Clinigen to acquire Link Healthcare

22 September 2015

Clinigen Group plc

Clinigen to acquire Link Healthcare to strengthen positionacross Asia, Africa and Australasia

Clinigen Group plc ('Clinigen' or the 'Group', AIM: CLIN), the specialty global pharmaceutical company, has agreed to acquire Link Healthcare ('Link'), a specialist pharmaceutical and medical technology business focussed on the Asia, Africa and Australasia ('AAA') region, for an initial consideration of £44.5 million and a maximum of approximately £100 million based on achievement of milestones (the 'Acquisition').

Highlights

· Link will significantly strengthen Clinigen's global footprint and position in the AAA region

− The Group's Managed Access and Global Access divisions' global leadership position will be considerably strengthened in the AAA region with three key hubs in Singapore, South Africa and Australia and in Link's local operations in Hong Kong, Japan and New Zealand.

− The Group will gain excellent local knowledge and expertise with Link's well-established pharmaceutical and medical technology customer bases, access to local target customers of pharmacists and key opinion leaders in these regions.

· Link is being acquired on a debt-free cash-free basis, for the following:

− initial consideration of £44.5 million, comprising £22.25 million in cash and the allotment of 3,102,558 new Clinigen shares, payable at Completion

− additional deferred consideration of up to £55.5 million in cash if earn out targets are achieved in the years ending 30 June 2016 and 2017

· For the financial year ended 31 March 2015, Link achieved revenue of £31.6 million and EBITDA of £4.2 million

· The Acquisition is expected to be immediately earnings enhancing

· The initial cash consideration will be financed from the Group's existing debt facilities

· John Bacon, Group Chairman and Founder of Link, will be joining the Clinigen Board as a non-executive director upon Completion of the Acquisition, following the AGM

· The Group has also today published its results for the year to 30 June 2015 which highlight the advances in its strategic priorities, with underlying EBITDA up 20% - see separate release

Peter George, Chief Executive Officer of Clinigen, said:

"This strategic acquisition is a key step in our ambitions to strengthen and broaden our international distribution network across the AAA region - Asia, Africa and Australasia.

"Link, which is located in the three key hubs of Singapore, South Africa and Australia, has excellent local knowledge and connections as well as established customers.

"There is a strong, and increasing, demand for hospital-based oncology, anti-infective, orphan and other crucial drugs in pharmerging markets. Link will enable us to directly supply much needed, but not always licensed, medicines into these growing markets.

"Link will also support our underlying philosophy of getting the right drug to the right patient at the right time regardless of the location anywhere in the world."

John Bacon, Group Chairman and Founder of Link, added,

"Becoming part of Clinigen's impressive, world-leading business makes perfect sense to us. We share similar visions and values to deliver essential medicines where they might not be available due to licensing or a lack of supply.

"By combining our expertise and geographical footprints, we are well placed to benefit from the tremendous opportunities for growth in new markets and on a global basis."

-Ends-

 To see a recorded message from Peter George describing the impact of the proposed Link Acquisition, see https://vimeo.com/139592580.

An analyst briefing will be held at 8:30am on Tuesday, 22 September 2015 at the offices of Instinctif Partners, 65 Gresham Street, London EC2V 7NQ.

An audio replay file will be made available shortly afterwards via the Group's website: www.clinigengroup.com.

For further information, please contact:

Acquisition of Link

1. Introduction

Clinigen today announces that it has agreed to acquire the entire issued share capital of Link Healthcare Private Limited on a cash-free debt-free basis for an initial consideration, payable at Completion, comprising £22.25m in cash and the allotment of 3,102,558 new Clinigen shares (such new shares having a value, by reference to the average closing mid-market price over the 10 trading days ending Friday 18 September 2015).

Additional consideration of up to a further £55.5 million will become payable in cash if earn out targets are achieved in the years ending 30 June 2016 and 2017. Accordingly the consideration payable in respect of the Acquisition has a maximum potential value of approximately £100 million.

Link is a specialist pharmaceutical and medical technology business focussed in the regions of Asia, Africa and Australasia. It offers a range of services on a local or cross-regional basis, including full commercial launch services, mature and discontinued product lifecycle management, comprehensive regulatory services, marketing and logistics. It further offers early market access programs which include the sourcing of Named Patient based Supply ('NPS') for more than 200 essential medicines.

Link is the holder of over 100 Marketing Authorisations in its local markets and employs 150 staff across the AAA region. It enjoys long-term partnerships with over 40 global blue chip pharma and medical technology clients.

For the financial year ended 31 March 2015, Link achieved revenue of £31.6 million and EBITDA of £4.2 million. It had gross assets of £23.3 million as at 31 March 2015. In the last 12 month period to June 2015, Link achieved revenue of £33.7 million and EBITDA of £5.1 million.

The Acquisition, once completed, will significantly strengthen Clinigen's position in the AAA region, with three key hubs in Singapore, Australia and South Africa and developing local operations in New Zealand, Hong Kong and Japan.

Clinigen will gain excellent local knowledge with well-established customer bases and access to local target customers of pharmacists and key opinion leaders in these regions.

Clinigen will finance the initial cash consideration and associated expenses through the Group's existing debt facilities. Completion of the Acquisition is conditional on (i) the passing at the forthcoming Clinigen AGM of the resolution to grant to the directors an allotment authority under section 551 of the Companies Act 2006, in order to allow the allotment of the new shares comprising the share element of the consideration for the Acquisition and (ii) the Admission of such shares to trading on AIM.

Completion of the Acquisition is expected to occur on or around 30 October after the Clinigen AGM which is being convened for 27 October 2015.

2. Overview of Link

Link is a specialist pharmaceutical and medical technology business, founded in Australia in 1997 and focussed in the regions of Asia, Africa and Australasia. It provides distribution infrastructure, pharmacovigilance, quality control, medical information and sales/marketing in local markets for its own products, partnered products, and sourced products where there is a local demand.

Link strives for excellence in the provision of vitally important specialty products and is committed to securing innovative medicines and technology, delivering access to world class therapies.

Link is active across the business segments listed below:

Medicine Access is focussed on the supply of products for Early Access Programs ('EAP'), Named Patient Supply ('NPS') and Supply for Clinical Trials ('CTS'). This includes high-value specialty pharmaceuticals for targeted therapeutic areas and delivery of structured programmes on behalf of other Pharma companies.

Hospital & Specialty undertakes the supply of key pharmaceutical products and services to hospitals. Link has an extensive range of prescription pharmaceuticals in essential therapeutic areas including Allergy, Anaphylaxis, Analgesia/Anaesthesia, Anti-infective, Antiretroviral, Cardiology, Endocrinology, ENT, Gastroenterology, Intensive care, Metabolic disease, Neurology, Oncology, Orphan Drugs, Palliative care, Psychiatry, Radiography, Transplantation and Toxicology.

Prescription & Pharmacy represents the sale of prescription and OTC drugs in pharmacies, which are owned or in-licensed by Link. This includes Novagen Pharma, a joint venture with Aurobindo in Hyderabad, India supplying generic medicines in the South African region. Over 40 products are sold, primarily representing antiretroviral treatments for AIDS patients, with the remainder being products for chronic health problems.

Med Tech commercializes a small range of medical technology products focused in the specialist areas of advanced wound care, diabetes and point of care testing.

3. Background to and reasons for the Acquisition

The Acquisition fulfils a number of Clinigen's strategic ambitions and will increase future growth opportunities, both in new markets and globally, and will support the business through:

- A significant AAA footprint, with an established, profitable and trusted business in key markets

- Strengthening key customers, hospital pharmacists and KOLs, across the AAA region

- Increasing distribution capabilities in the AAA region in line with Clinigen's hub and spoke model

- Providing registration and commercialisation capabilities in the AAA region

- Providing regional on-demand unlicensed ethical supply capabilities in established and 'pharmerging' markets

- Immediately growing the portfolio of products and services

- Providing access to Link's exclusive relationships for both licensed and unlicensed products

- Providing complementary customer lists in unlicensed supply

The Acquisition is expected to be immediately earnings enhancing.

The Acquisition will further strengthen the Group's position as the global market leader in ethical unlicensed supply - a large addressable and under-penetrated market with the opportunity to shape and develop a $5 billion plus market.

4. Principal terms of the Acquisition

Maximum consideration of approximately £100m will be payable to the vendors of Link in up to three tranches over the period to the date of determination of the relevant accounts of Link in respect of the year ending 30 June 2017, subject to performance.

Such consideration will be paid at Completion, as to £22.25 million in cash and as to the allotment of the 3,102,558 new Clinigen shares, which equates to 2.8 per cent. of the Company's current issued share capital, and in up to two further tranches to a maximum of £55.5m in cash in total, depending on the achievement of EBITDA for the financial years ending 30 June 2016 and June 2017.

The maximum consideration will be due if the earn-out target is achieved in either year. Partial payment of the consideration will be due if a threshold Link EBITDA is exceeded in the year to June 2016, and a further partial payment if in the year to June 2017 the EBITDA exceeds the level reached in 2016

The share element of the consideration will comprise 3,102,558 ordinary shares in Clinigen (the 'Consideration Shares'), such number of shares having been calculated by dividing £22.25 million by the average closing mid-market price of a Clinigen share over the 10 trading days ending Friday 18 September 2015. This equates to 2.8 per cent of Clinigen's current issued share capital.  

Application will be made for the Consideration Shares to be admitted to trading on AIM on 30 October 2015, at which time the Acquisition will complete.

The Consideration Shares will be subject to a lock-in whereby they cannot be disposed of without Clinigen's prior consent (save in certain limited circumstances) during the period of 12 months following Completion. Thereafter, the Consideration Shares will be subject to orderly marketing provisions for the period expiring on the announcement by Clinigen of its results for the year ending 30 June 2017 (of, if sooner, on the second anniversary of Completion).

Peter George, the Chief Executive Officer of Clinigen, has agreed with the vendors of Link, in respect of 4,167,932 of the shares in Clinigen held by him, that he will not (save in certain limited circumstances) dispose of any of such shares without prior approval given on behalf of such vendors at any time during the 12 months following Completion.

5. Proposed change to the Board

On Completion of the Acquisition John Bacon, Link Healthcare Group Chairman, will be appointed as a non-executive director of Clinigen. John Bacon's letter of appointment will provide for a two year appointment, although his directorship will be capable of termination at any time either by him or by Clinigen on three months' notice. Such letter of appointment will entitle John Bacon to annual director's fees of £48,000. A further announcement on this will be made by the Group in advance of Mr Bacon's appointment to the Board.