Bo­tox maker adds wrin­kle to lineup

Al­ler­gan agrees to buy Kythera, devel­oper of Ky­bella, which treats dou­ble chins.

Los Angeles Times - - BUSINESS - By James F. Peltz

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, techni- cally 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 es-

pe­cially 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 dou­blechin 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.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.