Kythera to be Acquired by Allergan, Shares Up 22%

Allergan to Buy KytheraAllergan plc Ordinary Shares (NYSE/AGN), the maker of “Botox,” is expanding its product lineup through buying a company that offers the first, and so far only, approved non-surgical treatment for trimming chin fat.

On Wednesday, June 17, Allergan announced that it agreed to acquire Kythera Biopharmaceuticals, Inc. (NASDAQ/KYTH) for $2.1 billion. (Source: Allergan, June 17, 2015.)

According to the press release, Allergan would pay $75.00 per Kythera share, a 23.5% premium over the company’s closing price on Tuesday. Total transaction was valued at $2.1 billion. The deal would be 80% cash, with the remaining 20% in new Allergan shares issued to Kythera shareholders.

Upon the announcement, investors rushed towards Kythera shares. The company’s stock price surged an astonishing 22.02% to $74.10 on Wednesday morning. Allergan’s share price also increased, but at a more moderate pace of 0.50% to $299.51.

The acquisition would give Allergan access to “Kybella,” Kythera’s product to treat contouring submental fullness, also known as double chin. Kybella is the first and only approved non-surgical treatment to reduce fat under the chin. The product is expected to generate at least $500 million in domestic sales and has also applied for regulatory approval internationally in Switzerland, Canada, and Australia.

Kybella would fit well with Allergan’s current product lineup. The pharmaceutical company is famous for its Botox injection, which prevents wrinkles. The company also has “Latisse,” a product that promotes eyelash growth.

“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, Allergan’s CEO and President.

“As a leader in aesthetics, we know our customers are looking to offer their patients new options beyond traditional facial aesthetics. Kybella will do that while complementing our market leading facial aesthetics portfolio.”

Despite the addition of new products, Allergan’s earnings-per-share forecast for 2015 would remain unchanged. The company expects the acquisition to break even in 2016 and become accretive afterwards.

The deal is yet to be approved by the shareholders of Kythera. If everything goes as planned, Allergan expects the transaction to close in the third quarter of 2015.