Deals



Sinclair IS Pharma plc Acquires of Global Rights to Ellansé™


Posted: 2nd April 2014 08:36

Sinclair IS Pharma plc (AIM:SPH.L) ("Sinclair" or "the Group"), the international specialty pharmaceutical company, announces that it has entered into agreements to acquire the global rights to Ellansé™, a combined dermal filler and collagen stimulator product range, through the acquisition of AQTIS Medical BV ("AQTIS") for an initial consideration of €16.6 million in cash (£13.8 million). Additional cash consideration of up to €30.0 million (£25.0 million) may be payable depending on various revenue and regulatory approval milestones being achieved. Ellansé™ is growing rapidly particularly in emerging markets where it will be highly complementary to Perfectha®, Sinclair's range of hyaluronic acid fillers acquired in January 2014, and further consolidates Sinclair's growing presence in the global aesthetics market.

The Ellansé™ brand comprises a range of latest generation fully bioresorbable polycaprolactone (PCL) dermal fillers for the face and hands, which combine the immediate correction of wrinkles and folds as well as volumisation through the stimulation of collagen. The duration of activity is highly predictable and at up to 4 years has a very competitive lifespan although Sinclair expects the bulk of sales to be for 1 or 2 year duration products.

AQTIS doubled audited revenues to €5.0 million with profit before tax of €1.9 million in the year ended 31 December 2013. Around 90% of AQTIS's 2013 revenues came from emerging markets including 65% from APAC with the balance from Western Europe. Net assets of AQTIS as at 31 December 2013 were €1.4 million.

The additional consideration comprises two sales related milestones of up to €20.0 million in aggregate which are expected to be funded from cash flows generated from sales of Ellansé™, Sinclair does not expect the first of these milestones to be payable until calendar year 2016.  In addition, it is anticipated that after completion of clinical trials two of the Ellansé™ products will be launched in the U.S., with the first approval expected to be in calendar year 2017. Milestones of €5.0 million will be paid on each approval together with a capped royalty on U.S. sales.

The upfront consideration is being funded through an extension to the existing debt facility from the Hayfin Capital Management Group ("Hayfin"). Hayfin are providing an additional €18.0 million of debt funding in addition to the £35.0 million commitment made at the time of the Perfectha acquisition announced in January 2014.

With its commercial infrastructure and technical know-how in Dermatology, Sinclair is well positioned to consolidate aesthetic dermatology assets. Aesthetic dermatology is of major strategic importance to the Group, offering strong and profitable growth in Europe and International markets. Over one third of Sinclair's revenues are expected to come from aesthetics this financial year and the impact of recent acquisitions including Ellansé™ is expected to see this rise to around 50% in the year ending 30 June 2015. Ellansé™ will make a small contribution to sales and EBITDA in the remainder of FY14 but along with Perfectha® is expected to enhance earnings significantly in FY15 and beyond. In Europe Sinclair expectsEllansé™ to both complement and in some cases substitute Sculptra®.

The sales bias of both Perfectha® and Ellansé™ to Asia, where the incidence of aesthetic procedures is already high in several markets, enhances Sinclair's strong competitive position in this territory. Although recently launched in several countries, so far sales are mostly concentrated on a few markets including South Korea, Russia and Spain. Over time, Sinclair expects broader growth as the product gains critical mass and increased market recognition. Sales of Ellansé™ have grown rapidly despite the small infrastructure and financial constraints of AQTIS. With around 70 individuals at Sinclair involved in Aesthetics sales and marketing, the Group expects to increase market presence quickly and substantially. Further, as with Perfectha, the Group will benefit from bringing sales of Ellansé™ in-house due to both margin capture and improved sales force productivity.

AQTIS will be rapidly integrated into Sinclair with acquisition and restructuring costs estimated at under £1.0 million in FY14. Ellansé™ is manufactured at AQTIS's production facility in Utrecht where, for a modest investment, capacity is currently being doubled to meet future demand.

Chris Spooner, Sinclair CEO, commented: "Facial aesthetics is one of the fastest growth segments in dermatology and creating a global presence is a key strategic objective for Sinclair. We expect Ellansé's™ innovative product range and emerging market bias in combination with our existing aesthetics business to add materially to Sinclair's overall growth rate and market presence in this exciting field".

Henk Super, AQTIS CEO, commented: "Over the last few years, we have established Ellansé as the next generation collagen stimulator with an enthusiastic client base and fast growing international presence. We welcome Sinclair as our partner to further accelerate our revenue growth and obtain market approval in the important US market. Our companies have a strong commercial and cultural fit and we look forward to our cooperation."

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