Actavis announced that it has agreed to acquire Abrika Pharmaceuticals Inc., a US based specialty generic pharmaceuticals company which engaged in the formulation and commercialization of both controlled release and other technically difficult pharmaceutical products.
Actavis has reached an agreement to acquire Abrika for an initial gross consideration of EUR85 million (US $110 million) in cash. Additional earn-out payments of up to EUR 96 million (US$125 million) are payable over the next three years subject to performance.
Following the acquisition, Actavis will be one of the leading companies in the US market in development of CR products, with over 50 CR products in the pipeline, over EUR50 million expected to be invested in CR development in 2007 and 100 employees dedicated in the development of CR products.
The enlarged group has 13 pending ANDA's for CR products with the FDA. The acquisition increases Actavis' critical mass and ability to leverage its position in the key US market.
There is limited competition in CR generics due to the complex innovation and high manufacturing standards required for successful launches. This has led to higher and more durable margins than in other segments of the US generics market.
CR versions of drugs expand the therapeutic application of products and are highly sought after by branded pharmaceutical companies because of their ability to extend product life cycles. Abrika's business model is to apply its proprietary technologies to selected high value branded pharmaceuticals and duplicate the release characteristics of the originator drugs in order to bring to market generic versions that can be substituted for these branded products.
Abrika's development expertise and infrastructure will enable Actavis to utilize its existing CR technology and accelerate growth in the niche CR market.
Abrika has filed nine ANDAs with the FDA since its inception and launched of its first internally developed product (isradipine) in Q1 2006. The company believes that it has secured the first-to-file exclusivity on two products, which are expected to be launched after the year 2007.
Abrika has a number of high value product filings and launches planned over the next two years with at least three product launches expected before the end of 2007 and 5-6 in the year 2008. Abrika has its own dedicated facility in Florida and the necessary infrastructure in-place to support a significant scale-up of the business as a center of excellence for CR products.
Abrika is forecasting revenues of EUR20 million (US$26 million) for 2007 and EUR35 (US$45 million) in 2008, with an EBITDA margin in both years of approximately 40 per cent.
The purchase price of EUR85 million (US$110 million) will be paid in cash from additional debt facilities that have been committed by Actavis and carry similar terms and conditions to Actavis' existing debt. Abrika is expected to have a net cash value at closing of approximately EUR4 million (US$5 million). The acquisition is subject to regulatory approval and is expected to close in January 2007.
The initial consideration represents a multiple (EV/EBITDA) of 9.5 times Abrika's projected 2007 EBITDA, and if Abrika meets the earn-out targets and triggers the additional payments, the total consideration will represent a multiple of 8.3 times Abrika's projected 2007 EBITDA.
Commenting: Robert Wessman, president and chief executive of Actavis said, "Our core objective for strategic acquisitions is to find opportunities that extend our product portfolio and pipeline as well as broaden our platform for growth in core markets. Abrika entirely fits that rationale and therefore represents another significant step forward for Actavis in the US, a key market where we already generate a third of our total revenues. The addition of such an exciting, fast growing business to our Group will allow us to grow our market share and take a leading position in the controlled release market."
Commenting, Alan Cohen, chairman of Abrika said, "Abrika has rapidly reached a stage in its development where we felt we needed a strong strategic partner with a broad product portfolio and global presence that can foster the ability of our formulation team to create products for a global platform. Actavis has the expertise and infrastructure to accelerate our growth and take this business to the next level."