Inamed Implants Collagen Aesthetics (News) August 2, 1999

Inamed Implants Collagen Aesthetics

August 2, 1999

Despite the obvious temptation, we'll leave the Pamela Anderson jokes to the experts and stick to the story at hand: silicon-based implant products maker and marketer Inamed Corp.'s (OTC BB: IMDC) agreement to buy collagen implants producer Collagen Aesthetics (Nasdaq: CGEN) for $142 million in cash.

Inamed will pay $16.25 per share for Collagen Aesthetics, about a 35% premium to Friday's closing price for the stock.

This deal not only looks nice for Collagen Aesthetics in the near term, but also for of the combined company in the future. Acquisitions that take out direct competitors are certainly nice, but they can pose problems when, for instance, cannibalization and culture clashes are figured in.

This doesn't look like that that kind of deal, however, as the two companies' businesses complement each other nicely: Collagen Aesthetics makes and markets tissue repair products primarily used in facial aesthetic work, while Inamed does the same thing with, to name a few of its products, saline and silicone gel-filled breast implants, silicone-based tissue expanders, facial implants, and custom prostheses.

Inamed had sales of $144 million for the 12 months ended June 30, while Collagen Aesthetics posted revenues of $84 million for same period.

"This acquisition marks the culmination of a 15-month effort by Inamed to implement its strategy of diversifying into the collagen business," Inamed President Ilan Reich told investors in a statement, "while leveraging its existing marketing, distribution and corporate infrastructure." Reich told investors to look for a $0.25 per share boost to full-year 2000 earnings, but didn't discuss the deal's projected impact on 1999 results.

Taken in combination with Inamed's May deal with tissue engineering company Advanced Tissue Sciences (Nasdaq: ATIS) that included an option to license rights to human collagen from Advanced Tissue's culture system for uses like wrinkle and cosmetic correction, it certainly appears that Inamed is positioning itself to add some nice new revenue streams. Inamed hopes to capitalize on Collagen Aesthetics' franchise to boost the value of that deal.

"The value we see in Collagen Aesthetics," Reich said, "reflects... the unique benefit which Inamed hopes to derive by commercializing those human collagen products faster than Collagen Aesthetics could have done based on its current research and development program."

In recent years Collagen Aesthetics has spent more on R&D -- in terms of both total dollars and percentage of revenues -- than Inamed has. But much of Inamed's outlay has been tied up in the development of its BioEnterics obesity products division. With BioEnterics now becoming profitable and Inamed seeking a partner for the business, that could free up money and attention that could be directed toward the collagen product pipeline.

By Dave Marino-Nachison (TMF Braden) (TMF Braden)

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