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Allergan Coughs Up $2.1 Billion for Double-Chin Drugmaker Kythera

Written by: | | Dated: Wednesday, June 17th, 2015

Allergan Plc, best known as the maker of Botox, announced today that it will buy Kythera Biopharmaceuticals, Inc. (KYTH) for approximately $2.1 billion. Kythera is focused on treatments for double chins and male pattern baldness.

The deal for the Dublin-based Allergan Inc. (AGN) to pay about $75 per Kythera share. About 80 percent will be in cash and 20 percent will be in new AGN shares provided to Kythera shareholders. Kythera is headquartered in Westlake Village, Calif.

Kythera’s Kybella (deoxycholic acid) injection is a treatment for double chin. It was approved by the U.S. Food and Drug Administration (FDA) on April 29, 2015. It is also being submitted for approval in Switzerland, Canada and Australia, as well as other markets. Kythera also has a compound in early-stage development for male pattern baldness, KYTH-105 (setipiprant).

“The acquisition of KYTHERA is a strategic investment that strengthens our leading global position in aesthetics and continues to position us for long-term growth,” said Brent Saunders, president and chief executive officer of Allergan in a statement. “KYBELLA is an exciting new product that offers patients the first and only clinically-proven, non-surgical treatment for submental fullness (excess fat under the chin). As a leader in aesthetics, we know are customers are looking to offer their patients new options beyond traditional facial aesthetics.”

On Mar. 17, 2015, Allergan was acquired by Dublin-based Actavis (ACT) for about $70.5 billion. This merger created one of the world’s top 10 pharmaceutical companies by sales revenue, with about $23 billion anticipated in 2015.

“Supporting the growth of this innovative industry model is our strategically focused research and development engine, built on novel compounds in specialty and primary care markets where there is significant unmet medical need, and fueled by approximately $1.7 billion in annual investment,” said Saunders in a statement at the time. “With an innovative product development portfolio exceeding 20 near-term projects and a world-class generics pipeline, which continues to hold an industry-leading position in First-to-File opportunities in the U.S. and more than 1,000 marketing authorizations globally, we are uniquely positioned within our industry to ensure our development activities support sustainable long-term organic growth.”

For much of 2014 Allergan was embroiled in a hostile takeover bid by Canadian-based Valeant Pharmaceuticals International, Inc. (VRX) and Bill Ackman’s New York hedge fund, Pershing Square Capital Management. In March 2014 Pershing Square acquired about 10 percent of Allergan stock. Valeant and Pershing Square a month later announced a joint bid for Allergan, which resulted in a 15% stock increase, providing Pershing $1 billion in gains.

Allergan filed a lawsuit with the U.S. Securities and Exchange Commission (SEC) accusing Pershing and Valeant of insider trading, which launched an official investigation.

Allergan approached Raleigh, N.C.-based Salix Pharmaceuticals, Ltd. (SLXP) in August 2014 regarding an acquisition in hopes of fending off Valeant and Pershing. That deal, however, fell apart when due diligence revealed significant inventory problems with Salix, which resulted in Salix’s chief financial officer, Adam Derbyshire, resigning and a full inventory audit to be initiated.

In a morning conference call regarding the Kythera acquisition, Saunders said, “The strategic logic of this deal is incredibly sound. This is really about extending our leadership in facial aesthetics.”

Analysts agree. In a research note, Maxim Jacobs, with Edison Investment Research, said, “Allergan’s decision to acquire Kythera was likely not a hard one as their double-chin treatment, Kybella, is exactly the type of product that Allergan excels in selling plus two members of the senior management team had spent a total of around 30 years at Allergan.”



June 17, 2015
By Mark Terry, Breaking News Staff

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