Acquisition strategy boosts Alliance

Speciality pharmaceuticals supplier Alliance Pharma continues to reap the benefits of its acquisition strategy and it is acquiring two more products from Reckitt Benckiser (RB). AIM-quoted Alliance specialises in acquiring existing drugs with a solid market base. They do not need a lot of money spent on marketing and they provide a strong cash flow. Sales rose 60% to £49.9m with much of that coming from recent acquisitions. However, at least £5m of that growth was organic. This shows that although the drugs in Alliance's portfolio are relatively mature they can still generate growth. Pre-exceptional profit jumped 91% to £16.4m, while £18.1m of cash was generated from operations. Alliance has issued shares to help finance some acquisitions but earnings per share still rose 43% to 5.07p. The full year dividend has been increased by 90% to 0.57p a share. Net debt was £21.9m, including convertible loan stock, at the end of 2010. There are significant additional facilities that can be used for acquisitions. Alliance has agreed to pay RB £2.55m for ulcer treatment Anbesol and Ashton & Parsons, which is a treatment for teething problems. This is being funded from the £20m revolving credit facility that had not been used up to now. The EU said that RB had to sell the two treatments following the acquisition of SSL.The purchase will add £2m of revenues in a full year. Longer-term, there is a danger that Novartis will take back nine products in 2013. That would reduce gross profit by around £500,000.