The transaction provides Allergan with up-front cash of $75 million in addition to a $15 million minority interest in Apollo and $20 million in regulatory and sales milestones, according to an Apollo statement.
The sale transfers to Apollo the well-known Lap-Band gastric banding system and the Orbera intra-gastric balloon system, products that Allergan has had trouble winning substantial reimbursement for.
In an interview during MassDevice’s 2012 Big 100 West, shortly after Allergan announced plans to sell the Lap-Band division, company CEO David Pyott explained the company’s rationale for moving away from what appeared to be an obvious blockbuster product.
"Clearly when one looks back, there’s a huge need for the product," Pyott said. "So it comes down to the issue of reimbursement. Even if you’re so fortunate to have health insurance, which isn’t everybody until the Affordable Care Act comes into place, you’re looking at a co-pay of between $2,500 to $4,500 [for the procedure]. For people in those circumstances, that’s a massive outlay. What we learned was, in the pre-recession days, we thought about ⅓ of that business was what we call ‘cash pay.’ With hindsight, it was actually ‘credit-card pay,’ and you can imagine what happened when the recession occurred. That funding source has gone close to zero post-2009 recession."
Almost exactly 1 year later, Allergan put a ribbon on the divestiture in handing over its entire obesity interventions business to Apollo, which already works in the bariatrics space.
"With worldwide obesity numbers reaching epidemic levels, the acquisition of the Lap-Band and Orbera technologies places Apollo Endosurgery in a leadership position to provide surgeons and patients with innovative and less invasive solutions in the fight against obesity," Apollo president & CEO Dennis McWilliams said in prepared remarks. "By expanding both our product portfolio and adding talent to our team, this acquisition will be a catalyst for growth as we continue to advance technologies in the fields of bariatric and minimally invasive surgery."