Apollo Endosurgery Wants Lap-Band To Become Even More Of An Asset

Article preview from Start-Up - November 8, 2013

At the end of October, Apollo Endosurgery announced that it would acquire certain obesity assets from Allergan: Lap-Band, one of the most well-known brands in bariatric surgery, and Orbera, Allergan’s intra-gastric balloon system, the leading such product in Europe. It’s not unusual these days for large companies to unload under-performing businesses, but the Allergan deal is striking because of its choice of partner. Apollo Endosurgery is a small organization acquiring a much larger one.

Apollo Endosurgery Wants Lap-Band To Become Even More Of An Asset

Article preview from Start-Up - November 8, 2013

Success is directly proportional to the amount of energy concentrated on an endeavor, and both Allergan Inc. and Apollo Endosurgery Inc. are betting on that principle. At the end of October, small and focused Apollo Endosurgery announced that it would acquire certain obesity assets from Allergan: Lap-Band, one of the most well-known brands in bariatric surgery, and Orbera, Allergan’s intra-gastric balloon system, the leading such product in Europe. (Orbera is in clinical trials in the US.) Apollo will pay $75 million in cash up front, plus a minority equity interest of $15 million and up to an additional $20 million contingent upon regulatory and sales milestones. 

Sales of Lap-Band were way down from its peak – Allergan’s obesity products accounted for $243 million in 2010 and brought in only $160 million in 2012, largely because of competition that had come in from other minimally invasive products and procedures for bariatric surgery. Apollo happens to sell endoscopic surgical tools that enable some of those less invasive bariatric procedures, and with the acquisition, it will offer a continuum of less invasive alternatives for obesity.

Allergan’s divestiture reflects a trend, in the past year or so, of large companies shedding profitable assets, usually in the $100 million to $500 million revenue range, simply because they’re either not strategically aligned with the rest of the portfolio or because they’re not large enough to move the needle in terms of growth.

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