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A number of indivisible agreements have been signed which will result in Paladin Labs Inc. (“Paladin”) becoming Litha Healthcare Group’s (“Litha”) largest shareholder and international strategic partner.
Litha will acquire 100 % of Pharmaplan (Pty) Ltd (“Pharmaplan”), Paladin’s South African based pharmaceutical operations, which will then merge with Litha’s Pharma Division.
The group will achieve a key milestone in its pharmaceutical strategy of rapidly growing its Litha Pharma Division through acquisitions and will now be the Group’s second largest division by revenue and largest by earnings.
JOHANNESBURG, SOUTH AFRICA (February 21, 2012) – JSE listed Litha Healthcare Group Limited (“Litha”) today announced that the group has entered into a strategic partnership agreement with Paladin Labs Inc.(“Paladin”), a listed Canadian-based pharmaceutical company focused on developing and in-licensing of innovative pharmaceutical products for Canadian and global markets. This will also include a number of indivisible transaction agreements, including a sale of shares and subscription agreement with Paladin.
As part of the agreement, Litha will purchase 100 % of Pharmaplan (Pty) Ltd (“Pharmaplan”), Paladin’s South African based pharmaceutical operations, which will then merge with Litha’s Pharma Division.
Litha to build scale with greater pharmaceutical portfolio
With business interests spanning pharmaceuticals, vaccines and medical devices, the enlarged group will now deliver on its stated strategy to acquire pharmaceutical businesses in order to possess enhanced commercial scale and portfolio breadth within its pharmaceutical operations.
The acquisition will give the Group the appropriate critical mass across all three divisions namely pharmaceuticals, vaccines and medical devices which will enhance Litha’s capacity to negotiate with suppliers on a bigger scale as a diversified company.
The Group will continue to synergise and solidify its business model in South Africa and develop its long term strategy to expand its African footprint in the sub-Saharan African healthcare market.
Transaction Terms
Paladin currently owns 44.99% of Pharmaplan and under the terms of the transaction, has agreed to buy-out the remaining 55.01% of Pharmaplan, which it does not currently own and will accordingly become the sole shareholder of Pharmaplan.
As part of this same transaction, Litha will acquire 100% of the share capital of Pharmaplan from Paladin in exchange for a cash portion of ZAR125 million and the remainder through the issue of 169 090 909 shares in Litha at R2.75 per share totaling ZAR590 million.
Paladin will acquire half of the Blackstar Group SE and Blackstar (Cyprus) Investors Limited’s (Blackstar entities) current holding in Litha and will also make an offer to all Litha shareholders to acquire half the shares they own for ZAR2.75. The combination of these events will result in Paladin deploying an anticipated CDN$ 48 million in cash and CDN$ 4 million in issue of shares and will result in Paladin owning up to 49.09% of Litha, becoming the group’s single largest shareholder upon closing. The deal values Pharmaplan at a total of ZAR 590 million and Litha at ZAR 2.75 per share.
The transaction is subject both to South African competition review and approval by shareholders of Litha and is expected to close in Q2 2012.
Increased Deal Flow and Access to Innovative Products
The South African pharmaceutical market is estimated at ZAR 29.5 billion (excl. vaccines) and has experienced a compounded annual growth rate (CAGR) value of 12.9% (07-11) in the private sector and CAGR value of 17.8% in the public sector for the same period1. The public sector which is worth ZAR 5.01 billion has grown much faster than the private market due to government spending on anti-retrovirals (ARV’s) and vaccines of which, vaccines account for ZAR1.46 billion in public market spend.
"In order to build scale and open up further direct international licensing opportunities for our Pharma Division, this strategic partnership with Paladin will be a key driver in increasing deal flow and future product acquisition success rates,” says Selwyn Kahanovitz, Group Chief Executive Officer of Litha Healthcare Group Limited. "What is truly exciting is the acquisition of Pharmaplan and the merging of its niche pharmaceutical portfolio with Litha Pharma’s current product offering which will complement our branded detailing business unit as well as our retail (over-the-counter) and generic medicines business unit,” adds Kahanovitz.
The size of the deal will not only create significant opportunities to extract synergies within Litha’s diversified healthcare business, but will also lead to increased margins for the group as a whole.
Under the leadership of Dr. Gert Hoogland, Pharmaplan has become one of the fastest growing specialist pharmaceutical companies in South Africa, with an enviable market position in the private specialist and niche generics markets.
With a proven track record in the specialist prescription medicine market, Pharmaplan has had a 24.7 % Compounded Annual Growth Return over the past four years which is double that of the South African pharmaceutical market (12.9%) for the same period¹.
“The merging of our Pharma Division with Pharmaplan will not only boost our current product portfolio revenues, but also broaden our access to international R&D pipelines and improve our current platform for expansion into new markets including biogenerics, oncology and aesthetic medicine. Pharmaplan will also benefit from the additional opportunities which the synergies across the group’s business operations will provide, which include our relationship with the Department of Health through our Public Private Partnership (PPP) at The Biovac Institute,” explains Kahanovitz.
“We are confident that with our skills and expertise, coupled with Pharmaplan’s exclusive international supplier agreements, we will bring long-term value to the Group which is not only empowered but has long established relationships with government and a sizable public healthcare marketshare,” says Dr. Gert Hoogland, CEO and Founder of Pharmaplan.
Paladin to benefit from locally empowered business and rapidly growing African market
The agreement represents the most significant strategic corporate expansion initiative for both Litha and Paladin and is a bold and decisive move by the Litha Group to create competitive differentiation in the fast-growing South African pharmaceutical market.
"This strategic partnership with Litha will become a commercial powerhouse to extend our footprint in Sub-Saharan Africa," says Mark Beaudet, Interim President and Chief Executive Officer of Paladin Labs Inc. “Paladin will benefit from Litha’s locally empowered business, as well as experience in dealing with the public healthcare sector through its vaccines business, as it seeks opportunities in the rapidly growing African markets of interest to us. Our combined focus on business development, sales and marketing and our unprecedented customer reach via pharmaceuticals, vaccines and medical devices will make us a formidable competitor for the long run on the African continent,” concludes Beaudet.
The deal provides many opportunities for all parties and the merging of the two ‘entrepreneurial style’ pharmaceutical businesses will ensure a like-minded model for integration and continuation of the business culture. As a listed company on the Toronto Stock Exchange, Paladin will play an active role in opening up international prospects from a product pipeline and investment perspective, as well as provide their business and industry experience as members of the Litha Board of Directors.
Dr. Gert Hoogland will head up the entire Litha Pharma Division which will include all Litha’s pharmaceutical interests within the group. This will ensure the continuation of these businesses with no foreseeable change in leadership or key personnel within Litha Group’s operational business model. Together with Paladin’s Interim President and CEO Mark Beaudet and its VP of Business and Corporate Development, Mark Nawacki, Dr. Gert Hoogland will join Litha’s Board of Directors, effective from the closing date.
About Paladin Labs Inc.
Paladin Labs Inc., headquartered in Montreal, Canada, is a specialty pharmaceutical company focused on acquiring or in-licensing innovative pharmaceutical products for the Canadian and world markets. With this strategy, a focused national sales team and proven marketing expertise, Paladin has evolved into one of Canada's leading specialty pharmaceutical companies. Paladin's shares trade on the Toronto Stock Exchange under the symbol PLB. For more information about Paladin, please visit the Company's web site at www.paladinlabs.com.
About Pharmaplan (Pty) Ltd
Pharmaplan is a fast growing pharmaceutical company which represents small to medium sized international Principals in South Africa and other selected sub-Saharan territories. The company offers a full service of registering, importing, promoting and distributing the products of its Principals exclusively to all wholesalers, hospitals and clinics in South Africa and selected neighbouring countries. The Company currently employs 75 people and according to IMS data¹, is ranked the 8th top generic company in South Africa.
Pharmaplan has been a registered importer and distributor of niche speciality/biotechnology medicines since 1996 and sells products from the US, Europe, India and New Zealand. Pharmaplan markets products in a range of therapeutic areas which include oncology, dermatology, nephrology, paediatrics, gynaecology, surgery, radiology, neurology, cardiology and psychiatry.
Pharmaplan has a solid market base in the originator, specialist prescription medicine market and exclusive distribution agreements with all its international principals.
For more company information please go to: www.pharmaplan.co.za
About Litha Healthcare Group Limited
Litha Healthcare Group Limited is a JSE-listed integrated healthcare company with a varied product offering in: biotechnology/vaccines, pharmaceuticals, medical devices and cold chain logistics. The group holds 46 international agencies and has extensive contracts in both the public and private healthcare sector. LHG has seen its share price rise from 45c in March 2009 to its current price of 288c. Litha Healthcare Group also has a significant stake in The Biovac Institute which is a Public Private Partnership (PPP) between the SA Government and The Biovac Consortium to produce vaccines in South Africa and is currently the major supplier of vaccines to the public healthcare department under the Extended Programme of Immunisation (EPI).
Litha Pharma is a Division of Litha Healthcare Group Limited and comprises two business units: Branded/detailing doctor business unit – Pharmafrica (Pty) Ltd and a Generic/pharmacy/dispensing doctor business unit - Goldex Healthcare (Pty) Ltd and recently acquired OTC Pharma SA (Pty) Ltd. The current product portfolio comprises 117 product line items with 34 of them owned by Litha. The extended product portfolio includes cold and flu preparations, NSAIDS/analgesics, cardiovascular agents, anti-histamines, ophthalmic agents, anti-microbials, anti-psychotics, anti-depressants, nutritional supplements, homeopathic remedies, skin and anti-ageing creams. All media releases and other company information is available at: www.lithahealthcare.co.za
Reference:
1 IMS Moving Annual Total (MAT) Sept ’11, price ex-mnf, exchange rate (ZAR6.9669 Oanda.com)
Forward Looking Statements Related to Paladin
This press release may contain forward-looking statements and predictions. These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. The Company considers the assumptions on which these forward-looking statements are based to be reasonable at the time they were prepared, but cautions that these assumptions regarding the future events, many of which are beyond the control of the Company and its subsidiaries, may ultimately prove to be incorrect. Factors and risks, which could cause actual results to differ materially from current expectations, are discussed in the annual report as well as in the Company's Annual Information Form for the year ended December 31, 2011. The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information or future events and except as required by law. For additional information on risks and uncertainties relating to these forward-looking statements, investors should consult the Company's ongoing quarterly fillings, annual report and Annual Information Form and other fillings found on SEDAR at www.sedar.com. |