Allergan Bets on Aesthetics With $2.48 Billion Zeltiq DealBy
Zeltiq makes devices that chill fat cells, eliminating them
Botox maker Allergan doubles down on body sculpting products
Botox maker Allergan Plc is betting on aesthetics with the $2.48 billion acquisition of fat-chilling device maker Zeltiq Aesthetics Inc., doubling down on a lucrative industry where patients pay mostly in cash for products and services.
The purchase price is $56.50 a share in cash, the companies said Monday in a statement, a 14 percent premium to Pleasanton, California-based Zeltiq’s closing price Friday of $49.40. Through Friday, the stock had already more than doubled in the last 12 months.
With the deal, Allergan has now agreed to spend more than $5 billion in less than two months to build up its aesthetic-medicine and cosmetic-surgery lines -- businesses that are less susceptible to pressures from U.S. insurers and politicians seeking to reduce health costs.
Zeltiq sells the CoolSculpting System, a noninvasive procedure that chills fat cells to the point where they die and are eventually eliminated. The procedure, first approved by the U.S. Food and Drug Administration in 2010, costs typically $2,000 to $4,000 per patient, according to Zeltiq’s website. It will join Allergan’s facial products, including its best-selling wrinkle treatment Botox, and regenerative lines.
The deal is a logical step as Allergan expands in aesthetics. “Allergan is kind of the leader” with plastic surgeons, said Kevin Kedra, an analyst at Gabelli & Co, who rates the shares as buy. “They have a larger presence, and a long history of being in these offices.”
Shares of Zeltiq, which had 2015 sales of $255 million, rose 13 percent to $55.06 at 2:53 p.m. in New York. Allergan was up less than 1 percent to $247.22.
Allergan projects that body contouring is about a $4 billion business globally that is ripe for growth. In December, it agreed to acquire LifeCell Corp. for $2.9 billion, gaining tissue matrix products used in breast and abdominal surgeries. About a year ago, the company bought Anterios for $90 million for global rights to a product for potential treatment of hyperhidrosis, acne, and crow’s feet lines.
“The hottest trend in the aesthetics profession is the rest of the body,” Allergan Chief Executive Officer Brent Saunders said on a call with investors today, comparing body sculpting with facial aesthetics. “That isn’t going away.”
Allergan also sells Kybella, an injection to eliminate or reduce double-chins. The drugmaker views Kybella as a complementary product to CoolSculpting, which is also distinct because it is for the whole body, and it will be sold to doctors through a separate sales force, Saunders said on the call. Customers could increase to 8,000 from 4,000 globally, he said.
The drugmaker, which has a legal address in Dublin but is run from Parsippany, New Jersey, has been adding non-cosmetic products as well to help build out its pipeline of developing drugs. In September, it announced two liver-disease deals in one day that were among four total acquisitions that month.
The Zeltiq purchase is expected to close in the second half of this year, Allergan said.
Moelis & Co. advised Allergan on the deal, and Debevoise & Plimpton LLP was lead legal counsel. Guggenheim Securities is Zeltiq’s financial adviser, and Cooley LLP provided legal advice.
— With assistance by Zachary Tracer