28th Jul 2015 13:25
LONDON (Alliance News) - FTSE 100-listed Hikma Pharmaceuticals PLC on Tuesday said it has agreed a USD2.65 billion deal to acquire Roxane Laboratories Inc and Boehringer Ingelheim Roxane Inc from Boehringer Ingelheim, the German pharmaceutical company.
The Roxane businesses are a US speciality generics operation, Hikma said, and production of its products it handled at its manufacturing site in Columbus, Ohio.
Under the terms of the deal, Hikma will issue 40 million shares to Boehringer at 2,350 pence per share, along with a USD1.18 billion cash payment. This will give Boehringer an around 16.71% interest in the company. Hikma shares were up 9.1% at 2,269.72 pence Tuesday afternoon, the second best performer in the FTSE 100.
Hikma said that Boehringer's investment in Hikma's shares at a premium reflected Boehringer's confidence in the value creation potential for them as long-term shareholders.
Hikma said the deal will significantly expand its US portfolio, including oncology, respiratory, extended release and controlled substances products. It will enhance the company's pipeline, adding 89 research and development projects, Hikma said.
It expects Roxane to achieve revenue of between USD725 million and USD775 million in 2017, and for the company to achieve an earnings before interest, tax, depreciation and amortisation margin of around 35% over the medium-term.
If the deal closes in the fourth quarter of 2015 it is expected to add to adjusted earnings per share in 2016, its first full year, and to add very strongly to adjusted earnings per share from 2017 onwards.
The deal is Hikma's second with Boehringer; last July the company acquired Ben Venue Laboratories Inc's generic injectibles manufacturing site in Bedford, Ohio, for up to USD300 million, along with the businesses assets. Ben Venue Laboratories is a member of the Boehringer Ingelheim group and its US generic injectibles business is named Bedford Laboratories.
The Bedford sites were voluntarily shut down in 2011 after the US Food and Drug administration raised significant manufacturing and quality concerns about the site, although Ben Venue poured funds into upgrading the facility and resumed limited production towards the end of 2012, it decided to cease production at the end of 2013, as it was unable to return to "sustainable production".
Hikma has since begun transferring products from these sites to its own manufacturing facilities, with the aim of having all 20 products back on the market in 2017. The company said it has rapidly expanded its presence in the US generics market in recent years, and believes that the acquisition of Roxane will make it the sixth-largest company in US generics.
The pharmaceutical company noted Tuesday that Roxane's manufacturing facility has a "strong track record in regulatory inspections."
Roxane had gross assets of USD967 million as at the end of 2014, with a pretax profit of USD24 million. Its 2014 results were hit by a number of significant items that are not expected to recur, along with ongoing costs related to some products in its pipeline.
"This transaction has significant strategic value for us, transforming our position and scale in the US generics market. Roxane's impressive portfolio, attractive pipeline and R&D expertise, focusing on higher value, niche and differentiated products, will create a platform for sustainable long-term growth," said Hikma Chief Executive Said Darwazah.
Hikma was promoted to the FTSE 100 in March.
By Sam Unsted; [email protected]; @SamUAtAlliance and Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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