Last checked at 8 Feb 2010 07:00
| For immediate release | 8 February 2010 |
ALLIANCE PHARMA PLC
("Alliance" or the "Company")
Proposed acquisition and vendor share placing
Alliance Pharma plc (AIM: APH), the speciality pharmaceutical company, announces that it has conditionally agreed to buy the trade and certain assets of Cambridge Laboratories (Ireland) Limited and Cambridge Laboratories Limited (together the "Vendors") for total consideration of between £14.3m and £16.4m plus the value of inventory held by the Vendors at completion (the "Acquisition"). Completion of the Acquisition is expected on 22 February 2010 ("Completion").
Included in the Acquisition are 18 prescription products across a range of therapeutic areas, including:
·; ImmuCyst®, an immunotherapy for superficial bladder cancer;
·; gelclair®, an oral gel for the management of oral mucositis caused by chemotherapy and radiotherapy;
·; procarbazine, a treatment of Hodgkin's Lymphoma as part of chemotherapy treatment; and
·; a liquid formulation of Vitamin E, the only one licensed in the UK.
The rights included in the Acquisition are primarily for the United Kingdom and the Republic of Ireland.
The portfolio also includes a toxicology product that is purchased by the UK government for a stockpile, which is replaced on a 2-3 year cycle. The Vendors have been awarded the contract, worth £5.6m, for the current stockpile replacement, which is taking place between October 2009 and January 2011. In the year ended 31 December 2009 (based on the Vendors' unaudited management accounts for that period), total sales, excluding the toxicology product, were £10.6m and the pro forma gross margin was £4.9m.
The Acquisition is expected to be significantly earnings enhancing to Alliance in the financial year ending 31 December 2010.
The oncology products (ImmuCyst®, gelclair® and procarbazine) within the Acquisition portfolio represented approximately 40% of the portfolio by sales in 2009 and together their sales have been growing at around 18% per annum over the past three years. Alliance intends to keep in place the specialist sales force of five that is currently promoting these products.
Certain of the products being acquired by Alliance are on licences from various third parties and these licences are typically due for renewal every five years. The timing of the transfer of one of the products from the Vendors to Alliance (the "Deferred Transfer") is dependent on a related supply contract being executed. The Deferred Transfer product has pro forma annual gross margin of approximately £0.4m.
Under the terms of the Acquisition, the offices in Dublin and Newcastle from which the Vendors operate will transfer to Alliance, together with around 30 staff employed by the Vendors. The Company currently proposes to merge the support functions into its existing offices in Chippenham, Wiltshire, resulting in approximately 25 positions being put at risk of redundancy. The Company will be entering into a period of consultation with the affected employees in connection with the potential redundancies.
The consideration for the Acquisition comprises a base consideration of £14.3m (the "Base Consideration") and a deferred contingent consideration of between £1.6m and £2.1m (the "Deferred Contingent Consideration"). The Deferred Contingent Consideration will be payable if the ImmuCyst® licence is extended beyond 31 March 2012, with the actual amount payable being dependent on the level of sales of ImmuCyst® during 2010 and 2011. The Base Consideration comprises an initial payment of £10.2m at Completion, three further cash payments of £0.4m in March 2010 and £1.1m each in June and October 2010 (the "Deferred Payments") and a £1.5m cash payment upon completion of the Deferred Transfer (the "Deferred Transfer Payment"). The amount of the Deferred Payments may be adjusted up or down depending on the level of sales of the toxicology product before Completion. Payment for the inventory, which is expected to cost approximately £1.4m, will be in cash within one month of Completion.
The Base Consideration is to be satisfied as to £7.5m by way of a vendor share placing (the "Placing") with the remainder in cash. 28,846,154 new ordinary shares of 1 pence each in the capital of Alliance ("Placing Shares") have been conditionally placed with certain existing and new UK investors by Numis Securities Limited ("Numis") at a placing price of 26.0 pence per share (the "Placing Price").
To fund the cash element of the Acquisition due at Completion and the Deferred Transfer Payment, Lloyds Banking Group is providing an additional £4m term loan and has increased the existing £5m working capital facility to £6m. The Company expects to fund the Deferred Payments and the Deferred Contingent Consideration, if applicable, through the working capital facility and internal cash generation.
The Acquisition and the Placing are conditional upon, inter alia, the placing agreement between the Company and Numis becoming unconditional and not being terminated and the admission of the Placing Shares to AIM ("Admission"). Application will be made for the 28,846,154 Placing Shares to be admitted to AIM and it is expected that dealings in the shares will commence on 22 February 2010. Upon Admission, the Placing Shares will rank pari passu in all respects with the existing Ordinary Shares in issue. Following Admission, the total number of Ordinary Shares in the Company with voting rights in issue will be 222,165,552.
Trading update and full year dividend
In a trading update issued on 6 January 2010, Alliance announced that the Group's profit before tax (excluding any impairment charges for Isprelor®) for the year ended 31 December 2009 was expected to be not less than £8.5m on sales of approximately £31m. Operating profit before any impairment charges for the same period is expected to be approximately £11m, up 73% on 2008. Net bank debt at 31 December 2009 was £21.7m, a reduction of £3.5m since 31 December 2008, despite approximately £4m of cash being used for the acquisition of Buccastem® and Timodine® in August 2009.
The Company is expecting to declare a final dividend of 0.23p per Ordinary Share in March 2010, to be paid in July 2010, which would give a full year dividend for 2009 of 0.30p per Ordinary Share. Further details will be provided in the announcement of the 2009 preliminary results scheduled for 24 March 2010.
Commenting on the Acquisition, John Dawson, CEO of Alliance, said:
"This Acquisition represents a major step in the development of Alliance. We are delighted to have found a business such as this that fits very well with our strategy of acquiring low-risk, established products and of organic growth via selective promotion.
"We are also delighted by the support received for the Placing and Acquisition from current investors and welcome four new blue-chip institutional shareholders to our share register in this significantly oversubscribed Placing."
Director shareholdings
Following Admission of the Placing Shares, the share interests of the Directors and their families will be as follows:
| Director | Number of Ordinary Shares held before the Placing | Percentage shareholding before the Placing | Number of Ordinary Shares held following Admission | Percentage shareholding following Admission |
| John Dawson | 62,261,402 | 32.21% | 62,261,402 | 28.02% |
| Anthony Booley | 6,810,723 | 3.52% | 6,810,723 | 3.07% |
| Michael Gatenby | 350,000 | 0.18% | 350,000 | 0.16% |
| Andrew Smith | 200,000 | 0.10% | 200,000 | 0.09% |
| Richard Wright | 190,768 | 0.10% | 190,768 | 0.09% |
| Paul Ranson | 48,000 | 0.02% | 48,000 | 0.02% |
| Thomas Casdagli* | 17,400,000 | 9.00% | 19,300,000 | 8.69% |
*Mr Casdagli is a partner of MVM Life Science Partners LLP ("MVM"). As part of the Placing, MVM subscribed for 1,900,000 Placing Shares at the Placing Price.
For further information:
Alliance Pharma plc | + 44 (0) 1249 466966 |
| John Dawson, Chief Executive |
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| Richard Wright, Finance Director |
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| www.alliancepharma.co.uk |
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Buchanan Communications | + 44 (0) 20 7466 5000 |
| Mark Court / Stasa Filiplic / Jennie Spivey |
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| Numis Securities Limited | + 44 (0) 20 7260 1000 |
| Nominated Adviser: Michael Meade / Brent Nabbs |
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| Corporate Broking: David Poutney |
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Notes to editors:
About Alliance
Alliance, founded in 1998, is an AIM listed speciality pharmaceutical company based in Chippenham, Wiltshire, UK. The Company has a strong track record of acquiring the rights to established niche products and owns, or licenses, the rights to 38 pharmaceutical products and continues to explore opportunities to expand the range.
Alliance's products are prescribed in the treatment of a wide range of conditions and include brands used in the treatment of dermatological conditions, in childbirth, in the prevention of heart disease, in Parkinson's disease, in nutrition and in nasal infections. Alliance's sales are mainly prescription driven. Its products are distributed to hospitals directly and to pharmaceutical wholesalers, which service both hospital and retail pharmacies with their prescription requirements.
Alliance joined the AIM market of the London Stock Exchange in December 2003 and trades under the symbol APH.
Numis Securities Limited, which is authorised and regulated by the Financial Services Authority, is acting for Alliance Pharma plc and for no-one else in connection with the contents of this announcement and will not be responsible to anyone other than Alliance Pharma plc for providing the protections afforded to clients of Numis Securities Limited, or for providing advice in relation to the contents of this announcement or any matters referred to herein.