Tuesday, November 20, 2012

Allergan acquires SkinMedica for $350m - Transaction Valuation and Acquisition Rationale

The dermatology space is witnessing significant interest as far as M&A is concerned. This is the fourth transaction in the recent past. The others include Valeant acquiring Medicis Sandoz acquiring Fougera.and Sun Acquiring DUSA 

Allergan acquiring SkinMedica - Transaction Valuation

Allergan will pay SkinMedica shareholders $350M in upfront and an additional $25M contingent upon the acquired products achieving a pre-specified sales level.  SkinMedica was expected to generate $70M in 2012. On 2012 revenues, the deal is valued at 5x revenue if we exclude the $25M contingent payment). The transaction appears to be in-line with sales multiples paid for aesthetics/dermatology assets in recent years, although clearly toward the higher end of the range (3.0-5.2x).  Allergan expects the SkinMedica transaction to be EPS neutral in 2013 but in-line with the company’s mid-teens growth aspirations longer term

About SkinMedica

SkinMedica markets prescription and non-prescription skin care products direct to physicians – including Vaniqa the only FDA approved Rx treatment for the reduction of unwanted facial hair in women. SkinMedica’s business is expected to reach profitability next year.

Allergan acquiring SkinMedica - Acquisition Rationale

Allergan’s has a global reach, while SkinMedica is a predominantly US focused. Thus Allergan can  leverage its existing relationship with physicians globally in aesthetic medicine by virtue of its product Botox Cosmetic to grow Skin Medica existing business.