Merz to Acquire Ulthera for $600M: A Deal That Should Raise Some Eyebrows

Jun 26, 2014

Today we are excited to report that NEA medical device portfolio company Ulthera will be acquired by Merz for up to $600 million in cash in upfront and milestone payments. This acquisition is the largest in Merz’s history, and positions their combined aesthetics franchise for accelerated growth with a comprehensive portfolio of treatment options.

Since NEA’s initial investment in late 2007—when Ulthera had just three full time employees, still resided inside its founding incubator, and was nearly two years from its first US regulatory approval—Ulthera has undergone tremendous growth into a truly global medical device franchise. Today, the Ultherapy System is the leading non-invasive skin lifting and tightening solution for plastic surgeons and dermatologists. On less than $40 million of equity capital, Ulthera has grown to more than 150 employees, performed over 200,000 commercial procedures worldwide, and operated profitably since 2012 with expected sales of more than $100 million in 2014. Most recently, Ulthera acquired Cabochon Aesthetics to broaden its platform with Cellfina, an innovative solution for the treatment of cellulite in the office setting.

Despite this trajectory, it wasn’t always smooth sailing.

Our initial investment in Ulthera was based on highly compelling, objectively verifiable fundamentals. We appreciated the precision of Ulthera’s therapeutic ultrasound technology platform with integrated, real-time ultrasound imaging, the extensive intellectual property protection, the potential for best-in-class gross margins, and the huge market opportunity for a non-invasive skin tightening solution that offered consistent, meaningful benefits. What we didn’t anticipate was an industry-wide slowdown in FDA regulatory timelines and a concurrent downturn in the consumer economy. Regulatory approvals slowed to a trickle and the Dow Jones declined 50% in the 18 months following our initial investment.

During this period, Matt Likens and his team focused on building a strong foundation for the company’s future growth, and we weathered these storms together. Despite the regulatory and market headwinds that challenged our initial investment thesis, we actually moved forward and increased our position in the company. Why? Because it had become increasingly clear to us that Ulthera was a special company. Our initial investment may have been based on objectively verifiable qualities, but our enthusiasm was based on more subjective measures—particularly the company’s culture and its execution on a plan to approach the aesthetics industry with an emphasis on rigorous clinical development as a business strategy—which we believed would drive Ulthera to succeed in the long term.

Those qualities continue to shine today. If you ask any Ulthera employee—and a good number of Ulthera’s customers—they will be able to recite to you Matt’s Seven “C’s” or key operating principles (Customer Focus, Consistency, Constructive Confrontation, Compliance, Cost Effectiveness, Creativity and Collaboration) that have become integral to Ulthera’s culture and mission to Lift Lives. (And board members will tell you Matt’s Eighth “C” is Corny Jokes). His relentless attention to nurturing this culture has created a cohesive, performance-focused organization that delivers outstanding results.

And strategically, Ulthera’s team set out with a focus and a sustained commitment to pursue rigorous clinical development and bring quantifiable measures of efficacy and safety to support marketing products in the aesthetics industry. Ulthera continues to invest heavily in clinical data, conducting over 37 clinical trials involving more than 1,200 patients since 2005, to refine its treatment algorithms and expand the utility of the Ultherapy System for its customers and their patients.

We are extremely proud to have been Ulthera’s partner in building this franchise, and look forward to the promise of a bright future as Ulthera becomes a part of the Merz family of global companies.