Medicis Pharmaceutical Corp. (MRX) recently announced to have entered into a ‘Stock Purchase Agreement’ with Solta Medical, Inc. (SLTM), under which the latter will acquire all the outstanding shares of Medicis Technologies Corporation (formerly LipoSonix, Inc.), a subsidiary of Medicis Pharma. The deal is expected to close in the fourth quarter of 2011.
According to the agreement, Solta will make a payment of $15 million to Medicis Pharma following the closure of the deal. Additionally, Solta will pay up to $20 million to Medicis Pharma on the achievement of certain regulatory milestones.
Medicis Pharma is also entitled to receive payments based on the future performance of the LipoSonix technologies. Solta's obligation to make these additional future payments expires after about 7 years.
We note that the LipoSonix system is currently marketed in Canada, the European Union and Japan, for non-invasive waist circumference reduction, and was approved by the US Food and Drug Administration (FDA) last week, for the said use.
The divestment of Medicis Technologies Corporation was an expected move, as Medicis Pharma had already announced its plans of exploring strategic alternatives for the LipoSonix business in February 2011. The company classified the LipoSonix business as a discontinued operation while reporting first quarter 2011 results. Until Solta assumes responsibility, Medicis Pharma will continue catering to the existing worldwide customers of LipoSonix.
Our Take
We currently have a Neutral recommendation on Medicis Pharma. The stock carries a Zacks #3 Rank (Hold rating) in the short-run. We view this divestment as a positive for the company, as the LipoSonix business is a stand-alone business, and now with its sale, Medicis Pharma can focus on its medical dermatology and facial aesthetics products.
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