Why Kythera Biopharmaceuticals, Inc. Stock Soared Today

By Markets Fool.com

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What: Shares ofKythera Biopharmaceuticals shot up by 22% today after the company agreed to sell itself to Botox-makerAllergan for $75 per share, or $2.1 billion. Through this deal, Allergan will gain access to Kythera's newly-approved injected cosmetic treatment, Kybella, for submental fat, commonly known as "double chin". In addition, Allergan will add a host of intriguing experimental candidates in the cosmetic drug arena to its clinical pipeline, such assetipiprant for male pattern baldness. Per the press release, Kythera shareholders will receive80% of the transaction in cash and the remaining 20% in the form of Allergan shares.

So what: Kythera's management believes Kybella could generate roughly $500 million in domestic sales, and a similar amount overseas down the road. If this line holds, Allergan just executed perhaps the best deal in the pharmaceutical industry, from a valuation creation standpoint, in recent memory.

Now what: Allergan is uniquely positioned to launch Kybella given its strong presence in the facial cosmetic market with Botox. In fact, there is a good chance that there will end up being a fair amount of cross-over between the Botox and Kybella target markets. As such, this novel product should contribute almost immediately to the drugmaker's top-line, making it a key drug to watch going forward.

The article Why Kythera Biopharmaceuticals, Inc. Stock Soared Today originally appeared on Fool.com.

George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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