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Allergan inks $2.1bn deal to buy cosmetic drug firm Kythera

Company will add Kythera’s double chin therapy Kybella to its portfolio

Allergan logoThe M&A juggernaut in the specialty pharma sector shows no signs of slowing down with Allergan paying $2.1bn to snap up Kythera Biopharmaceuticals.

Botox manufacturer Allergan has extended its position in the growing cosmetic or 'aesthetic' pharmaceuticals sector with the purchase, which adds Kythera's double chin therapy Kybella to its portfolio. 

Kybella (deoxycholic acid) was approved by the FDA in April and is administered by injection into the chin in order to break down "submental" fat. It has not yet been launched as Kythera is in the process of training doctors to administer the therapy, which is approved for up to six doses and is expected to cost in the region of around $3,000-$5,000 per course.

Allergan said buying Kythera would allow it to accelerate the growth of Kybella, which Kythera had predicted would become a $500m product in the US alone, by pushing it through the sales channels already in place for wrinkle treatment Botox and its dermal filler products Voluma, JuveDerm and SkinMedica. 

The company's chief executive Brent Saunders also suggested Allergan would be able to speed up the international roll-out of Kybella.

"It has been filed in Canada, Switzerland and Australia and we'll continue to pursue additional markets around the world," he told investors on a conference call yesterday, saying he expected the product to be "a big growth driver for the next 20 years." Kythera has previously indicated it believes the ex-US market for the drug is also in the region of $500m.

The latest deal comes as Allergan is still in the aftermath of a $70bn takeover by Actavis, which completed in March, as well as the official change in trading name for the enlarged group to Allergan. 

Saunders pointed to the results of surveys suggesting 68% of consumers are bothered by fat under their chins. While initial marketing efforts will be towards existing users of Allergan's facial aesthetic products - which are mostly women - Kybella promises to be a product that "really resonates with men."

He also said Kythera has a preclinical-stage development programme looking at the use of a prostaglandin D2 inhibitor in male pattern baldness that could also prove to be a valuable addition to efforts to build the male aesthetics business.

Allergan is paying $75 per share for Kythera, 80% ($1.6bn) in cash and 20% in equity, and the company expects the deal to close in the third quarter. Kythera's shareholders still need to vote on the transaction.

Last year Valeant - which had previously been pursuing a takeover of Allergan before Actavis stepped in - sold a portfolio of aesthetic treatments to Nestle subsidiary Galderma for $1.4bn in cash. 

The US market for facial aesthetics was around $2.5bn in 2013 but is growing by 13.5% on average a year and is set to almost double by 2018, according to GlobalData predictions.

Article by
Phil Taylor

18th June 2015

From: Sales

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