Allergan’s AqueSys acquisition could start a trend

After the sale of its Lap-Band obesity franchise two years ago Allergan appeared to be getting out of medical technology, though the Actavis transaction this year brought with it a suite of aesthetic products. But there is one area in which the company is making a deliberate move into devices: ophthalmology.

Its $300m purchase of the ocular stent developer AqueSys, announced on Friday, is the company’s second tuck-in medtech deal in this space in the past three months. And, with three other companies working on similar technology, this might become the latest area to see a glut of medtech acquisitions.

After all, if Allergan has seen value in the glaucoma device area then it is a reasonable bet that other companies have too. If other acquirers want a foothold in this space, Glaukos, Ivantis or Transcend Medical would be the obvious candidates (Funding war as Ivantis chases Glaukos’s world-first eye stent, February 7, 2013).

Glaukos will not be easy or cheap to acquire. For a start its iStent is the only device approved by the FDA for use with cataract surgery to reduce intraocular pressure in glaucoma patients. But it has also signalled its determination to remain independent, conducting one of the largest medtech IPOs this year when it raised $108m on the NYSE in May (Medtech floats remain steady in 2015, July 2, 2015).

Ivantis or Transcend might be easier prospects. Like AqueSys they have an advantage in that they can probably get their device on sale in the US via the cheaper and faster 510(k) regulatory path, using Glaukos’s iStent as the predicate.

They have raised almost exactly the same amount of venture funding as AqueSys – $89m in total for Ivantis and $80m for Transcend to AqueSys’s $88m – and at a time when VCs are highly sceptical about the value of medical technologies this could be seen as a validation.

Sight for sore eyes

AqueSys’s technology, called Xen45, is similar to the ocular stents developed by Glaukos and Ivantis but unlike these, which are made from titanium and nitinol respectively, Xen is made from a type of permanent gelatin.

AqueSys says the pliability of the gelatin allows the stent to conform to the shape of the eye, and is intended to minimise the chances of migration or tissue damage. As well as the $300m Allergan paid up front for the California company it is also on the hook for regulatory and sales milestones for Xen45 and other products – although AqueSys has not disclosed any other products.

Xen45 is CE marked in Europe for use in patients with primary open angle glaucoma in whom previous treatments have failed; Allergan said it can also be used in conjunction with a cataract procedure. It is in a pivotal trial in the US, and FDA 510(k) clearance could come by late 2016.

The acquisition is twice the size of Allergan’s first ever medtech takeover, that of Oculeve in July for $125m up front. Oculeve’s lead product is a non-invasive nasal neurostimulation device to treat dry eye disease by increasing tear production. This device, called OD-01, could reach the US market at roughly the same time as Xen45.

If the other three players do now attract interest, the question of who might buy is harder to answer. A number of larger companies have demonstrated their willingness to conduct tuck-in deals lately, and these have often come in a sudden slew. It would not be surprising to see a similar pattern with ocular stents.

To contact the writer of this story email Elizabeth Cairns in London at elizabethc@epvantage.com or follow @LizEPVantage on Twitter

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