Allergan bets $125M on a new approach to dry eye disease

Allergan CEO Brent Saunders

Allergan ($AGN) has scooped up a med tech startup with an innovative treatment for dry eye disease, paying $125 million up front for the rights to a tiny device designed to spur tear production.

Under the deal, Allergan picks up the venture-backed Oculeve and its lead candidate, a nerve-stimulating implant placed in the nose. The device, OD-01, has successfully treated symptoms of dry eye across four clinical trials in more than 200 patients, according to Allergan, and the company plans to launch two more studies before submitting the implant for FDA scrutiny in 2016. If the device wins approval, Oculeve's shareholders are due undisclosed commercial milestone payments, Allergan said.

Buying into OD-01 fits with Allergan's overarching approach to R&D, which calls for a sharp focus only on therapeutic areas where it can lead and a preference for treatments that have already cleared the proof-of-concept hurdle. Allergan is well heeled in dry eye thanks to the top-selling Restasis, and Oculeve's device will join an unspecified number of pipeline treatments targeting the disease, the company said.

Oculeve, founded by Stanford's Michael Ackermann in 2011, grew out of the school's Biodesign program with seed funding from Kleiner Perkins Caufield & Byers. After nailing down a prototype in 2012, the startup banked a $7.6 million A round from KPCB, Versant Ventures and New Enterprise Associates, following that with a $16.6 million fundraise in 2014.

"Allergan's position and expertise in eye care will maximize the development and potential commercialization of the OD-01 technology," Ackermann said in a statement. "I am extraordinarily appreciative and proud of the Oculeve team that has worked so hard to develop our exciting technology, and I am thrilled for us to partner with the Allergan team on the continued development, potential approval and availability of OD-01 to patients worldwide."

For Allergan, the buyout comes about a month after the company agreed to pay $2.1 billion for Kythera ($KYTH) in another on-brand deal, bringing in a drug to burn away chin fat and complementing its portfolio of aesthetic treatments led by Botox.

And each deal syncs up with CEO Brent Saunders' vision of what he calls "growth pharma." Saunders' Actavis, which acquired the old Allergan for around $70 billion this year, made its name downplaying traditional drug discovery in favor of building a pipeline with its sizable checkbook. And that same principle has carried over into the new Allergan, which prefers paying higher premiums for products that have already established proof of concept or won FDA approval to spending hundreds of millions of dollars a year on early-stage lab experiments with long odds of success.

- read the statement