TIDMHIK
RNS Number : 2311I
Hikma Pharmaceuticals Plc
28 May 2014
Hikma significantly strengthens its global Injectables business,
acquiring assets of Bedford Laboratories
London, 28 May 2014 - Hikma Pharmaceuticals PLC ("Hikma") (LSE:
HIK) (NASDAQ Dubai: HIK) (OTC: HKMPY), the fast growing
multinational pharmaceutical group, today announces that it has
signed an asset purchase agreement with Ben Venue Laboratories,
Inc., a member of the Boehringer Ingelheim Group of Companies, to
acquire assets of Bedford Laboratories ("Bedford"), its US generic
injectables business, for a total consideration of up to $300
million, which will be satisfied through an upfront cash payment of
$225 million. A further $75 million in contingent cash payments
will be paid, subject to the achievement of performance-related
milestones, over a period of five years. In addition, Hikma has
entered into an exclusivity arrangement with the Boehringer
Ingelheim Group to potentially acquire substantially all of the
assets of the Ben Venue manufacturing facility in Bedford, Ohio,
one of the largest sterile injectable manufacturing sites in the
world.
Bedford is a generic injectables company with the third largest
portfolio of generic injectable products in the US.[1] Under the
agreement, Hikma is acquiring Bedford's assets, including a large
product portfolio, intellectual property rights, contracts for
products marketed under license, raw material inventories, a strong
R&D and business development pipeline and a number of employees
across key business functions.
The combination of these assets with Hikma's existing global
Injectables platform will significantly strengthen Hikma's position
as a leading generic injectables company in the US.
Transaction highlights
-- Helps to address critical supply shortages in the US market
through the planned re-introduction of the acquired products
-- Delivers significant strategic value, adding a large
portfolio, broad pipeline and experienced employee base to
strengthen Hikma's position as a leading generic injectables
company in the US
-- Brings a broad range of complementary products, including a
large oncology portfolio and a number of niche, differentiated
products
-- Adds a unique and attractive R&D pipeline and a number of
business development opportunities, along with experienced R&D
and operational teams
-- Leverages Hikma's US FDA approved injectable manufacturing
capacity in the US, Portugal and Germany, as well as its expertise
in sterile liquid, lyophilised and cytotoxic production, bringing
scale benefits and cost synergies
-- Slightly dilutive to adjusted[2] earnings per share ("EPS")
in 2014 and 2015, with strong EPS accretion thereafter as the
acquired products are re-introduced to the market
Said Darwazah, Chief Executive Officer of Hikma commented:
"I am very excited to be making this strategically important
investment in our Injectables business. Bedford's impressive
product portfolio and deep pipeline will significantly increase the
scale and scope of our rapidly growing US Injectables business. The
large number of high value, niche and differentiated products we
are acquiring will strengthen our market position in the US and
will benefit patients by bringing back products to the market that
are currently in short supply.
Through our disciplined approach to M&A, we have established
an excellent track record of making value enhancing acquisitions. I
am confident that we have the technical capabilities and
manufacturing expertise to successfully re-launch the acquired
products over the next few years and our success in integrating the
MSI acquisition will help to ensure a smooth integration. We remain
committed to investing in the long term growth of our Injectables
business and we believe that this transaction will deliver
significant future value for the Group."
Paul R. Fonteyne, US Country Managing Director, President and
CEO of Boehringer Ingelheim USA Corporation, and Chairman, Ben
Venue Board of Directors commented:
"We believe that this is a positive development, allowing Hikma
to leverage its existing infrastructure and manufacturing
capabilities to re-introduce important products to the US market,
bringing significant benefit to patients. For more than 20 years,
Bedford Laboratories and its product portfolio have been of great
value to patients, customers and the marketplace. As part of Hikma,
the Bedford team will remain focused on strengthening its
relationships with customers and continuing to serve the needs of
patients."
Strategic rationale
In 2013, Hikma's global Injectables business generated revenue
of $536 million and accounted for 39% of Group revenue. Investing
in the growth and development of this business has been a key
strategic priority in recent years. In May 2011, we completed the
acquisition of Baxter's Multi-Source Injectables business ("MSI"),
which transformed our US Injectables business, establishing Hikma
as the third largest supplier by volume in the US generic
injectables market. The large and fast growing US generic
injectables market is valued at around $7.6 billion[3] and offers
significant future growth opportunities. Our strategic focus within
Injectables continues to be to increase our US market share by
value through investment in a strong product portfolio and
pipeline.
This acquisition marks another significant step towards
achieving our ambitions in Injectables, adding a large portfolio of
84 products, which combined with Hikma's 63 existing marketed
products, creates the broadest portfolio of generic injectable
products in the US market.[4] Bedford's portfolio spans a range of
therapeutic categories and includes a large number of oncology
products, as well as a number of niche, differentiated
products.
Bedford also brings a unique and attractive R&D pipeline of
27 products, of which 16 are filed and pending approval from the US
FDA. The pipeline assets focus on higher value, medically necessary
and acute care products, including numerous Paragraph IV
opportunities. The pipeline also includes several exciting business
development projects, including licensing and co-development
partnerships.
The acquisition will strengthen our current US operations,
adding highly skilled employees across key business functions, such
as R&D, sales and marketing, business development and
regulatory affairs. These employees will bring experience and
expertise in US injectables and strengthen Hikma's existing
operations.
Hikma will be able to leverage its US FDA approved facilities in
the US, Portugal and Germany to manufacture the acquired products,
which we will begin transferring to Hikma's sites immediately
following closing the transaction. We are targeting to transfer an
initial tranche of around 20 products, which we expect to be able
re-launch to the market between 2015 and 2017, with the potential
to transfer further products thereafter. The products will be
prioritised based on the strength of the market need, the ease of
transfer and the expected gross margin contribution.
In addition, Hikma has entered into an exclusivity arrangement
with the Boehringer Ingelheim Group to potentially acquire
substantially all of the assets of the Ben Venue manufacturing site
in Bedford, Ohio, subject to due diligence and customary approvals
in the United States and the United Kingdom. These assets would
significantly enhance Hikma's existing global injectable
manufacturing capabilities, adding one of the largest
lyophilisation plants in the world and dedicated cytotoxic
facilities.
Financial information
In 2013, the assets subject to the transaction generated revenue
of $19 million and negative EBITDA of $22 million,[5] which
reflects the limited sales of Bedford's products following
manufacturing issues at its affiliate, Ben Venue, which halted
production in 2013. Hikma expects the acquired assets to generate
limited revenue in 2014 and 2015 while products are being
transferred to Hikma's manufacturing sites. By 2017, Hikma expects
revenue from the acquired assets to have increased significantly to
around $150 million, as the acquired products are re-launched and
certain pipeline opportunities are realised, with strong growth
potential thereafter. The acquisition is expected to be slightly
dilutive to adjusted[6] EPS in 2014 and 2015 and strongly accretive
to adjusted EPS from 2016 onwards.
The gross assets subject to the transaction, prior to the
performance of the fair value exercise and excluding acquired
intangible assets, have a book value of $65 million.[7] They are
primarily comprised of raw material inventories and will help to
accelerate the re-launch of the acquired products to the market.
The transaction will be funded by new debt facilities. We expect to
complete the transaction in the second half of 2014, subject to
customary regulatory approvals.
Following completion of this transaction, we will continue to
have the financial flexibility to pursue further value enhancing
opportunities across our businesses.
A conference call for analysts and investors will be held on 28
May 2014 at 14:00 BST on UK and international dial in: +44 (0) 20
3426 2890 or UK toll free dial in: 0808 237 0060. A live webcast of
the conference call will be available at
www.hikma.com/en/investors.aspx. A recording of the call will be
available on the Hikma website.
Centerview Partners and Citigroup Global Markets Limited
("Citi") acted as financial advisers to Hikma. Citi and HSBC
jointly led the arrangement of the financing. White & Case LLP
acted as lead counsel to Hikma.
Bank of America Merrill Lynch acted as the financial adviser,
and Covington & Burling LLP acted as counsel, to Ben Venue.
-- ENDS --
Enquiries
Hikma Pharmaceuticals PLC
Susan Ringdal, VP Corporate Strategy and Director of Investor
Relations +44 (0)20 7399 2760/ +44 7776 477050
Lucinda Henderson, Deputy Director of Investor Relations +44
(0)20 7399 2765/ +44 7818 060211
FTI Consulting
Ben Atwell/ Matthew Cole/ Julia Phillips +44 (0)20 7831 3113
About Hikma
Hikma Pharmaceuticals PLC is a fast growing multinational group
focused on developing, manufacturing and marketing a broad range of
both branded and non-branded generic and in-licensed products.
Hikma operates through three businesses: "Branded", "Injectables"
and "Generics", based principally in the Middle East and North
Africa ("MENA"), where it is a market leader, the United States and
Europe. In 2013, Hikma achieved revenues of $1,365 million and
profit attributable to shareholders of $212 million.
[1] IMS Healthcare, CY December 2013 and Bedford management
information
[2]Before amortisation (excluding software) and integration
costs
[3] IMS Healthcare, MAT December 2013
[4] IMS Healthcare, CY December 2013 and Bedford management
information
([5]) Bedford management information. Reflects carve-out
adjustments and includes non-recurring items and other pro-forma
adjustments
[6] Before the amortisation of intangibles (excluding
software)
[7]Bedford management information. Reflects carve-out
adjustments
This information is provided by RNS
The company news service from the London Stock Exchange
END
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