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AbbVie Enters Growing Market for Tattoo Removal, Cellulite Treatment

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- By Barry Cohen

"What were you inking?"

That's a question more and more people might be asking themselves as they move into middle age and beyond. That tattoo of a fire-eating dragon or a girlfriend's likeness on the shoulder that seemed so hip and cool in their 20s doesn't seem like such a good idea as the ink begins to fade, their skin becomes wrinkled and the love of their life has been long forgotten.

That's undoubtedly a major reason AbbVie Inc.'s (NYSE:ABBV) Allergan Aesthetics unit is getting into the tattoo removal business, shelling out $550 million to acquire the nine-year-old Houston-based company Soliton Inc.(NASDAQ:SOLY).

The key to the deal is Soliton's Resonics tattoo and cellulite removal device, which uses rapid pulses of acoustic shockwaves to help fade unwanted ink and break apart undesired fat deposits for short-term improvements in its dimpled appearance.

AbbVie has signed on to pay $22.60 in cash for each of Soliton's outstanding shares, about a 25% premium over the closing price when the deal was announced. On Tuesday, Soliton was trading interday at $22.36.

"Tattoo regret" is sparking a growing industry that is expected to reach $4.8 billion in just two years as the percentage of people who lament their decision to get inked expands, reported the Washington Post. Tattoos have become hugely popular. A Harris poll found that nearly half of millennials and more than one in three Gen Xers had at least one tattoo, compared to 13% of baby boomers.

Allergan, acquired by AbbVie for $63 billion last year, will add the Resonic device to its other skin cosmetic products such as CoolSculpting Elite and CoolTone hardware for freezing fat and strengthening muscle, as well as its mainstay Botox cosmetic.

Resonic will also go after a piece of the large and growing market for cellulite treatment, which was valued at $2.4 billion worldwide in 2018 and is forecast to reach more than $4 billion by 2025, reported Zion Market Research. That's a nifty compound annual growth rate of 7.5%. The human body has a complex of connective tissue strands to keep fat in location, which is called septa. If the septa aren't powerful and tightly woven, fat can become loose, giving the skin a lumpy and dimpled appearance. This condition is called cellulite and can be treated. Females are more likely to suffer from cellulite as compared to men.

"There is a huge unmet need to address cellulite and effective treatments have been elusive and frustrating for consumers," Allergan Aesthetics Global President Carrie Strom said in a statement, adding that Soliton's non-invasive approach is convenient to the patient and fast.

Resonic was first approved by the Food and Drug Administration two years ago, However, the device is just now being rolled out after the company received a second FDA approval for cellulite just last week.

Other public companies in the tattoo removal business are Hologic Inc. (NASDAQ:HOLX), Cutera Inc. (NASDAQ:CUTR) and Lumenis Ltd. (NASDAQ:LMNS).

Disclosure: The author has a position in AbbVie.

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This article first appeared on GuruFocus.