Allergan ($AGN) will sell its obesity intervention business to Apollo Endosurgery in a deal worth up to $110 million, capping its yearlong quest to unload the Lap-Band and other related devices.
Austin, TX-based Apollo Endosurgery, a 2012 Fierce 15 winner, said it will pay $75 million up front, plus a minority equity interest of $15 million. Over time, Allergan also stands to gain up to $20 million more based on specific regulatory and sales milestones. With the acquisition, Apollo gains products including the Lap-Band, an adjustable gastric banding system approved in the U.S. and internationally for over 18 years; and Orbera, an intragastric balloon system with international regulatory approval.
Apollo investors PTV Sciences, H.I.G. BioVentures, Remeditex Ventures, Novo A/S and CPMG provided equity financing for the deal. Oxford Finance led the debt financing, which also included MidCap Financial and EastWest Financial Services, Apollo Endosurgery President and CEO Dennis McWilliams told FierceMedicalDevices via email.
McWilliams said he he sees the acquisition as "a logical step forward for Apollo in what we see as an extension of our existing focus on developing less invasive medical devices for a variety of procedures."
"The Allergan obesity business provides us with a solid starting point for global expansion and additional product commercialization for both weight loss and other procedures," he explained, noting that 50% of Apollo's existing customers/procedures are already in the obesity space.
McWilliams said that the deal is focused on "growth and commercial expansion." He noted that "a big piece of the value of this transaction is [Allergan's] direct sales infrastructure in the US and in 40 countries around the world."
Maybe so, but Allergan's obesity intervention division has struggled in recent years. The California-based company began to explore a possible sale back in October 2012. This followed its decision to abandon plans to pursue expanded Lap-Band use in the U.S. teen market in the wake of safety concerns, new research that questioned Lap-Band's effectiveness and other complaints. As Bloomberg previously noted, revenue for the obesity division peaked in 2009 at $296 million, before hitting $159.5 million in 2012. Declining revenue aside, Allergan said it was happy to sell the division to Apollo and believes it is ripe for future growth.
"We are confident that Apollo Endosurgery has the management expertise, industry experience and commitment to innovation that will be essential to the continued clinical development and future advancement of the Lap-Band and Orbera franchises," Allergan Chairman and CEO David Pyott said in a statement.
Apollo itself has been primed for expansion for a while, so it may inject some new life into Allergan's obesity franchise. The company pulled in a $47.6 million Series B financing in early 2012 that has helped support commercial rollout in Europe of two of its endoscopic surgical products. Apollo already has at least 11 FDA approvals and is already marketing several products in the U.S., including is OverStitch endoscopic suturing system.
McWilliams said combined product roster will drive new growth, products such as Apollo's OverStitch and Allergan's Orbera device.
"The combined organization will have over 900 patents in the field of less invasive surgery, and so we will have a fertile field to grow revenue from this innovation," he told us.
- read the release
Special Report: FierceMedicalDevices' 2012 Fierce 15 - Apollo Endosurgery