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Alliance Pharma (LON:APH) will receive £6.7mln in compensation after it settled with Sanofi Pasteur following the withdrawal of bladder cancer treatment ImmuCyst three years ago.
Manufacturing problems at Sanofi meant Immucyst was withdrawn from the market in 2012, a time when it was generating sales of around £5mln annually for Alliance under a distribution agreement.
The £6.7mln, which will be paid in cash, is inclusive of costs and a full and final settlement of Alliance's claims.
Sanofi has now built a new plant to manufacture the product and it is expected to be re-introduced this year.
Alliance will continue to distribute ImmuCyst in the UK, though it cautioned it expects future stocks of ImmuCyst will be constrained.
Numis said this was slightly disappointing as its main competitor, Merck’s OncoTice, was also in short supply.
UK demand is for approximately 6000 vials per month, said Numis, but recently Merck has only been able to supply about 2000 per month.
John Dawson, Alliance’s chief executive, said Sanofi’s new plant was producing less than expected and it would have to share what there was on a pro-rata basis with other distributors elsewhere.
Numis added that debt at the last half –year net debt was about £26.5mln.
After legal costs, the settlement could knock £6m off that debt number.
The broker’s target price is 52p and it sees scope for further bolt-on acquisitions, which would boost its forecasts.
Shares rose 3% to 55.4p.