Allergan buys chin fat firm Kythera for $2.1bn
This article was originally published in Scrip
Allergan is now geared up to treat all signs of facial aging, it claims. The Irish-headquartered firm is to buy Kythera Biopharmaceuticals and its approved submental fullness (double chin) drug Kybella (ATX-101) for $75 per Kythera share, or around $2.1bn. The drug, which has a US launch slated for the third quarter of this year, will slot neatly into Allergan's facial aesthetics portfolio, which includes Botox, and serve as a "pivotal entry point for expanding the use of facial aesthetic products in men," hopes Allergan.
Key members of Kythera's management team will already be quite familiar to Allergan. Kythera's chief medical officer Frederick Beddingfield previously ran dermatology and aesthetics research at Allergan, and the company's chief commercial officer Elisabeth Sandoval spent 22 years at Allergan in several different roles, including global marketing for various aesthetic brands.
Kybella (deoxycholic acid) is the first pharmaceutical option for submental fullness – offering a less invasive approach than surgery or liposuction. It was approved by the US FDA in April.
The fixed-value deal consists of 80% cash and 20% new Allergan shares. Allergan says its 2015 EPS forecast provided in May remains unchanged. The acquisition is expected to be breakeven in 2016 and be accretive thereafter, with Allergan "committed to de-levering to below 3.5x debt to adjusted EBITDA by the end of the first quarter of 2016."
Kythera began the process of a training-led launch in the US to educate physicians and qualified injectors on the safe use of Kybella this month.
Allergan has indicated that a major initial launch focus will be on its existing Botox/Juvederm patients.
"From my perspective, the big unknown is how much off-label usage this product may get," commented Evercore ISI analyst Umer Raffat. "[The] FDA advisory committee on Kybella debated how much off-label usage may happen to reduce fat in 'larger body areas'."
Kybella has been forecast to have US sales of around $400m by 2020.
In addition to Kybella, the acquisition adds Kythera's setipiprant (KYTH-105), in development for the prevention of male pattern baldness, as well as additional early-stage development candidates. Kythera licensed setipiprant, an oral antagonist to the prostaglandin D2 (PGD2) receptor, and patent rights covering the use of PGD2 receptor antagonists for the prevention of hair loss in February from Actelion Pharmaceuticals and the University of Pennsylvania. Actelion has tested setipiprant in Phase II studies as an allergic inflammation treatment.
Kythera has cash and equivalents of $211.7m at the end of March 2015. Net loss for the quarter was $28.8m. Allergan expects to close the transaction in the third quarter of this year, pending certain conditions.
other territories
A new drug submission was submitted to Health Canada in August 2014 and a marketing authorization application (MAA) was submitted in October 2014 in Switzerland. Additionally, a new drug submission was submitted to the Therapeutic Goods Administration (TGA) in Australia in February 2015.
Bayer turnaround
In March last year, Kythera bought back the ex-US/Canada rights to Kybella from Bayer for $33m in stock, plus a $51m note payable by 2024. The deal was widely seen as positive for the US company. Bayer had paid $43m upfront for the rights in 2010 and further cash in the form of milestone payments. The German company is now eligible for royalties on ex-US/Canada sales of Kybella.
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