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Alliance Pharma plc: THE INVESTMENT CASE

Alliance Pharma brings on board its third international product with US$17.5mln Vamousse deal

It is paying an initial US$13mln for Vamousse, which it is acquiring from TyraTech, the AIM-listed developer of the range. This will be followed by a deferred pay-out of as much as US$4.5mln based on sales targets
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INVESTMENT OVERVIEW: APH The Big Picture
Deal done - the company has completed more than 30 acquisitions

Alliance Pharma PLC (LON:APH) shares rose 5% after it said it was acquiring a pesticide-free head lice product line for up to US$17.5mln – giving the growing healthcare company a third international brand.

It is paying an initial US$13mln for Vamousse, which it is acquiring from TyraTech PLC, the AIM-listed developer of the range. This will be followed by a deferred pay-out of as much as US$4.5mln based on sales targets.

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

The earnings enhancing deal should be completed by the end of the year.

Using existing infrastructure

“Vamousse will leverage our current infrastructure as it fits well into our growing UK consumer business, whilst expanding our footprint into the US,” said Alliance chief executive John Dawson.

“The brand will also benefit from added distribution both through our EU affiliates and through our international partner network operating in over 90 territories worldwide."

READ: Cash generative Alliance Pharma poised for further growth

In the last full financial year, Vamousse’s mousses and shampoos generated sales of US$6.6mln and a gross profit of US$4.6mln. In the latest six months, revenues were US$3.3mln and gross profit US$2.3mln.

US focused 

A total of 83% of the turnover came from the US, with the remainder generated in the UK.

"We are delighted to acquire the innovative consumer healthcare brand Vamousse, which will become our third major international growth brand,” said Alliance CEO Dawson.

“The acquisition will be immediately earnings enhancing and expected to be accretive to our return on invested capital from the second year.”

The sale of Vamousse should provide a significant boost to shares in Tyratech as the initial consideration being handed over by Alliance is US$3mln more than the AIM firm’s current market capitalisation.

Tyratech has said it will use US$8.5mln of the proceeds to buy back its stock for 3 pence a share – which is more than double Friday’s close.

Well-judged acquisitions 

The company has grown via a series of well-judged acquisitions (35 now in 19 years) and Alliance owns around 90 pharmaceutical and healthcare products and sells into over 100 countries.

In that portfolio, it has what it calls ‘local hero’ lines, which sell well in a particular territory or country.

The crown jewels are its ‘global stars’, which are managed and marketed centrally and, as the name suggests, are sold internationally.

They are Kelo-Cote, a scar reduction spray and gel, and MacuShield, for an eye condition called age-related macular degeneration.

The former saw its sales increase 52% in the first half to US$8.4mln, while the latter’s advanced 67% to US$4.6mln. In other words, they showed their ‘star’ quality.

Third international brand

Vamousse adds a third leg to the firm’s global aspirations.

Alliance shares rose 3.22p to 61.97p following the unveiling of the deal. Numis thinks the stock is worth 71p.

The City broker has raised its earnings per share forecasts by 3% and 4% respectively for next year and the year after to factor in the bottom line impact of Vamousse and Ametop, an anaesthetic gel it acquired last week (Dec 1) for US$7.5mln.

“We view both acquisitions as sensible value-enhancing bolt-ons with the potential to leverage Alliance's improving international reach and scale,” said analyst Sally Taylor.

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Alliance Pharma plc Timeline

Newswire
July 31 2017

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