Here we go again yet another brilliant acquisition from Allergan, which Jim Cramer refers to as the takeover artist formerly known as Actavis.
Actavis changed its name recently after it made a massive purchase last year of Allergan. The new Allergan is led by CEO Brent Saunders, who has afforded his company the ability to grow tremendously over the years by making a series of very smart acquisitions.
On Wednesday morning, investors learned that Saunders did yet another deal, purchasing Kythera Biopharmaceuticals for $2.1 billion, or $75 a share, which is a 25 percent premium to where it closed on Tuesday.
Allergan already had the wrinkle product Botox and Latisse for eyelashes, and now with Kythera it will have a non-surgical injection product that helps to remove double chins. It officially dominates the face, the most important piece of real estate on the planet!
The company expects to break even on the Kythera deal next year, and then become additive to earnings in 2017.
"Honestly, I think Allergan's stock should have rallied on the news, rather than doing next to nothing and then actually going down slightly like it did today," Cramer said.
Could this acquisition ultimately take the stock even higher? To find out more on the deal, Cramer spoke with Saunders.
The CEO shared that after spending $2.1 billion dollars on Kythera; he decided to try the product himself. He explained that he had received injections on Wednesday morning, and that users can expect to see visible reductions over the course of one to five treatments.
"I was visiting with customers as I usually do when I travel and I met a great facial injector… who told me that if I spend $2.1 billion on this product, I should be a user or a patient. So, I had it done," Saunders explained.
Saunders added that Kythera's drug first popped up on his radar as a part of his due diligence when Actavis acquired Allergan. He started to spend a lot of time with the Keith Leonard, the CEO of Kythera, to understand the company. The FDA approval that the product received was a strong vote of confidence, and reduced the deals' risk, in Saunders' perspective. However, he added that it also caused him to pay a bit more for Kythera as a result.
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"For me, it was something I started tracking as part of our diligence when we bought Allergen. I looked at what were the emerging technologies in facial aesthetics that were very interesting," Saunders said.
However, what excited Saunders the most were the other things that Kythera has in the pipeline, as it had a very strong research and development team. He added that it has other things that will complement Allergan's facial aesthetics business, and he will reveal them in about six months.
"We are very committed to maintaining an investment grade rating, so that's very important to me. But there are ways of restructuring things to create breathing room by making sure that we're buying the right technologies to keep our business viable and in growth mode," Saunders added.
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