1st Apr 2022 18:08
(Alliance News) - Alliance Pharma PLC's recent acquisition of ScarAway is right in its "sweet spot" stockbroker Liberum said on Friday, believing the deal could lead to it gaining "critical mass" in the US market.
Last Friday, Chippenham, England-based distributor of consumer healthcare brands and prescription medicines Alliance acquired silicone-based scar treatment brand ScarAway from Perrigo Co PLC for USD19.4 million. As part of the deal, Alliance also bought the rights to sell its scar treatment brand brand Kelo-cote in the US.
Liberum estimates the annual US OTC scar treatment market is estimated to be worth USD90 million. According to the investment bank, silicone-based approaches are universally considered the first-line treatment option for hypertrophic scares and keloids.
"On retails sales value, ScarAway reportedly represents 28% of the US OTC scar treatment market, placing it 2nd place behind the market leading Mederma, 40%, a non-silicone product now owned by Perrigo after acquiring HRA Pharma, hence the decision to divest ScarAway and the attractive deal multiple," Liberum analyst Edward Thomason said.
"The deal is right in Alliance Pharma's sweet spot, with substantial experience already of the scar treatment market from marketing Kelo-Cote, and there is great opportunity to push these scar treatments through the existing US marketing platform leveraging its substantial expertise in the scar treatment field."
The deal adds "critical portfolio mass" in the US, he continued, with Alliance able to slot its new products into the existing commerce infrastructure alongside Amberen and Vamousse. It also noted ScarAway and Kelo-Cote's gels are made by the same manufacturer in the US - which will lead to cost synergies.
Liberum believes the deal will add about USD2 million in earnings versus the previous 12 months.
"This appears excellent value given the double-digit growth outlook. We believe the low valuation reflects the necessary divestment of the ScarAway brand by Perrigo after the HRA Pharma acquisition, possible disruption to Perrigo's supply-marketing function and that the licensing rights for Kelo-Cote were set to return back to Alliance Pharma in 2026," Thomason added.
Liberum has reiterated its 'buy' recommendation for Alliance after the deal. The stock closed at 120.40 pence each in London on Friday, with Liberum holding a target price of 145p.
By Paul McGowan; [email protected]
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