Yahoo Finance KYTHERA Soars on $2.1 Billion Buyout Offer from Allergan - Analyst Blog
The newly rebranded Allergan Inc. AGN (previously known as Actavis) announced its intention to acquire KYTHERA Biopharmaceuticals, Inc. KYTH – an aesthetic products manufacturer – in a cash and stock transaction (80% in cash and 20% in Allergan shares) valued at about $2.1 billion or $75 per share.
While KYTHERA’s shares jumped 22.1% on the news, Allergan shares were up 0.3%.
What Does Allergan Gain?
The KYTHERA acquisition will add multi-million dollar potential drug, Kybella (deoxycholic acid) injection to Allergan’s facial aesthetics portfolio. Kybella gained approval in the U.S. for improvement in the appearance of moderate-to-severe convexity or fullness associated with submental fat in adults, commonly known as a double chin, in Apr 2015. Kybella is the first FDA-approved, non-surgical treatment for double chin.
KYTHERA is gearing up for the launch of Kybella with an extensive physician training program. KYTHERA is also looking to get the drug approved in Canada, Switzerland and Australia.
The acquisition will also give Allergan rights to setipiprant (KYTH-105), which is being developed for the prevention of male pattern baldness in addition to early-stage development candidates.
Meanwhile, Allergan confirmed that its earnings outlook for 2015 remains unchanged. The company continues to expect earnings in the range of $17.0–$18.5 per share. The acquisition, which is slated to close in the third quarter of 2015, is expected to reach breakeven in 2016 with accretion to earnings anticipated thereafter.
Our Take
With the KYTHERA acquisition, Allergan is looking to boost its long-term growth profile and strengthen its facial aesthetics portfolio, which currently consists of Botox, Voluma, Juvederm and SkinMedica. Given that 67% of consumers are affected by submental fullness as per a survey by the American Society for Dermatologic Surgery, we believe the drug has a multi-million dollar sales potential.
The deal comes close on the heels of Actavis changing its name to Allergan after completing its acquisition of the Botox maker for $70.5 billion in a deal announced last year. The company has for some time been working on expanding its branded business through acquisitions. These include the Durata Therapeutics deal completed in Nov 2014 (to boost its infectious disease portfolio) among others. We expect the company to pursue similar acquisitions.
KYTHERA currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the health care sector are Gilead Sciences Inc. GILD and Actelion Ltd. ALIOF. Both hold a Zacks Rank #1 (Strong Buy).
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