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Alliance Pharma gets more ammo for acquisition drive

Broker raises price target rises to 42p as pharma group gets additional £10mln to fund new deals.

Alliance Pharma's (LON:APH) expansion of its acquisition fund is a key development for the specialist pharmaceutical company, according to broker Numis.

The group today announced an additional £10mln facility with Lloyds Banking Group, taking the total facility available to the group to make purchases up to £30mln.

Alliance has used £16.5mln of the facility and has £13.5mln to spend following the latest injection of funds.

Numis said that management has executed on 23 deals over the last 14 years and continually reiterates the strength of its M&A pipeline. 

If the £13.5mln was fully deployed on acquisitions through 2013 at the historical average 3 times gross profit, the broker sees up to 30% upside to its 2014 profit forecasts.

“P/E multiples in the speciality pharma/generics peer group have expanded one point to 12x over the last couple of months - we therefore increase our price target to 42p, from 37p and reiterate our buy rating,” said Numis.

Alliance also said profits will beat market forecasts for the year just ended after very strong sales of skin and eczema emollient Hydromol. 

“As a result of a stronger than expected gross margin rate, pre-tax profits are expected to be slightly ahead of current market expectations,“ the specialist pharmaceutical group said.

Total revenues in 2012 will be £44.9mln, compared to £46mln in the previous year.

Sales were hit by Sanofi Pasteur’s temporary suspension of the manufacture of Immucyst in June, but Hydromol’s record performance offset some of the impact. Hydromol sales grew by 29% or £1.1 mln to £4.7 mln.

Last year’s acquisitions, Opus Group and three anti-malarial brands, performed as expected, Alliance Pharma said. 

Numis also raised its 2012 profit forecast to £10.5mln, from £10.2mln, following the update.

The company’s business model is to acquire the rights to established niche pharmaceutical products. It now owns or licenses the rights to more than 60 products.

Shares rose by 4% to 33.5p.


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