Allergan, Inc. (AGN - Free Report) announced that it has completed the sale of its obesity intervention business. The obesity intervention business was sold to Apollo Endosurgery, Inc. for an up-front cash payment of $75 million and a $15 million minority equity interest in Apollo. Additional considerations include contingent payments of up to $20 million based on the achievement of certain regulatory and sales milestones.
We remind investors that on Oct 29, 2013, along with its third quarter 2013 results, Allergan announced that it had entered into a definitive agreement with Apollo for the sale of its obesity intervention business.
Allergan’s erstwhile obesity intervention business comprised several weight loss treatments including Lap-Band, an adjustable gastric banding system and the Orbera intra-gastric balloon system.
The company has classified the obesity intervention business under discontinued operations since the first quarter of 2013. Allergan’s board of directors after evaluating several strategic options for maximizing the value of their business decided to sell off this unit.
The obesity intervention segment has performed disappointingly over the past few years. Sales declined 21.5% in 2012. The obesity market is getting very competitive. Last year, two new obesity drugs - Belviq and Qnexa - were approved. Other companies are also developing candidates targeting the lucrative obesity market. Sale of the struggling business unit will enable the company to focus on its areas of strength.
Allergan carries a Zacks Rank #3 (Hold). Some better-ranked stocks include Actelion Ltd. , Jazz Pharmaceuticals (JAZZ - Free Report) and Bayer (BAYRY - Free Report) . While Actelion and Jazz Pharma carry a Zacks Rank #1 (Strong Buy), Bayer holds a Zacks Rank #2 (Buy).