Kythera Biopharmaceuticals - A Buyout Target Following Phase III Results

Yesterday evening, after trading hours, Kythera Biopharmaceuticals (NASDAQ:KYTH) announced positive top line results from its Phase III studies with ATX-101 for the reduction of submental fat. The REFINE-1 and REFINE-2 Phase III trials met all primary and secondary endpoints and reaffirmed the efficacy and safety of ATX-101 for the reduction of submental fat, commonly referred to as a double chin.

Focused on development and commercialization of products for the aesthetic medicine market, Kythera is led by a highly experienced management team, boasting impressive record in the pharmaceutical industry and the aesthetic medicine market, as former Allergan (NYSE:AGN) and Amgen (NASDAQ:AMGN) executives. Kythera has been flying under the radar since its October 2012 IPO, and the successful completion of the Phase III program is expected to bring KYTH to the front, and in our opinion, makes it a buyout target.

Kythera's ATX-101 is a proprietary synthetic formulation of sodium deoxycholate, a naturally occurring secondary bile acid, which destroys fat cells when injected subcutaneously into the target fat, while leaving surrounding tissue largely unaffected. ATX-101 has been developed as a treatment for the reduction of submental fat via administration of a series of microinjections into the submental area for up to six treatment visits at least 28 days apart.

ATX-101 is aimed at replacing the current, highly invasive, alternatives - liposuction, chin lifts and chin implant surgeries - which have been gaining immense popularity lately. If approved, ATX-101 will be the first and only drug product for the reduction of submental fat, with the potential to reach annual sales of $500 million in the United States alone, according to the company.

KYTH holds a collaboration agreement with Bayer's (OTCPK:BAYRY) dermatology division to develop and commercialize ATX-101 outside the United States and Canada, and is eligible to receive up to $297m in additional regulatory and commercialization milestones, as well as escalating sales royalties in mid to high-teens. Bayer completed two pivotal Phase III trials of ATX-101 in Europe for the reduction of submental fat. During June 2012, Kythera released results from these studies, in which ATX-101 achieved a statistically significant reduction in submental fat based on clinician, patient and objective ratings.

The impressive phase III results presented by KYTH yesterday show improvement compared to data from previous clinical studies, which were impressive on their own. The table below summarizes the efficacy results of the REFINE-1 and REFINE-2 Phase III North American studies.

ATX-101 also proved safe and tolerable, as no treatment-related serious adverse events were recorded in the studies. The common adverse events were predominately transient and local to the treatment area.

North American studies



Trial design

- Up to 6 treatments at 28-day intervals.

- ~1000 patients enrolled.

- Primary assessment performed 12 weeks after last treatment.

Primary end-points

Proportion of

Patients with ≥ 1 point simultaneous improvement in CR-SMRFS1 and PR-SMFRS2

70.3% vs.
18.7% (placebo)


66.9% vs.
22.4% (placebo)


Proportion of

Patients with ≥ 2 point simultaneous improvement in CR-SMRFS1 and PR-SMFRS2

13.4% vs.
0% (placebo)


18.7% vs.
0% (placebo)


Secondary end-points

Volume reduction in the submental region (measured through MRI)

46% vs.
5.4% (placebo)


40% vs.
5.1% (placebo)


Change from baseline in PR-SMFIS3

3.63 vs.
1.14 (placebo)


3.47 vs.
1.48 (placebo)


1 5-point Clinician-Reported Submental Fat Rating Scale

2 5-point Patient-Reported Submental Fat Rating Scale

3 Patient-Reported Submental Fat Impact Scale (rating visual
and psychological impacts)

The successful completion of the ATX-101 Phase III program, both in the EU and North America, represents the end of uncertainty regarding Kythera. The notable and consistent efficacy, combined with a very positive safety profile, mean that regulatory approvals are expected without significant challenges. Submission of an MAA to the EMA by Bayer and an NDA to the FDA by KYTH are expected during Q1 of 2014, with marketing approvals in the beginning of 2015.

Right now, the only uncertainty is whether Kythera will be acquired. The company's extreme focus and the attractiveness of its sole product make it a very good buyout target. Add to that the partnership with Bayer, and the very tight connections Kythera executives have with Allergan, and the top two candidates are easy to spot.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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