Hikma Lowers Purchase Price For BI’s Roxane by $535 Million

Hikma Pharmaceuticals PLC is revising the purchase price it had offered to acquire Roxane Laboratories Inc. and Boehringer Ingelheim Roxane Inc., two businesses of Boehringer Ingelheim (BI), based on a lower-than-expected financial performance by Roxane in 2015 and anticipated for 2016 and 2017. Hikma will reduce its purchase price by $535 million to a gross consideration of $647 million in cash as opposed to the $1.18 billion it offered in July 2015 when the deal was announced. In July 2015, Hikma Pharmaceuticals agreed to acquire Roxane Laboratories Inc. and Boehringer Ingelheim Roxane Inc., for $2.65 billion in a cash-and-stock deal. The transaction value represented $1.18 billion in cash (the portion of the deal now being lowered) and the acquisition by BI of a 16.71% stake in Hikma upon the issuance of 40 million new Hikma shares to BI, following the closing of the deal. Hikma will still issue 40 million consideration shares, which is unchanged from the number agreed in July 2015.

The deal adds to Hilkma’s US generics portfolio, giving Hikma 88 products in specialized and niche segments of the market, including oncology, respiratory, extended-release, and controlled substances. It also adds to 89 products to Hikma’s pipeline, including 57 Paragraph IV products, 13 of which are first-to-file opportunities.The deal represents a second major deal by Hikma with BI. In July 2014, Hikma acquired the US generic injectables business, Bedford Laboratories, from BI. The Roxane pending acquisition strengthens Hikma’s non-injectable business in the US. Roxane is a well-established US specialty generics company with product facilities in Columbus, Ohio.

Hikma now expects that Roxane’s unaudited revenue for 2015, rather than being slightly higher than 2014, was around $650 million, which when taken together with increased expenses, has led to a weaker result than achieved in 2014. On the basis of the new information provided by BI, Hikma now anticipates that Roxane’s full-year revenue for 2016 will also be negatively impacted compared to Hikma’s previous expectation and, as a consequence, will be lower than revenue in 2015. Hikma now expects that further adjustments for the impact on revenue it anticipates due to the rebates in 2016, alongside the previously expected increase in competition on the current marketed portfolio, will only be partially offset by revenue from recent and planned new product launches. On the basis of the new information provided by BI and the revised terms of the acquisition, Hikma now expects that the acquisition will be slightly dilutive to adjusted earnings per share in 2016.I

Hikma now anticipates that Roxane's total revenue for 2017 will be between $700 million and $750 million, rather than the previous expectation that revenues in 2017 of between $725 million to $775 million.In spite of the reduction in Hikma's expectations for Roxane's revenue in 2017, Hikma reiterates that the acquisition is expected to be strongly accretive to adjusted EPS from 2017, the first full year, onwards.

Hikma continues to expect approximately 20 launches from the Roxane pipeline in 2016 and 2017, including some potentially substantial market opportunities. In addition, Hikma expects an improved product mix in 2017, resulting from the successful commercialization of Roxane's differentiated pipeline and the reduction in the supply of lower-margin products to BI and its affiliates.

The board of Hikma continues to unanimously recommend that the shareholders vote in favor of the deal and related adjustments at the company’s General Meeting to be held February 19, 2016.

Source: Hikma

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