Everybody involved in a corporate takeover always says all the right things, but you never really know how the deal will shake out until some time passes. So I paid a visit last week to Jens Quistgaard to see for myself. His company, Bothell, WA-based Liposonix, agreed to be sold about six weeks ago to Medicis Pharmaceutical for $150 million upfront.
Quistgaard, the founder and president of Liposonix, was in one of his usual impish moods. “Here’s what we spent $40 million on,” he said, pointing to an ultrasound machine designed to be a minimally-invasive alternative to liposuction.
The sign on the front door still has the Liposonix logo, and I didn’t see Medicis corporate signs anywhere. Not much has changed culturally in the operation, Quistgaard says. Scottsdale, AZ-based Medicis (NYSE: MRX) is keeping all 45 employees at Liposonix in Bothell, and is looking to hire at least six more there now. Medicis, the maker of the Restylane anti-wrinkle treatment, doesn’t have the sort of electrical engineering talent found at Liposonix, so they aren’t coming in and acting like they know everything better and turning the operation upside down, Quistgaard says. “We’re Seattle guys, and they know we want to stay here and aren’t moving to Scottsdale,” he says.
What Medicis does bring is a sales and marketing force, with an understanding of the cosmetics market that Liposonix doesn’t have, which should help it fully capitalize on its opportunity among customers who want to shed fat without the trouble of diet and exercise. One critical factor to Quistgaard is that Medicis doesn’t behave like breathless late-night TV hustlers who will push as many machines out the door as they can, and make outlandish promises about it being a miracle fat-remover machine. “We’re taking a methodical approach, to make sure the early-adopting physicians and patients are happy,” he says.
My main question to him was a simple one. Why sell now? After all, Liposonix received approval to market its machine in Europe in March, and has already delivered it to an undisclosed number of doctors in Germany, Spain, Austria and Italy, at 110,000 euros apiece (about $171,000). The company was at the point where it needed to raise more capital, and had lined up a venture financing, when Medicis approached with its offer. “The numbers were compelling,” he says, and good enough that he decided to walk away from the venture deal.
The technology at the heart of Liposonix has always had the potential for enormous media hype, which Quistgaard has tried to downplay every time I’ve interviewed him in the past five years. It’s unlike the ultrasound-assisted form of liposuction surgery, which has been around for about 15 years, and is used in about one-fifth of those procedures to make it easier to bust up the fat, Quistgaard says. The Liposonix method uses high-intensity ultrasound waves, beamed a little more than an inch below the skin surface, without requiring patients go under the knife. The idea is to bust up fatty tissues without pain, scars, anesthesia, or a long recovery time.
Nobody was entirely certain in the early going where the fat went, although the theory was that once it was busted up into smaller particles, the immune system’s garbage disposal unit, macrophage cells, would digest the fat. If too big a particle broke loose and clogged an artery or lung, that would be big trouble.
Quistgaard remains tight-lipped about what the company’s clinical trials show in terms of safety and effectiveness, and how the device is being pitched. About all he would say is that about 200 patients in clinical trials have gotten the Liposonix treatment in Mexico and Canada. Medicis has said publicly that it wants to win FDA approval and start marketing the machine in the U.S. by 2011, “if not sooner.” The company will get its clinical trial results published, but Quistgaard said he doesn’t know which journal it will appear in or when.
The real opportunity is, of course, in the land of the obese—the United States. Americans spent an estimated $13 billion in 2007 on cosmetic surgery and nonsurgical cosmetic treatments like Botox, according to the American Society for Aesthetic Plastic Surgery. That’s up from $9.4 billion in 2003.
Quistgaard, formerly the chief product and strategy officer at SonoSite (NASDAQ: SONO) before he started Liposonix in 2002, is personally sticking around, although he wouldn’t say what the company is offering to keep him and the rest of the employees on board and motivated. He appears to still enjoy plenty of autonomy. (During our interview, no PR gatekeeper was required to listen in and keep him from saying anything out of line.)
The employees remain motivated to see their creation get approved and marketed in the U.S., Quistgaard says. Over this past weekend, they celebrated their good fortune from the Medicis deal by renting a boat on Lake Washington to see the U.S. Navy’s Blue Angels. If they stay together and do what it takes get Liposonix on the U.S. market, then the company will be in line for another $150 million of milestone payments. That sounds like enough for everybody to buy their own boats if they want.
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