This Pill Makes You Richer

03/30/2010 10:03 am EST


John Snowden

Contributor, The IRS Report

Niche player Alliance Pharma has a growing, profitable drug portfolio and a well-motivated boss, writes John Snowden in The IRS Report.

Alliance Pharma (London: APH) has an established track record in acquiring the rights to niche products. Sales are mainly prescription-driven, and products are distributed directly to hospitals as well as [to] pharmaceutical wholesalers. The products cover a wide range of conditions and include brands used in the treatment of dermatological conditions, in childbirth, and in the prevention of heart disease, in Parkinson’s, nutrition and nasal infections.

A year ago, Alliance [said] that it was looking for further brands to enhance the business. In August, the company announced a £7.5-million deal to buy the worldwide rights to the Buccastem and Timordene brands from various subsidiary companies of Reckitt Benkiser. Half the cost was paid in cash and the other half [through] a vendor share placing of 31.2 million shares at 12.5 pence.

In September the company stated that the group should have a strong performance for the second half and added in December that profits for the year would exceed broker expectations.

Another major acquisition was made in February, [when] Alliance agreed to buy the trade and certain assets of Cambridge Laboratories (Ireland) and Cambridge Laboratories Limited. The total consideration is between £14.3 million and £16.4 million, with a deferred contingent consideration of between £1.6 million and £2.1 million. Alliance placed 28.846 million shares at 28 pence for £7.5 million.

The acquisition brings a new portfolio of 18 prescription products into the group covering a wide range of therapeutic areas. They include ImmuCyst, an immunotherapy for superficial bladder cancer; gelclair, an oral gel for the management of oral mucositis caused by chemotherapy and radiotherapy; procarbazine, a treatment of Hodgkin’s Lymphoma as part of chemotherapy treatment, and a liquid formulation of Vitamin E.

The rights for all these compounds are primarily for the UK and Republic of Ireland. The acquisition is expected to be significantly earnings-enhancing for the current 2010 year.

For the year [ending] December 2008, Alliance increased revenues to £21.76 million and produced a pre-tax profit of £2.42 million. For the year to December 2009 the company [stated] that profit before tax was expected to be not less than £8.5 million on sales of around £31 million.

On February 22nd the Cambridge acquisition and share placement was completed and among the major shareholders it was announced that professional investor Nigel Wray has a direct holding of 24,319,995 shares, some 10.95% of the company. He has always been a man to follow and has continued to build up his interest in the company, which stood at 14.89 million shares last April.

The founder and chief executive officer John Dawson remains the largest single shareholder with 62.26 million shares. The fact that the boss has a huge holding should always be a comfort for private investors. [Shares closed at 33 pence in London Tuesday—Editor.]

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