Coverage: Allergan buying Zeltiq for $2.48 billion

Botox maker Allergan Plc agreed to pay $2.48 billion in cash for Zeltiq Aesthetics Inc., adding a system that it says helps people slim down by freezing fat away to the company’s line-up of aesthetic products.

Michael Erman and Natalie Grover of Reuters had the news:

Allergan said it would benefit from the cross-selling opportunities for consumers of Zeltiq’s CoolSculpting System, which uses cooling to kill fat cells, as well as customers of its own facial injectible products.

“Demand for both procedures is high and this is similar to pouring more gas on the fire,” Allergan Chief Commercial Officer Bill Meury said on a call with investors.

The Botox maker agreed to pay $56.50 per Zeltiq share, or a premium of 14.4 percent to the company’s Friday close. Zeltiq’s shares rose 12.8 percent to $55.72 in midday trading on Monday.

Zeltiq’s process was created after two scientists at Harvard University noticed that some children who ate popsicles got dimples in their cheeks, according to Zeltiq’s website. They discovered that the popsicles were eliminating small pockets of fat cells.

Insurers do not cover Zeltiq’s CoolSculpting System, meaning the bulk of the company’s more than $350 million in 2016 sales was paid directly by consumers. Allergan said it has been targeting so-called “cash-pay” businesses, which is a model it uses for some of its Botox sales and other aesthetic offerings.

Portia Crowe of Business Insider notes Allergan has been a serial acquirer recently:

In December, it announced it was buying the regenerative-medicine company LifeCell for $2.9 billion. In October it said it was buying the rights to a Crohn’s-disease drug for about $1.3 billion.

In September, the company announced four other deals:

• On September 20, it acquired Tobira Therapeutics, which is developing two treatments for a liver condition called NASH in a deal worth $1.65 billion.
• Later that afternoon, the company announced it had also acquired Akarna Therapeutics, a private company also working on drugs to treat NASH. That deal was worth $50 million up-front.
• On September 14, it acquired the dermatology company Vitae Pharmaceuticals for $639 million.
• A $60 million up-front deal to buy RetroSense Therapeutics, a gene-therapy company that is working on a treatment for a cause of blindness, happened September 6.

Those followed the $34 billion sale of Allergan’s generic-drug business to the Israeli pharmaceutical Teva. Allergan attempted to merge with Pfizer in 2015 in what could have been a tax inversion, but US regulators blocked the deal last April.

Jared S. Hopkins of Bloomberg News reports that Allergan is betting in products where consumers pay cash:

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.