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Financial results

Sharp drop in US gastric band operations

Allergan's Lap-Band is the market leader in laparascopic gastric bands.
Gastric band operations lose out to sleeve gastrectomy procedures
Bariatric market shrinking, but decline is "flattening"

The number of laparoscopic gastric band operations in the US dropped by around 20% since 2011, indicating scepticism in the country’s medical community over its efficacy and the increasing popularity of new operative techniques.

In their second-quarter earnings call, released August 1, Allergan, manufacturer of the Lap-Band, reported that gastric banding had a 33% share of the bariatric market in May 2012, down from “the low forties” in 2011.

33% Gastric band's share of the US bariatric market in May 2012 31% Laparoscopic sleeve gastrectomy's share of the US bariatric market in May 2012

David Pyott, CEO of Allergan, said that banding in the US was losing to gains in laparoscopic sleeve gastrectomy, which had garnered a 31% share of US operations in May 2012.

Although Allergan’s second-quarter 2012 international net product sales across their entire product range were 8.7% up on the previous year and second-quarter earnings were up year-on-year, their obesity intervention line declined 24.1%.

Allergan’s bariatric product line consists of two products: the Lap-Band, and the Orbera gastric balloon, which sells outside of the USA.

Pyott said that it was “encouraging” that the decline in the overall US bariatric market is flattening, saying that the rate of decline in the last three months to may was estimated at 2%, compared to 6% throughout 2011.

However, he admitted that in a time of high unemployment, high patient co-pays were a barrier for many, even in patients with insurance coverage.

Following the publication of the financial results, Allergan’s stock price jumped 10.5%, from $82.07 to $90.68.

Gastric bands

Allergan’s financial results point to a diminishing role for laparoscopic gastric bands in US bariatric surgery. Their Lap-Band makes up 90% of the US gastric band market; the only other FDA-approved band is Ethicon’s Realize system.

While gastric bands generally result in fewer serious complications than Roux-en-Y gastric bypass, several studies suggest that it is less clinically effective over the long term.

Dr Luigi Angrisani recently reported that in his 10-year study, bypass patients were likely to lose more weight and keep it off for longer than band patients. Another recently published six-year case-matched study reported that Roux-en-Y gastric bypass is associated with better weight loss, resulting in a better correction of some comorbidities than gastric banding. 

Sleeve gastrectomy is often seen as a useful midpoint between gastric bypass and gastric banding: more effective than banding, and with fewer complications than bypass. In America, the Centers for Medicare and Medicaid Services recently announced the operation could be supplied by some Medicaid administrators.

Obesity drugs

While the FDA have recently approved two anti-obesity drugs in the USA – Belviq and Qsymia – Pyott said he did not see them as a further threat to Allergan’s two obesity products.

“It’s a different type of patient in terms of the number of kilos they want to lose, and I think that touches much more diet change and exercise,” he said.

Meanwhile, Covidien reported a third-quarter rise in net sales of 3%, which included sales of $2.06 billion in their medical devices division, fuelled in part by double-digit gains for their line of staplers.

Johnson and Johnson, who own Ethicon EndoSurgery, reported second-quarter sales of $16.5 billion, a year-on-year decrease of 0.7%.

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