Devices & Diagnostics

On day celebrating love, beauty deals abound

Love is in the air today, but physical beauty may line some pockets as billion-dollar acquisitions occur in the medical aesthetics market.

Beauty by tradition

Beauty may be skin deep, but the business of beauty has never seemed so promising as on this Valentine’s Day.

On Monday, Allergan announced that it was purchasing Zeltiq Aesthetics, whose CoolSculpting technology freezes fat to get rid of all those extra unseemly layers that will not bend to diet and exercise. Allergan paid a cool $2.5 billion to acquire the nonsurgical technology.

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A Deep-dive Into Specialty Pharma

A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.

And on Valentine’s Day, Hologic, the maker of 3-D tomography equipment announced that it is also venturing into the medical aesthetics space. It is buying Cynosure for $1.65 billion. Among the treatments it offers is noninvasive body sculpting to get rid of cellulite using lasers.

Even the name of the company – Cynosure, which means a thing or person at the center of attention or admiration – does not beat around the bush of what indeed it is hoping to achieve for its customers. But the deal caught analysts by surprise.

“While the deal does add a new leg to HOLX‘s growth story, we did not expect a deal of this size to occur so quickly, and we had expected smaller tuck-in deals in GYN Surgical,” wrote Glenn Novarro, an analyst with RBC Capital Markets, in a research note on Tuesday.

For Allergan, the deal is not completely out of the ordinary given that with its Botox franchise, beauty falls within its current portfolio.

For Hologic though it represents a move for medical device companies to look for growth outside its regular confines of therapeutic purpose.

And betting on beauty while unexpected for the likes of medical devices companies like Hologic, may be a smart business deal.

A market research report forecasts that the medical aesthetics market — which includes liposuction, cellulite and fat reduction, skin tightening, breast implants, Botox, dermal fillers, tattoo removal, thread lift, and laser hair removal — will grow to $13.3 billion by 2021. That’s more than a 10% increase (compound annual growth rate) from what it was in 2016.

In announcing its acquisition of Cynosure, Hologic touted the growth that the beauty company has been experiencing. Last year Cynosure, garnered $433.5 million in revenue and posted 28 consecutive quarters of annual top-line growth.

Still, not all analysts are buying it.

“The purchase price combined with a larger deal than expected, a move into a new area, which always has risk, and an area that is very economy sensitive may lead to investors not loving this deal and pressuring Hologic shares today,” wrote Sean Lavin, an analyst with BTIG, in a research note Tuesday.

Love is in the air today but physical beauty may line some pockets.

Photo: PeopleImages