Apollo Endosurgery Acquires Obesity Intervention Division from Allergan

Apollo Endosurgery Inc., a developer of medical devices and endoscopic surgical procedures, is buying the obesity intervention division of Irvine, Calif.-based Allergan Inc. Allergan’s obesity intervention division makes  the Lap-Band adjustable gastric band system and the Orbera intra-gastric balloon system.

Apollo Endosurgery will give Allergan an upfront payment of $75 million in cash plus a $15-million stake in the company in return for rights to the Lap-Band device, which is a stomach-restricting band used to treat obesity. The deal, which is expected to close this year, also includes up to $20 million in additional payments to Allergan based on various business milestones.

Analysts had high hopes for Allergan’s Lap-Band business, in part because more than a third of American adults are obese. In 2011, Allergan won regulatory approval to expand marketing for Lap-Band to a much wider group of obese patients in the U.S., but demand for the device never met expectations. The stomach-restricting band limits food intake, but it can also cause irritation of the esophagus, infection, nausea and vomiting in some cases.

“The acquisition of the Lap-Band and Orbera technologies will provide Apollo Endosurgery with a strong revenue stream that will enable us to expand our investment in innovative solutions that focus on improving patient outcomes in both the bariatric and endoscopic spaces,” said Dennis McWilliams, president and CEO of Austin, Texas-based Apollo Endosurgery. “The addition of these devices will complement Apollo’s portfolio to include less invasive bariatric product offerings while expanding our domestic sales channel and increasing our global reach into more than 40 countries.”

Lap-Band adjustable gastric band is a minimally invasive laparoscopic weight-loss device with  U.S. Food and Drug Administration approval and broad-based insurance coverage. The device is designed to to help patients gradually lose weight and keep it off without any cutting, stapling or amputation of the stomach.  Orbera is a non-surgical alternative for the treatment of overweight and obese adults that is approved for sale outside the United States in more than 40 countries.

“We are pleased to enter into a definitive agreement with Apollo Endosurgery regarding the sale of our obesity intervention business,” said David E.I. Pyott, chairman of the board and CEO of Allergan.  “We are confident that Apollo Endosurgery has the management expertise, industry experience and commitment to innovation that will be essential to the continued clinical development and future advancement of the Lap-Band and Orbera franchises.”

Additional terms of the transaction were not disclosed.