Alliance completes an earnings-enhancing consumer healthcare acquisition in the US, acquiring Biogix Inc, and the AmberenTM brand for the relief of menopause symptoms

Acquisition of Biogix Inc

Alliance completes an earnings-enhancing consumer healthcare acquisition in the US, acquiring Biogix Inc, and the Amberen^TM brand for the relief of menopause symptoms

With a strong growth profile and run-rate net sales of approximately US$27 million for 2020, Amberen will become Alliance’s second largest brand

Alliance Pharma plc (AIM: APH), the international healthcare group, is pleased to announce that it has today completed the acquisition of 100% of the share capital of Biogix Inc (“Biogix”), a privately held, US-based consumer healthcare company, for a total consideration of US$110.0 million (the “Acquisition”) paid for in cash from the Group’s existing financial resources.

Highlights

• The Biogix acquisition brings into the Group a highly successful and fast-growing brand, Amberen, with significant near-term growth potential
• Amberen, for the relief of menopause symptoms, is a strong brand in a new market segment for Alliance, within the fast-growing vitamin, mineral, supplement market
• Brings increased scale to our business in the US, the world’s largest OTC market
• Immediately earnings enhancing in FY 2021 and significantly earnings enhancing from FY 2022

Peter Butterfield, Chief Executive Officer of Alliance, commented:

“As 2020 draws to a close, I am very pleased to be announcing the successful completion of the Biogix acquisition, a substantial and strategically important acquisition for Alliance, which increases our presence in the US and in consumer healthcare.

“As an established, clinically evidenced brand with significant sales and good growth potential, in a growing market, Amberen fits perfectly with our strategy of acquiring established consumer healthcare brands in territories where we already have a presence.

“This Acquisition significantly enhances the scale of our business operations in the US, the largest healthcare market in the world, and provides the business with another great platform for the delivery of future organic growth, alongside our key existing brands; Kelo-cote^TM and Nizoral^TM.”

Introduction and overview of Biogix

The Biogix assets comprise a clinically evidenced range of over-the-counter products for the relief of the symptoms of menopause, and more recently perimenopause, both of which are marketed under the brand name Amberen.

Amberen was launched in the US in 2007 and, since 2015, it has gained strong retail distribution across multiple channels, such that it is currently the primary driver of category growth in the US¹.

Biogix employs an outsourced, asset-light business model, with all manufacturing activities being undertaken by third parties. Post-acquisition, the Amberen business will be managed as part of Alliance’s existing US operations, and we look forward to welcoming the existing small team who have been instrumental in the growth of the brand to date.  Alliance’s main US operations will continue to be based in Cary, North Carolina, with the Biogix office in Los Angeles becoming the Group’s west coast satellite office.

In the year ended 31 December 2019, Biogix achieved audited net sales of US$22 million. On a run-rate basis, annualised net sales for 2020 are expected to be approximately US$27 million, which benefits from further distribution gains and the launch of the perimenopause product, and a management-adjusted EBITDA expected to be approximately US$7 million. As at 31 December 2019, Biogix had net assets of US$5 million.

Strategic rationale

This Acquisition is fully aligned with the Group’s strategy of complementing organic growth from its existing, international healthcare business with carefully selected acquisitions, focused on clinically valuable, growing consumer healthcare brands in territories in which it already has a presence.

The Acquisition has a number of key strategic benefits for Alliance, specifically:

• Amberen is expected to become Alliance’s second largest brand with its strong growth profile and current annualised sales of around US$27 million 
• As demonstrated by its strong performance in 2020, Amberen will meaningfully enhance Alliance’s existing revenue and EBITDA
• It enables Alliance to expand its growing presence in the important US market. Post completion, the US will represent approximately 17% of Group revenues on a proforma basis up from 4% in the year ended 31 December 2019
• It increases the diversification of Alliance’s product portfolio, deepening the consumer healthcare brand offering. Post completion, Consumer Healthcare will represent over 70% of Group revenues on a proforma basis
• It brings distribution channel synergy with Vamousse^TM in the US and also the potential to bid more effectively on future consumer product acquisition opportunities due to the increased scale of Alliance’s US operations
• It establishes a position for the Group in a new market segment (menopause supplements) with significant near-term growth potential
• It strengthens the Group’s e-commerce and digital marketing channel expertise and exposure
• As a stand-alone entity, the Acquisition also benefits from limited integration complexity

Acquisition terms and financial impact

The Acquisition consideration comprises US$110.0 million payable in cash on completion together with customary adjustments for acquired cash, debt and working capital.

The Acquisition has been funded by a drawdown from the Group’s existing £165 million Revolving Credit Facility.   Following this drawdown, the total drawn facility will be approximately £141 million, with £24 million of the facility undrawn post completion.

Group leverage² will increase to around 2.5 times at completion, comfortably below our banking covenant of 3.0 times. Leverage is expected to reduce to below 2.0 times by the end of FY 2021, reflecting the Group’s continued strong cash generation, with good cash flows from both the acquired business and the existing Alliance business.

The Board expects the Acquisition to be earnings enhancing in 2021, after modest integration costs, and significantly earnings enhancing from 2022 onwards, with further strategic benefits anticipated in future years. The Acquisition is expected to deliver a return on invested capital in excess of our WACC in the medium term, before taking account of future revenue synergies from an expanded US offering and a significant new brand with potential in other markets.

Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) prior to its release as part of this announcement.

¹ Source: IRI MULO 52 w/e Aug 9, 2020

² Adjusted net debt / enlarged Group EBITDA, calculated using pro forma EBITDA on a trailing 12 month basis

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