Alliance Pharma plc (AIM: APH), the specialty pharmaceutical company, announces that its wholly owned subsidiary, Alliance Pharmaceuticals Limited, has entered into an agreement to acquire the worldwide rights to Vamousse from TyraTech Inc (AIM: TYR and TYRU) for an initial consideration of US$13.0 million and deferred contingent consideration of up to US$4.5 million. This agreement is subject to the approval of TyraTech’s shareholders and the purchase is expected to complete before 31 December 2017.
The Vamousse assets comprise an innovative, pesticide-free range of consumer healthcare products for the prevention and treatment of human head lice.
Vamousse was launched in the US and the UK in 2014 and has gained strong retail distribution in both territories. Net sales of Vamousse by TyraTech for the year ended 31 December 2016 were US$6.6 million with a gross profit of US$4.6 million and for the 6 months to 30 June 2017 net sales were US$3.3 million with a gross profit of US$2.3 million. Approximately 83% of current revenue is derived in the US and 17% in the UK. With its unique physical mode of action, the market share of Vamousse has grown significantly ahead of its category in the US. Alliance plans to make use of its EU affiliates and extensive distribution network to drive further growth in the brand.
The initial consideration will be funded from existing cash and bank facilities, including a drawdown from the Group’s £35 million Revolving Credit Facility (“RCF”). Approximately £1.3 million of the RCF will remain undrawn on completion of the acquisition of Vamousse. The deferred contingent consideration will be funded from the Group’s cash generation. Up to US$2.0 million of this will be payable in 2019, and up to US$2.5 million will be payable in 2020, both dependent on the revenue growth of Vamousse.
The Group’s adjusted net debt/EBITDA ratio will be almost 2.5 times as at 31 December 2017 as a result of this drawdown. As set out in the Group’s announcement of the acquisition of Ametop® on 1 December 2017, Alliance has recently agreed an increase in its debt covenant from 2.5 times to 3.0 times for the remainder of its credit facility. Due to the strong ongoing cash generation of the business the Group anticipates that this ratio will reduce to below 2.0 times by the end of 2018.
In addition to the Vamousse rights, Alliance will be acquiring inventory with an expected value of approximately US$0.8 million.
Commenting on the acquisition, John Dawson, Alliance Pharma’s Chief Executive Officer, said:
“We are delighted to acquire the innovative consumer healthcare brand Vamousse, which will become our third major international growth brand. The acquisition will be immediately earnings enhancing and expected to be accretive to our return on invested capital from the second year. Vamousse will leverage our current infrastructure as it fits well into our growing UK consumer business, whilst expanding our footprint into the US. 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.”
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