Sinclair Pharma announces that it has entered into agreements to acquire the global rights to Perfectha™dermal fillers through the acquisition of Obvieline Laboratories SA and has also entered into agreements to acquire distribution rights principally in Brazil and Russia from Pharmavital SA for a total consideration of up to €32.2 million in cash with an initial payment of €10.0 million. The acquisition of Obvieline completed on 6 January 2014 and the acquisition from Pharmavital is expected to close within six months.
Global rights to Perfectha™are of major strategic importance to Sinclair given its focus on aesthetic dermatology. Perfectha™provides both product critical mass and a global presence in the fast growing aesthetic dermatology market. Sinclair will benefit from significant operational leverage as its specialist aesthetic sales forces distribute Perfectha™in Europe and benefit from a more comprehensive product range. Perfectha’s major emerging market presence in Asia, Russia and Brazil will enable Sinclair to add a fast growing facial aesthetics brand to its expanding international dermatology portfolio.
Perfectha™delivered audited revenues of €5.2 million and profit before tax and exceptional items of €0.4 million in the year ended 31 December 2012 and over 60% revenue growth to approximately €8.4 million (unaudited) in its financial year to 31 December 2013, which included approximately €3.6 million from Asia. Around 90% of Perfectha™2013 revenues came from emerging markets with the balance from Western Europe. Unaudited net assets of Obvieline as at 30 September 2013 were €0.7 million.
The total consideration is structured into a number of payments with most being delivered over the two years following completion. These include a balancing payment based on the finalised 2013 audited revenues of Obvieline; a payment on completion for the distribution rights in certain geographies (principally Brazil and Russia) of 2x 2013 sales of Perfectha™by Pharmavital and a payment of €6.5 million on obtaining EU approval for the Perfectha™lidocaine (anaesthetic) range. An additional one-off payment of €2.0 million will be made once sales of Perfectha exceed €17.0 million in any 12 month period from 6 January 2014. Integration of Obvieline into Sinclair’s operations is anticipated to be completed quickly with no planned operational restructuring.Perfectha™ is manufactured at Obvieline’s in-house production facility at Lyon in France, where for a small investment Sinclair will significantly increase production capacity in order to meet strongly growing demand from emerging markets.
The acquisition is being funded through a new debt facility from the Hayfin Capital Management Group (“Hayfin”). Hayfin are providing a new 5 year term facility of £35.0 million and a £3.0 million revolving credit facility. The new facility is being used to repay all borrowings under Sinclair’s existing debt facility with Clydesdale Bank plc, and to fund payments for the acquisition. Pro-forma net debt to EBITDA at completion is around 2.6x and is expected to peak at approximately 3.0x in Q4 2014 when the milestone on lidocaine approval is expected to be paid.
Perfectha™ is an ideal complement to Sculptra in the rapidly growing dermal filler market adding a complete hyaluronic acid (“HA”) filler range. The acquisition reflects Sinclair’s strategy of commercialising fewer larger brands on a global platform. Following the acquisition of Perfectha™, on a pro-forma basis aesthetic dermatology will represent over one-third of group revenues and government controlled pricing will affect less than one-third of Sinclair’s portfolio.
The overall dermal filler market is expected to grow in Western Europe by around 8% pa to 2017 with HA fillers accounting for over 90% of procedures (Source: Millennium Research Group). The Perfectha™ brand includes five gel products which reduce folds, lines and wrinkles in different facial areas. Perfectha’s E-brid technology requires lower injected volumes and is easy for clinicians to inject. Sinclair will benefit from the operational leverage of bringing growing, albeit small European sales in-house and more significantly by providing Sinclair’s European (EU5) sales forces with the commercial benefits of a comprehensive product range in a growing market.
Obvieline’s commercial focus has been through its distribution partners in emerging markets. In the year to 31 December 2013, Asia, led by South Korea, represented 40% of sales and together with Latin America, Russia and the Middle East constituted about 90% of turnover. Over the last 2 years sales in these territories, where aesthetic facial procedures are at a significantly earlier stage than Europe, have grown over 65%. Sinclair expects to further increase Perfectha’s growth through entry into new territories and in combination with Kelo-cote the Group’s leading aesthetic scar brand. In addition it is expected that the Perfectha™ range will be extended to include a pre-mixed lidocaine (anaesthetic) product in late 2014 and the launch of a new product for use in gynaecological indications in H2 2014/15.
Obvieline has marketed Perfectha™ by strengthening key opinion leaders’ product endorsement and effective congress and symposia promotion. Sinclair will invest further in sales and marketing and together with limited clinical development costs will result in Perfectha™ making a modest contribution to Group EBITDA in the remainder of the current financial year with significant earnings accretion expected to come in 2014/15 and beyond.
Chris Spooner, CEO, commented: ”Sinclair’s objective is to create global dermatology brands in key growth segments. The acquisition of Perfectha™ is a significant strategic step enabling us to create a global presence in facial aesthetics. We expect to benefit in the near term from accelerating growth and significant operating leverage.”
About Sinclair IS Pharma plc- see www.sinclairispharma.com
Sinclair IS Pharma is an international specialty pharmaceutical company centred on Dermatology, in particular Aesthetics, Wound care, and Skin care. The Group has a direct sales and marketing presence in the top five European markets and a rapidly growing International division concentrated on the Emerging Markets through long term multi-product, multi-country, sales, marketing and distribution deals with key strategic partners.
“Safe Harbor” Statement under the US Private Securities Litigation Reform Act of 1995: Some or all of the statements in this document that relate to future plans, expectations, events, performances and the like are forward.
