Allergan, the company who manufactures the Botox injections, recently announced that it would be purchasing Kythera Biopharmaceuticals Inc. along with its newly approved double-chin treatment in a deal that is said to be worth as much as $2.1 billion. The company will be paying $75 a share in stock and cash in order to close the deal.
Bolstering its Portfolio
Earlier this year, Kythera received FDA approval for injections that can eliminate the fat which causes double chins in patients. Numerous doctors had been eager to include the new drug called Kybella to their existing cosmetic treatment programs. The Chief Executive of Allergan, Brent Saunders, stated that Kybella “will do better in our hands” and that is “even more true internationally.” Although this deal would add to Allergan’s debt, it stated that it is expecting to reduce debt levels to 3.5 times adjusted earnings before tax, interest, depreciation and amortization by the end of Q1 in 2016.
A New Target in Cosmetic Medicine
Double chin treatment is one of the latest targets in the cosmetic medication market, which is currently led by Botox treatments. Although double chins are extremely common, the condition is still one which goes largely untreated in both men and women. The condition can result from weight problems as well as genetic issues and it is one of the areas on the body that are most resistant to exercise and diet. Analysts have predicted that forecast sales of Kybella could be lower than anticipated because of the fact that up to four treatment sessions could be needed for patients to see results – unlike other facial treatments where only one treatment was needed.
A Potential Sales Booster
Executives at Allergan say that the company can make use of its existing industry-leading sales force to help it achieve good sales figures for Kybella, while also using the appeal of the new drug to boost sales of its existing products like Botox. Phillippe Schaison, president of Allergan Medical stated in this regard, “There are more than 13 million women sitting on the fence” about whether to receive cosmetic treatment, and “Kybella will bring them in the office.” These patient consultations would provide further opportunities for Allergan to promote Botox, Voluma and Juvederm as well.
Another Added Benefit to Consider
Allergan has taken another potential advantage of Kybella into consideration – the opportunity to do away with unsightly and often embarrassing double chins may end up resulting in more men who are willing to undergo facial treatments. At present, only about 13% of the current facial injection market is made up of male participants. Kythera has mentioned that it also has a drug in the pipeline that would address the ever increasing problem of male baldness.
Since the company decided to go public 3 years ago, Kythera has not reported making any profits. In fact, during its most recent year of business activity, it ended up booking a loss of almost $136 million.