ProStrakan swoop on rival hastens European growth

DRUGS company ProStrakan yesterday unveiled its biggest acquisition in a move designed to help it accelerate its expansion in Europe.

ProStrakan chief executive Tom Stratford said the deal was a great demonstration of parent KHKs trust in the company. Picture: TSPL

The Borders-based specialty pharmaceuticals group is acquiring Archimedes Pharma for £230 million in cash provided by ProStrakan’s Japanese parent Kyowa Hakko Kirin (KHK).

The deal will boost the firm’s geographic and product footprint, particularly in treatments associated with therapeutic areas of pain, oncology and critical care. Like ProStrakan it licenses and distributes products, although it has developed PecFent, a nasal spray used by cancer patients.

The firm, based in Reading in Berkshire, has a development plant in Nottingham and operates from other sites in France, Germany and Spain. It recorded a 33 per cent rise in revenue to £41 million last year. It is a subsidiary of private limited liability company Novo, which in turn is fully owned by the Novo Nordisk Foundation.

ProStrakan chief executive Tom Stratford said: “This is very much about growth and expanding the European business. It is a great demonstration of KHK’s trust in us that it was prepared to invest a considerable sum of money to continue to grow the business.”

He described Prostrakan’s relationship with KHK as “rare” as the Galashiels company was able to continue operating as an independent business. “It is a good strategy and it is working,” he said. “The reason it has been so successful is the first-class team of people that has given KHK the confidence to invest in the business.”

The Archimedes deal, at just under six times revenue, was considered “good value” by ProStrakan’s advisers and follows two considerably smaller acquisitions since KHK bought the Scots company for £292m in 2011. The Borders firm had been listed on the stock market but had suffered manufacturing problems and delays to a key cancer-pain drug.

Archimedes helps fulfil KHK’s plans to become a global specialty pharmaceutical company. The acquisition delivers several strategic benefits to Pro- Strakan by growing its businesses in four of the largest European markets: the UK, France, Germany and Spain. In each of these countries Archimedes has sales and marketing infrastructure which will complement ProStrakan’s current operations.

The combined business sees 150 Archimedes staff added to ProStrakan’s 350, although the final details regarding any rationalisation have yet to be announced.

“Archimedes is a high-growth, high- margin business and this is a positive move for us,” said Stratford.

In 2013, ProStrakan generated a 20 per cent rise in revenue to £155m and operating profit up 138 per cent to £29.1m, or £1.6 million, after amortisation in the consolidated accouunts.

Broadening the portfolio helps position it for the launch of several products currently being developed by KHK, including one that will treat leukaemia sufferers.

Closing of the transaction is subject to anti-trust approvals in Germany.

Lazard is acting as exclusive financial advisor to KHK and ProStrakan, and Wragge Lawrence Graham & Co is acting as legal counsel to KHK and Pro-Strakan.