UCB will sell its U.S. specialty generics subsidiary, Kremers Urban Pharmaceuticals, for $1.525 billion cash to two private equity firms, the seller and buyers said today.
Advent International and Avista Capital Partners have both long specialized in pharma and other healthcare investments. As part of the deal, Avista healthcare executive Brian Markison will become Kremers Urban’s president and CEO. Markison will succeed George Stevenson, who according to the private equity buyers “is pursuing other interests.”
Markison has more than 30 years of experience in the pharma sector, most recently as president and CEO of Fougera Pharmaceuticals, a dermatology-focused specialty pharmaceuticals company that was spun off from Nycomed A/S in 2011 before being sold by Avista and two other private equity funds to Novartis’ Sandoz generics division in 2012.
UCB said the deal reflects the shedding of non-core assets. “This is another step for UCB to enhance focus on our core business in neurology and immunology,” UCB CEO Roch Doliveux, said in a statement.
Doliveaux is retiring as CEO on January 1, to be succeeded by Jean-Christophe Tellier. Under Doliveux, UCB transformed itself from a diversified chemical concern into a global branded pharma company.
Among Doliveaux’s moves was acquiring German drug developer maker Schwarz Pharma. The deal brought UCB several neurological treatments—as well as Kremers Urban.
Kremers Urban focuses on marketing “high-barrier-to-entry” drugs such as extended release formulas, unusual dosage forms such as patches, liquids and injectables and scheduled substances. Over the past seven years, Kremers Urban has grown its product portfolio from one major product to more than 20 marketed products across a number of indications. These include gastroesophageal reflux disease, attention deficit hyperactivity disorder, angina/hypertension and respiratory disease.
The deal has been unanimously approved by UCB's board of directors and is expected to close by the first quarter of 2015, subject to regulatory approval and other customary closing conditions.
UCB said it plans to use the proceeds from the sale of Kremers Urban to reduce its debt, accelerate growth, and strengthen its pipeline.
“Now was a logical and opportune time to dispose of this non-core business,” Peter Welford, an analyst at Jefferies International Ltd., said in a report quoted by Bloomberg.
Bank Degroof analyst Bernard Hanssens agreed: “It is logical that UCB focuses on its core business. The reinvestment remains the main question,” he wrote in a note to investors quoted by The Wall Street Journal.
Kremers Urban is more profitable than UCB as a whole, so it is uncertain how the company will achieve profit-margin goals without its generics unit, Jan De Kerpel, an analyst at KBC Securities in Brussels, wrote in a note to investors, according to Bloomberg.
“We look forward to know if UCB sticks to its long-term objective of reaching 2017 [earnings before interest, taxes, depreciation, and amortization] margins of 30%, and how that will be achieved,” De Kerpel wrote. UCB’s EBITDA profit margin reached 22.3% last year.
Advent has invested in more than 30 healthcare companies worldwide over the past 25 years – with Kremers Urban poised to be Advent’s fourth pharma investment in the past three years. The other three are South American-based companies: Biotoscana, Laboratorio LKM, and United Medical (since acquired by Biotoscana).
Avista has acquired or invested in 24 companies across healthcare, including Fougera and several other pharmas—Acino Pharma, Lantheus Medical Imaging, Nycomed and Vertical/ Trigen.
Jefferies, Credit Suisse Securities, Morgan Stanley, and Goldman, Sachs & Co. served as advisors to Advent and Avista.