www.biocompatibles.com
Biocompatibles International plc is a leading company in the field of drug-device combination products. The Oncology Products Division conducts the marketing of Biocompatibles’ approved oncology products. These include products that are used for the treatment of primary liver cancer (HCC), liver metastases from colorectal cancer and prostate cancer. Our R&D Facilities are engaged in licensing and in new product development for oncology, stroke, and diabetes and obesity. We have collaborative agreements with AstraZeneca, Bayer Healthcare Pharmaceuticals Inc. and Medtronic Inc.
City warms to the merits of BTG takeover of Biocompatibles
BTG’s (LON:BGC) planned takeover of Biocompatibles (LON:BII) has received a guarded welcome from the market – though analysts say it will take a while to digest the full implications of the deal.
However they all agree there is a definite logic to bringing together the specialist pharmaceuticals projects and pipeline of BTG with the innovative bead technology of Biocompatibles, which is currently being used in cancer but has a number of other alternative applications.
BII also has several new products that will benefit from the increased financial firepower of the enlarged company. This includes a potentially blockbuster drug in GLP-1 for diabetes and obesity.
“Supported by an even stronger balance sheet and a further expanded set of revenue generating products, the enlarged group’s diversified portfolio of in-house and partnered programmes will further reduce the risk that the business will be adversely affected by an unexpected product failure,” said Daniel Stewart analyst Vadim Alexandre.
“We believe that this level of portfolio risk diversification is unrivalled by BTG’s midcap UK-listed peers.”
The nuts and bolts of the deal are as follows. BTG is paying 430p a share, or £177.2 million in total for BII.
This represents a more than 60 per cent premium to the share price just prior to the announcement of takeover talks back in September.
Biocompatibles said it is recommending the offer because it believes the deal will create a “fast-growing, financially stronger, international specialist healthcare business”.
The deal will be earnings enhancing from year one and create synergies of around £3 million.
The pair will have cash resources of around £97 million to tap into and a number of other innovations to take into the marketplace.
“In particular, the BTG directors intend to undertake registration trials in respect of Biocompatibles' embolising beads and drug-eluting beads to increase the products' approved indications and the territories in which they can be marketed,” BTG said in a stock exchange statement.
Investors are being offered 1.6733 BTG shares for each Biocompatibles share they own plus 10p in cash.
Alternatively they can pass on the 10p cash payment and opt instead for contingent value notes up to the value of 47p (56 euros), which are linked to the development of GLP-1 for diabetes and obesity.
Shareholders accounting for 53.19 per cent of Biocompatibles stock have irrevocably committed to backing the deal, while a further 10.49 per cent have said they intend to back the offer.
The acquisition is being done via a scheme of arrangement, which requires 75 per cent backing from investors.
City broker Evolution reckons the acquisition looks a “quite expensive” based on a multiple of five times projected sales or 43 times EPS.
“However the deal leverages BTG’s newly vertically integrated specialty pharma capability,” said analyst Simon Conway said in a note to clients.
“And in line with their announced strategy, provides them with US marketed products and sales force in the interventional oncology space amongst other things and will complement BTG’s existing presence in acute care sector with CroFab etc.
“Thus while we think the market will take time to digest the deal and price, it helps to cement their position as an emerging force in specialty pharma space.”
Peel Hunt analyst Paul Cuddon was quick to see the basic financial merits of the takeover, pointing out that it brings in £36 million of revenues and £33 million of cash as well as a profitable underlying business.
It also offers BTG a channel into interventional radiologists in the US. Cuddon has a “blue-sky” price target of 600p on a “three-year view”.
“Although we have yet to fully value to Biocompatibles pipeline, the potential synergies, increased critical mass in the US and the diabetes program partnered with AstraZeneca is likely to see our valuation rise with scope to outperform,” the analyst concludes.
BII shares rose 59p, or 19 per cent to 376p, while BTG fell 27.8p to 223.2p.
