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Alliance Pharma buys rights to anaesthetic gel product, Ametop from Smith & Nephew for US$7.5mln

John Dawson, Alliance Pharma's chief executive, said: "The acquisition will be immediately earnings enhancing, accretive to our underlying return on invested capital, and it fits well in our existing bedrock business operations"
Pain
Alliance Pharma said the acquisition consideration is being funded from existing cash and bank facilities

Alliance Pharma PLC (LON:APH) has acquired all of the rights to an anaesthetic gel product, Ametop from FTSE 100-listed medical technology business Smith & Nephew PLC (LON:SN. for a consideration of US$7.5mln.

John Dawson, Alliance Pharma's chief executive, said: "The acquisition will be immediately earnings enhancing, accretive to our underlying return on invested capital, and it fits well in our existing bedrock business operations."

READ: Cash generative Alliance Pharma poised for further growth

Ametop is a topical anaesthetic gel product, used for numbing the skin prior to intravenous injection or cannulation, which Smith & Nephew has been selling in the United Kingdom, Republic of Ireland, New Zealand and Canada for over 10 years.

In the 12 months to 31 October 2017, Smith & Nephew’s total sales of Ametop were US$2.8mln, with approximately 75% of sales derived from the UK and the Republic of Ireland.

In addition to the Ametop rights, Alliance will be acquiring inventory, which is expected to have a value of approximately US$0.4mln.

Consideration funded from existing cash and bank facilities

Alliance Pharma said the acquisition consideration is being funded from existing cash and bank facilities, including drawdown from its £35mln Revolving Credit Facility (RCF).

The AIM-listed specialty pharmaceutical company said that, after this drawdown, around £11mln of the RCF remains available to fund further acquisitions.

The group added that its adjusted net debt/EBITDA ratio will increase to approximately 2.3 times as at 31 December 2017 as a result of this drawdown and has recently agreed an increase in its debt covenant from 2.5 times to 3.0 times.

In a note to clients, analysts at Numis Securities commented: “The product is expected to add 2% to Alliance's sales footprint in FY18E and while we make no changes to our forecasts at this stage, we could anticipate low single digit earnings up-tick from the deal from FY18E onwards.”

They added: “Alliance trades on 15x 2017E EPS against 12% 2017-19E CAGR EPS, which we continue to view as attractive.”

Numis reiterated a ‘buy’ rating and 66p target price on Alliance Pharma shares.

 In late afternoon trading, Alliance Pharma shares were 0.4%, or 0.25p lower at 58.75p.

 --- Adds share price, analyst comment --

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Alliance Pharma plc Timeline

Newswire
July 31 2017

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