4 Min Read
Oct 29 (Reuters) - Contract drugmaker Patheon Inc will buy Banner Pharmacaps, which focuses on gelatin-based oral drug delivery technology, for $255 million, to expand its presence in the over-the-counter market and gain a foothold in Mexico.
North Carolina-based Banner, a unit of Dutch food products company Vion NV, makes easy-to-swallow soft-gelatin capsules, tablets and chewable gels that drug firms use to coat their over-the-counter and nutritional drugs. It has labs and manufacturing plants in the Netherlands, Canada and Mexico.
"(Banner) expands our geographic presence. It gives us ... a direct-to-market business in Mexico and some of the other Latin American countries," CEO James Mullen told Reuters.
Patheon finds South America and the emerging economies more attractive and volume driven than North America and Europe, said Mullen, who took over as the CEO last February.
"We are certainly interested in India and China as well," he said from Durham, North Carolina.
Patheon, which provides contract development and manufacturing services to pharmaceutical companies, said on Monday its full-year revenue would now be between $740 million and $745 million. It had earlier forecast revenue of more than $735 million.
The deal, Patheon's first in the soft-gel drug delivery market, will also help the company cross the $1 billion revenue mark, the CEO said.
"On a pro forma basis, we will be there at the end of 2012, but certainly 2013 on a full-year basis as a combined company, we should exceed $1 billion in revenue."
Mullen said the acquisition will give Patheon access to Banner's customers in the direct-to-market private label business, such as Wal-Mart Stores Inc and Walgreen Co .
The company will also benefit from the addition of Banner's nutritional business - an area where it does not have a presence.
Patheon shares, which have gained about 76 percent in value in the past six months, closed down at C$3.68 on the Toronto Stock Exchange on Monday. They touched C$3.90, their highest in over four years, earlier in the day.
The acquisition of the soft-gel specialist will bring in additional formats in the oral dosage form that is popular both in the OTC market as well as among new products, the company said.
"The softgel technology in the nutritional and OTC market is quite a desired format ... It is a great product format for large capsules in nutritionals like fish oil that makes it easy to swallow," said Mullen, who holds a Bachelor of Science in chemical engineering from Rensselaer Polytechnic Institute.
Patheon partnered with Colombian softgel capsule maker Procaps SA in January to manufacture a line of softgel in North America, Europe and Asia.
It expects the Banner deal to close by the end of the year.
"We believe that Banner's complementary, specialized technology capability should be a credit to Patheon," said TD Securities' analyst Lennox Gibbs, who raised his price target on the Patheon stock to C$4.50 from C$2.50.
UBS Securities Llc advised Patheon on the deal, while Rabobank International and Rothschild Inc advised Vion NV.
Patheon would take a non-cash charge of $37 million in the fourth quarter related to debt refinancing and the acquisition, it said in a statement.
The company also said it had received financing commitments of about $650 million from Morgan Stanley, UBS, Credit Suisse and KeyBank.