Idis acquisition drives the strategy forwards
Clinigen Group Plc (LONDON:CLINC) has acquired Idis for £225m. Idis operates in the same highly specialised and defensive niches of clinical trials supply and ethical drug access programmes. The deal adds breadth and depth, resulting in clear leadership positions in the key areas that are set to prosper as the rising regulatory burdens, coupled with the drug industry’s focus on outsourcing more of the non-core functions, create material opportunities for growth. Our revised valuation, based on a number of parameters, sees the range rise from £479-550m (580-666p a share) to £854-978m (771-883p a share).
Synergistic fit broadens and strengthens businesses
Clinigen and Idis both operate in similar highly specialised and defensive niches that are benefiting from the drug industry’s greater outsourcing of non-core functions. The acquisition strengthens two key services, Clinigen CTS and Idis MAP, and brings in a third important service, Idis GAD, for unlicensed drugs ‘on demand’. Clinigen is now a global leader in supplying comparator drugs for customers’ clinical trials and in providing access to unlicensed specialist drugs. The combined units have a broader customer base, bigger geographic footprint, and complementary infrastructure. Idis GAP brings an attractive on-demand unlicensed supply service.
Idis boosts near- and medium-term growth prospects
The strategic and commercial rationale for the acquisition is compelling. The combination achieves critical mass in the core businesses, which should flow through into new opportunities in existing and nascent markets (notably the Americas). Although not driven by cost synergies, the annual savings of at least £2.5m, coupled with operating efficiencies, are expected to result in earnings accretion from FY16 onwards. Importantly, the financial flexibility to fund the acquisition of further specialty, hospital-only products has been retained.
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