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August 10, 2015

Mallinckrodt to Acquire Therakos for $1.325B

  • Mallinckrodt will purchase Therakos from investment firm The Gores Group for $1.325 billion, the buyer and seller said today. The deal is designed to expand the biopharma’s specialty brands business with the acquired company’s treatment platforms that use patients' immune systems to fight disease.

    Therakos’ Photopheresis® platforms are drug/device systems designed to deliver autologous immune cell therapy through extracorporeal photopheresis (ECP). The company’s latest version, the CELLEX® System, is intended to cut treatment time in half, to 1.5 hours, by combining cell collection, photoactivation, and reinfusion technologies in a single, integrated, closed system.

    In the U.S., Therakos Photopheresis is FDA-approved for the palliative treatment of the skin manifestations of cutaneous T-cell lymphoma (CTCL) in patients who have not been responsive to other forms of treatment. Outside the U.S., Therakos Photopheresis is approved for ECP, and used in a variety of conditions including CTCL, Graft Versus Host Disease, Crohn's disease, solid organ transplants and other diseases. Photopheresis platforms are used by more than 350 hospitals and major medical centers in more than 25 countries.

    "This transaction demonstrates our ongoing commitment to building a strong, highly profitable Hospital growth business as we build and diversify Mallinckrodt's Specialty Brands portfolio,” Mallinckrodt President and CEO Mark Trudeau said in a statement.

    Mallinckrodt reasons that the acquisition will significantly increase and broaden its footprint in hospitals—further extending the company's presence from multimodal surgical pain management and critical care respiratory therapies in neonatal intensive care units. CELLEX System, according to Mallinckrodt, will particularly benefit from the buyer’s larger hospital presence, regulatory expertise, years of complex drug and device manufacturing, and support of similar medication- technology-service offerings.

    Trudeau added that Therakos Photopheresis enjoys a commercial support model that has a high degree of potential hospital account overlap with Mallinckrodt’s INOMAX® (nitric oxide) vasodilator treatment for hypoxic respiratory failure in term and near-term infants.

    Mallinckrodt said it will integrate the Therakos commercial team into its current critical care organization within its Hospital Specialty Brands business. The company expects to augment sales of Therakos products with its customer experience teams, which include sales, marketing, training and clinician support.

    “We believe we will be able to unlock untapped value in Therakos—making ECP treatment accessible to more patients in more hospitals by applying some of the innovative contract, service and customer intimacy principles that have been so successful with our INOMAX.”

    Mallinckrodt said it will carry out the transaction for Therakos through a subsidiary. The deal is subject to customary closing conditions, and is expected to be completed in the latter part of the third quarter of this year, which is Mallinckrodt's fourth fiscal quarter.

    Headquartered in West Chester, PA, Therakos was acquired in 2012 by The Gores Group from Ortho-Clinical Diagnostics, a former subsidiary of Johnson & Johnson. Gores Group CEO and Chairman Alec Gores stated that Therakos was an example of the firm’s acquiring units carved out of corporate giants, then working with management teams to successfully transition those units into successful standalone businesses.

    Assuming the transaction closes as planned, it is expected to add “no less than $0.10 per share” to Mallinckrodt's adjusted diluted fiscal 2016 earnings and increasingly accretive thereafter, the buyer said. With roughly 60% of Therakos' revenue in the U.S., Mallinckrodt said it expects to finish fiscal 2015 with net sales of $185 to $195 million, and anticipates “high single-digit growth” from that base going forward, driven primarily by the U.S. market.

    Mallinckrodt said it has entered into debt financing commitments for amounts that, together with cash on hand, are expected to be sufficient to consummate the deal.

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