Sinclair Pharma Regulatory News (SPH)

Sinclair IS Pharma plc

Disposal of non-aesthetics business for £132m cash consideration

Creates a fast growth, high margin pure-play differentiated aesthetics company

· Building a scalable, global business with sustainably strong sales growth to capitalise on increased market demand, geographic expansion and new product introductions

· Strong portfolio of highly differentiated aesthetics brands addressing unmet market need for effective, high quality, minimally-invasive treatments

· Significantly reduced business complexity

· Established infrastructure, with potential to exploit significant future operating leverage

· Pro-forma net cash position of c.£82m post disposal

· Company will be re-named Sinclair Pharma plc

· Company is remaining in an offer period under the framework provided by a formal sales process under the Takeover Code as a number of strategic options for the aesthetics business remain

London, 26 November 2015 Sinclair IS Pharma plc (SPH.L), ("Sinclair" or the "Company") the international specialty pharma company, today announces the strategic disposal of its non-aesthetics business to Alliance Pharma plc (the "Disposal") for a total upfront cash consideration of £132m (£127.5m consideration plus c.£4.7m for estimated stock at closing) as well as sales-related royalty payments relating to Flammacerium US. Sinclair will also collect the remaining working capital associated with the non-aesthetics business, estimated at c.£4m net. The Disposal creates a fast growth, pure-play differentiated aesthetics company, with high gross margins recorded in FY15, and leaves Sinclair with a pro-forma net cash position of £82m to invest in future growth opportunities and to cover milestone payments from historical acquisitions. Business complexity is reduced with a simplified corporate structure and significantly reduced number of SKUs. Following completion of the transaction, which is expected to occur in December 2015, the Company will be re-named Sinclair Pharma plc.

CEO Chris Spooner said "The disposal of our non-aesthetics business for an upfront cash consideration of £132m creates a fast growing and high gross margin pure-play aesthetics company with a leading and differentiated position in collagen stimulation. In-market sales data shows that the growth rate of our Aesthetics portfolio has accelerated throughout 2015 and is now trending at c.40%. The disposal substantially reduces business complexity and transforms Sinclair's balance sheet. The Company remains in an offer period as a result of continued interest in Sinclair's leading aesthetics brands".

Sinclair has built a strong portfolio of differentiated, complementary aesthetics technologies with the acquisition of European marketing rights to Sculptra® (collagen stimulator) and subsequent acquisition of global rights for Ellansé® (collagen stimulator), Perfectha® (dermal filler) and Silhouette (volume repositioning), as well as Global ex-US rights for Atléan (collagen stimulator). These products achieved 35% LFL growth for the year ended 30 June 2015, generating revenues of £27.8m with at a gross margin of over 70%. The Company believes its aesthetics portfolio and development pipeline to be ideally placed in an evolving aesthetics landscape which is experiencing increasing demand for minimally invasive, longer duration products which provide natural looking results primarily through mid-face volumisation and jaw line definition, as opposed to merely filling wrinkles and lines.

The Company is planning entry to multiple new geographic markets and line extension launches over the next few years. In April 2015, the Company received US FDA clearance for Silhouette Instalift® and, based on independent market research, expects to achieve annual peak US sales in excess of $200m within 5 years (launch expected in Q2 2016). In Brazil, the Company has an option to acquire its Silhouette distributor in Q1 2016 and to create a direct presence in this key aesthetic market.

The non-aesthetics business being sold to Alliance Pharma generated revenues of £43.3m, gross profit of £22.3m and EBITDA of £9.0m for the year ended 30 June 2015 and includes the Company's wound care products (Kelo-cote®, Flammazine®, Flammacerium® and Aloclair®); skin care products (Kelo-Stretch®, Atopiclair®, Fazol®, Papulex® and Oxyplastine®) and hospital products (Haemopressin® and Optiflo®). Certain costs of around £6m allocated to the non-aesthetics business P&L will remain with Sinclair. These costs primarily relate to management of Sinclair's country operations, partner management and central corporate costs including premises, regulatory, development, finance and senior management. The Company's pro-forma net assets are estimated at £123.5m post the Disposal with net assets included within the disposal of £99.5m as at 30 June 2015.

The acquisition of the non-aesthetics business constitutes a reverse takeover for Alliance Pharma under the AIM Rules. The transaction is expected to close in December subject to approval by Alliance Pharma shareholders at an EGM vote to be held on 16 December 2015, admission of Alliance's enlarged issued share capital to trading on AIM, customary employee consultation processes and novation of certain contracts. 39 current Sinclair employees are expected to be transferred to Alliance Pharma following the transaction.

Following this announcement, the Company will remain in an offer period under the framework provided by a formal sales process under the Takeover Code. The Board believes that Sinclair as a dedicated aesthetics business is an attractive growth platform and has a secure and promising future as an independent business. The Board will continue its assessment on how to maximise shareholder value and continues to receive attention with regards to the remaining aesthetics business from a number of international companies, many of which are interested in some form of co-operation, including (co)-promotion; licensing of products; repatriation of distribution agreements; development collaborations; and merger and acquisition opportunities.

Rothschild is acting as financial adviser to Sinclair.

Sinclair's management Chris Spooner, CEO, and Alan Olby, CFO, will host a presentation for analysts today, November 26, 2015 at 8.30 am at the offices of FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD.

Please contact FTI Consulting on: +44 (0) 203 727 1000 for further details.

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About Sinclair IS Pharma plc - www.sinclairispharma.com 

Sinclair IS Pharma is an international specialty pharmaceutical company. The current business is centred on Dermatology, in particular Aesthetics, Wound care, and Skin care. Following the disposal of the non-aesthetics business the Company will become a fast growth, high gross margin, pure-play differentiated aesthetics business and will be re-named Sinclair Pharma plc. The group has an established sales and marketing presence in the leading EU markets' and a rapidly growing International division concentrated on the Emerging Markets through long term multi-product, multi-country, sales, marketing and distribution deals with key strategic partners.