10th Dec 2007 13:19
Hikma Pharmaceuticals Plc10 December 2007 Hikma acquires APM to strengthen its leading position in MENA LONDON, 10 December 2007 - Following its announcement on 7 October 2007, HikmaPharmaceuticals PLC ("Hikma" or "the Company") (LSE: HIK) (DIFX: HIK), themultinational pharmaceuticals group, announces that its offer (the "Offer") toacquire the entirety of Arab Pharmaceutical Manufacturing Company ("APM") (ASE:APMC), for a cash consideration of JD116.0 million ($163.6 million), has beenaccepted by APM shareholders at an Extraordinary General Assembly held yesterdayin Amman, Jordan. Strategic rationale The acquisition of APM: • Enhances Hikma's leadership position in the fast growing MENA region, particularly in the key markets of Jordan and Saudi Arabia • Brings together high quality and complementary portfolios that can be distributed through the enlarged Hikma network • Adds an attractive range of in-licensed products, including Takeda's blockbuster diabetes drug, Actos(R) • Significantly enhances Hikma's product development pipeline • Strengthens Hikma as a licensing partner of choice in the MENA region, with a combined sales and marketing team of 1000 employees • Brings additional high quality manufacturing capacity with broad capabilities • Slightly accretive to earnings in 2008, on a cash EPS basis(1) Hikma will finance the acquisition through new committed debt facilitiesalthough the Company also continues to review actively other financing options,including a potential equity issuance. The Company expects to assume control ofAPM by the end of the year. Said Darwazah, CEO of Hikma, commented: "The acquisition of APM further consolidates our strong position in the MENAregion and enhances our opportunities for growth across all of these markets. Wesee clear opportunities for synergies through a complementary pipeline, anenlarged sales and marketing team and increased manufacturing scale. We aretremendously excited about the potential of this combination and I look forwardto working with APM's experienced and successful team." Consolidating Hikma's Jordanian market position(2) In the first half of 2007, 27% of APM's sales were generated in Jordan, where itis the third largest pharmaceutical manufacturer with a market share ofapproximately 5%. The acquisition of APM will strengthen Hikma's market positionin Jordan, increasing its market share to approximately 12%, and will createclear commercial and operational synergies. Enhancing Hikma's leadership position in the MENA region(1) APM currently distributes its products in more than 25 countries, including 14MENA markets. APM's strong presence in these MENA countries will help further toconsolidate Hikma's position as the leading pharmaceutical manufacturer in theregion. APM has a market share in Saudi Arabia, its largest market, of just over1%. With Hikma's 3.9% of the Saudi market, the combined Group will have a marketshare of approximately 5%. Other important markets for APM include the UnitedArab Emirates and the other Gulf Cooperation Council ("GCC") countries, Iraq,Tunisia and Yemen. Gaining scale through complementary product portfolios APM's currently marketed portfolio of 106 products and 221 dosage strengths andforms will enhance the product offering available to Hikma's enlarged salesforce by expanding existing product lines, strengthening existing therapeuticareas and adding new molecules. APM's portfolio includes oral, injectable anddermatological products and spans a number of therapeutic categories, includingcardiovascular, diabetes and oncology. APM has recently received FDA approval tomanufacture and market an anti-viral product in the US market. APM's productswill also be leveraged to create new revenue opportunities, by introducing theminto markets like Algeria and Egypt, where Hikma already has a presence. APM also brings a portfolio of 5 in-licensed products, including Actos(R),Takeda's blockbuster drug for the treatment of diabetes. Hikma's expertise inmarketing in-licensed products and the strength of the combined sales forceshould drive incremental sales of these products. Hikma will also benefit from APM's pipeline of 35 products. Expanding Hikma's sales and marketing team Combining Hikma and APM's sales and marketing teams will create one of thelargest sales and marketing forces in the MENA region. APM will add a salesforce of more than 200, bringing the combined team to over 1,000 employees. Thiswill make Hikma an even more attractive partner for licensing. Leveraging APM's technical and manufacturing capabilities APM's strong technical and research and development expertise can be combinedwith Hikma's excellent sales and marketing capabilities and internationalmanagement skills to maximise the potential of the enlarged group. APM has high quality manufacturing facilities which are complementary to Hikma'sexisting facilities and capabilities and will help to expand currentmanufacturing capacity. Its three primary manufacturing plants are located inJordan and include facilities for the manufacture of oral and injectablepenicillins, topical preparations, and lyophilised oncology products. APM's solid financial position For the year ended 31 December 2006, APM had net sales of JD 29.1 million ($41.0million), operating income of JD 5.7 million ($8.0 million) and net income of JD5.1 million ($7.2 million). At the end of 2006, APM had total assets of JD 65.2million ($91.9 million) and total liabilities of JD 8.5 million ($11.9 million).In the six months to 30 June 2007, APM achieved net sales of JD 18.0 million($25.4 million), operating income of JD 3.6 million ($5.1 million) and netincome of JD 3.5 million ($4.9 million). This strong performance is expected tobe maintained in the second half of the year. Hikma expects significant revenue synergies to be derived from the distributionof APM's product across its network. Further synergies are expected to bederived from the increase in production capacity, operational efficiencies andenhanced R&D capabilities. The Company currently expects one-off integrationcosts of approximately $3.0 million. Merrill Lynch International is acting as exclusive financial adviser to HikmaPharmaceuticals PLC. Conference call and audio webcast Said Darwazah, Chief Executive Officer and Bassam Kanaan, Chief FinancialOfficer, will host a conference call on Monday 10 December 2007 for analysts andinvestors at 15.00 hrs (GMT). The conference call will be audio webcast and canbe accessed through the Company website www.hikma.com. To participate in theconference call, please dial +44 (0)208 817 9301 from within in the UK or +1 886629 2704 from the United States. A recording of the conference call will beavailable for seven days. To listen, please dial +44 (0)20 7806 1970 or +1 866239 0765 and enter the pass code 4918047#. - ENDS - Enquiries: Hikma Pharmaceuticals PLCSusan Ringdal +44 20 7399 2760Investor Relations Director Brunswick GroupJon Coles / Justine McIlroy / Alex Tweed +44 20 7404 5959 About Hikma Hikma Pharmaceuticals PLC is a fast growing multinational group focused ondeveloping, manufacturing and marketing a broad range of both branded andnon-branded generic and in-licensed products. Hikma's operates through threebusinesses: "Branded", "Injectables" and "Generics", based principally in theMiddle East and North Africa ("MENA"), where it is a market leader and sellsacross 18 countries, the United States and Europe. In 2006, Hikma achievedrevenues of $317 million (2005: $262 million), operating profit of $75.2 million(2005: $69.2 million) and profit attributable to shareholders of $55 million(2005: $44 million). In the first half of 2007, Hikma achieved revenues of$224.9 million (H1 2006: $154.9 million), operating profit of $51.8 million (H12006: $42.2 million) and profit attributable to shareholders of $36.8 million(H1 2006: $30.9 million). At 31 December 2006, the Group had over 2,400employees. For news and other information, please visit www.hikma.com. About APM APM is a well-established pharmaceutical company that develops and manufacturesits own branded generic products. APM also manufacturers and markets a number ofin-licenced products from leading global pharmaceutical companies. APM'sproducts are distributed in more than 25 countries and its 200-strong sales andmarketing team operates across 14 MENA markets. Completion In accordance with Jordanian company acquisition procedures, the Company willnow transfer funds into an escrow settlement account to effect the cashconsideration payment to APM shareholders in connection with its acquisition ofAPM. Following deposit of the consideration by Hikma, the Companies ControlDepartment will issue confirmations to allow the Securities Deposit Centre toaffect the registration of Hikma's ownership of the entire issued share capitalof APM, following which APM will become a wholly-owned subsidiary of Hikma. This material does not contain or constitute an offer for sale or thesolicitation of an offer to purchase securities in the United States. Anysecurities referred to herein have not been and will not be registered under theUS Securities Act of 1933, as amended (the "Securities Act") or with anysecurities regulatory authority of any State or other jurisdiction of the UnitedStates, and accordingly may not be offered or sold in the United States or to orfor the account or benefit of U.S. persons (as such terms are defined inRegulation S under the Securities Act) absent registration under the SecuritiesAct or an applicable exemption from such registration. There will be no publicoffering of any securities referred to herein in the United States. Certain statements made in this announcement are forward looking statements.Such forward looking statements are based on current expectations and numerousassumptions regarding the Company's present and future business strategies andthe environments in which the Company will operate in the future. Suchassumptions may or may not prove to be correct and actual results andperformance could differ materially from any expected further results orperformances, express or implied, by the forward looking statements. Factorsthat might cause forward looking statements to differ materially from actualresults include, among other things, changes in global, political, economic,business, competitive, market and regulatory forces, future exchange andinterest rates and future business combinations or disposals. The Companyexpressly disclaims and assumes no responsibility to update or revise any of theforward looking statements contained in this announcement to reflect any changein the Company's expectations with regard thereto or any change in events,conditions or circumstances on which any such statement is based. Merrill Lynch International is acting exclusively for Hikma Pharmaceuticals PLCand its subsidiaries and no one else in connection with the Offer and will notbe responsible to anyone other than Hikma Pharmaceuticals PLC and itssubsidiaries for providing the protections afforded to customers of MerrillLynch International or for giving advice in relation to the Offer. (1) Cash EPS excludes the impact of amortisation of definite life intangibles arising from the acquisition and is presented before one-off costs. (2) Market share data sourced from IMS Health and represents annualized sales through July 2007. 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