Botox-maker Allergan Plc to buy Kythera Biopharmaceuticals for $2.1 bn

Botox-maker Allergan Plc yesterday struck a deal to buy Kythera Biopharmaceuticals Inc in a $2.1-billion cash-and-stock deal, in order to expand its portfolio of cosmetic treatments.

Kythera is a biopharmaceutical company focused on the discovery, development and commercialisation of novel prescription products for the aesthetic medicine market.

Allergan is offering to pay $75 per share, a premium of 23.5-per cent to Kythera's closing price of $60.72 yesterday.

Kythera's shares rose 22.7 per cent to $74.50 in Wednesday pre-market trades, just 50 cents lower to Allergan's offer price.

Allergan's offer consists of 80 per cent cash and 20 per cent in stock, and the deal is expected to close in the third quarter of 2015.

Allergan's 2015 earnings-per-share forecast provided on 11 May 2015 is unchanged as a result of the acquisition.  The acquisition is expected to be breakeven in 2016 and accretive thereafter. 

"The Company remains committed to de-levering to below 3.5x debt to Adjusted EBITDA by the end of the first quarter of 2016," Allergan said in a statement.

The acquisition of Kythera immediately enhances Allergan's global facial aesthetics portfolio with the addition of Kybella injection, the first and only approved non-surgical treatment for contouring moderate to severe submental fullness, commonly referred to as double chin. 

Kybella was approved by the US Food and Drug Administration (FDA) in April 2015.

Kybella injection, which is also pending regulatory approvals in Switzerland, Canada, and Australia, and other markets, is expected to earn at least $500 million in the US, and is likely to generate the same amount in international sales.

The acquisition will also add Kythera's development product setipiprant (KYTH-105), a novel compound for the prevention of male pattern baldness, as well as additional early-stage development candidates.

"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, CEO and president of Allergan. 

"Allergan's world-class medical aesthetics, global footprint, history and commitment to developing leading aesthetic products makes them ideally suited to realize the maximum commercial potential of Kybella," said Keith Leonard, CEO and president of Kythera.

Allergan's anti-wrinkle and chronic migraine treatment drug Botox is the driver for the deal. Botox generated about $2 billion of Allergan's total 2013 revenue of $6.3 billion in 2013.

The deal is Allergan's first multi-billion acquisition after it was acquired by Actavis Plc for $66 billion. Ireland-based Actavis this week adopted the Allergan name.

Founded about 60 years ago, Allergan is a global specialty pharmaceutical company whose product range includes ophthalmic pharmaceutical, dermatology and neurological products.

Apart from Botox, Allergan's dry-eye drug Restasis generated about $940 million, its breast-implant business $378 million and Latisse, its prescription drug that increases the length of eyelashes contributed $100 million.

Allergan, which spends about 17 per cent or about $1 billion a year of its revenue on research and development of new drugs, has 11,400 employees and manufacturing plants in Texas, Ireland, and Costa Rica.