July 22nd, 2015
Botox maker Allergan buying Kythera, developer of double chin treatment
Already hoping to erase your wrinkles, Allergan now wants to do away with double chins.
The Ireland-based drug company, seller of Botox anti-wrinkle injections, agreed Wednesday to pay $2.1 billion in cash and stock for Kythera Biopharmaceuticals Inc.
Kythera, based in Westlake Village, is rolling out its first major product: a new injectable, fat-destroying drug called Kybella that reduces double chins, technically called submental fullness.
Kybella was approved by the U.S. Food and Drug Administration in April, and Kythera also hopes to sell the drug in Canada, Australia, Switzerland and other foreign countries.
Allergan said Kythera would broaden its product line in the multibillion-dollar market for “facial aesthetics,” or what some might simply call people’s vanity.
“When you talk to physicians … they say this is a huge opportunity for them to really help patients feel better about their face, and it can potentially attract more patients,” Allergan Chief Executive Brent Saunders told analysts on a conference call Wednesday.
Allergan hopes that’s especially true for men, who currently account for only 12% to 13% of patients for facial treatments, he said.
Allergan, based in Dublin, agreed to pay $75 a share for Kythera, a 24% premium above Kythera’s closing price Tuesday.
In response, Kythera shares soared $13.39, or 22%, to $74.11 on Wednesday. Allergan shares gained 77 cents to $298.79.
Kythera previously suggested that the double-chin drug could generate $500 million a year in sales. Botox generates more than $2 billion in annual sales.
Still, “this deal looks a bit pricey” under the merger’s terms even though Allergan, with its established market channels, “is an ideal commercial organization to take [Kybella] forward,” analyst Ronny Gal of the investment firm Sanford C. Bernstein wrote in a note to clients.
Until this week, Allergan was called Actavis. But Actavis adopted the new name after buying the former Allergan Inc., based in Irvine, for $70 billion in March.
Allergan still has 2,100 employees in Irvine and an additional 300 in Corona. Its global workforce totals 30,000.
Actavis’ offer thwarted a contentious takeover bid for the old Allergan last year by Valeant Pharmaceuticals International Inc., a Canadian company.
Valeant had partnered with hedge fund manager Bill Ackman in the attempted takeover, arguing that Allergan spent too heavily on research, which dragged down profits.
Allergan’s product line also includes Restasis, a prescription drug for chronic dry eye, and Latisse, a prescription drug that creates thicker eyelashes.
Allergan’s decision to buy Kythera “was likely not a hard one as their double-chin treatment Kybella is exactly the type of product that Allergan excels in selling,” analyst Maxim Jacobs at Edison Investment Research wrote in a note to clients.
Allergan CEO Saunders told analysts that the company would ramp up Kybella sales “much faster than Kythera could have on their own given our size and scale.”
Saunders also said that because users of Botox and certain other products “are comfortable with facial injections” they would be “the initial target [market] for Kybella.”
Kythera raised $72.5 million in its 2012 initial public offering. As primarily a clinical-stage, research-and-development firm with just over 100 employees, it has posted losses since then, including a $135.6-million loss last year.
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