat at $84 million. Implant sales declined 2 percent to $74 million.
• Allergan Q3 2008 sales: $1 billion, up 10.5 percent from $978 million. Net income was $169 million, up from 157 million.
• Medicis Q3 2008 sales: $115 million up 4 percent from $111 million. Net income was $16.1 million, down 12.2 percent from $18.4 million.

But now that Mentor is backed by J&J, it has -- at least potentially -- the largest available sales and distribution force.

The starting gun already sounded on the race with the recession. Esthetic docs are offering price cuts just like Walmart. So the category is now experiencing a perfect storm: heightened competition at a time of slackening demand.