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Why Allergan Acquired Topokine Therapeutics?

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What is Topokine Therapeutics?

Allergan (AGN) announced the acquisition of Topokine Therapeutics, a biotechnology company that develops fat reducing medicines, in April 2016. The company acquired Topokine for an upfront payment of $85 million with further milestone payments based on the development and sales of the product XAF5.

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What does the deal mean for Allergan?

Allergan acquired Topokine Therapeutics for its XAF5 technology and pipeline. Allergan is a leader in medical and facial aesthetics products, and XAF5 is a potential treatment for Steatoblepharon (or under-eye bags). Topokine has over 75 issued and pending patents worldwide. With the addition of XAF5 to Allergan, the company now has over 70 innovative products in its mid-to-late stage pipeline.

XAF5 and its function

XAF5 is a product from Topokine’s portfolio recently acquired by Allergan. XAF5 is an ointment formation developed to treat steatoblepharon. XAF5 is presently under the phase IIb/III clinical study known as XOPH5-OINT-3. XAF5 is applied to lower eyelids at night. It penetrates the skin and acts on the fat cells to shrink under-eye bags. As per Allergan’s press release, estimates suggest that around 40 million Americans have steatoblepharon.

Investors can consider ETFs like the Fidelity MSCI Healthcare ETF (FHLC), which holds ~2.3% of its total assets in Allergan or the iShares US Healthcare ETF (IYH), which holds ~4.2% of its total assets in Allergan in order to divest the risk. Apart from Allergan, IYH also holds 4.2% of its total assets in Amgen (AMGN), 5.2% in Merck & Co. (MRK), and 4.0% in Bristol-Myers Squibb (BMY).

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