Alliance Pharma plcProject Byron
John Dawson Maddy Scott
October 2004
Contents
1. Brief Alliance Update
2. Alliance Interims (Aug 2004)
3. Project Byron (2 brand acquisition projects)
4. Appendix on Alliance Management Sources of growth Growth product – Nu-Seals Growth product – Symmetrel Growth project – APL 202 Growth project APL 510 Flotation Dec 2003 Current capital structure
Alliance Project Byron
Speciality pharma co exploiting
niche prescription opportunities in
UK and Ireland
Grown to £11m+ sales via six
brand acquisition deals since 1998
Ongoing profitability with growth
opportunities from
• current portfolio
• future brand acquisitions
• in-house developments for launch
In-house: transformational project
(APL 510 for sleep disorders)
• £500m EU prescription market
Two brand acquisition projects which transform Alliance
Immediate and significant boost to P&L (£3.1m sales at 70+% gross margin)
High long-term growth potential
Greatly develops Alliance’s international reach
Alliance has agreed contracts on each
Total consideration £8.8m
Bank debt secured £5.2m
Apr
1998
Jan
1999
Aug
2001
Oct
2001
Apr
2002
Sep
2002
Feb
2004
Oct
2004
Oct
2004
Fostering arrangement
£2.1 M £0.5 M £9 M£4 M £2.1 M £0.9 M
16 brands
Rheumatoidarthritis
Parkinson’s
disease
Potassiumdeficiencies
Creams for dry skin and
eczema
Enteric coated aspirin
Alphaderm
Slow-K
SymmetrelDistamineBroflex
Biorphen
Pragmatar
Naseptin
Aquadrate
Nu-Seals Acnisal
Meted
Pentrax
Occlusal
Alliance Acquisitions
4 Derma Brands
ForcevalPeriostat
Periodontitis Rx Multi-Vitamin
£1.8 M £7.0 M
Project Byron
Alliance Brands – Sales Progression
MAT Cash 28 + 56
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Acquisition from
0
200
400
600
800
1000
1200
1400
Nu-Seals (Ireland) Symmetrel Dermatology (8 brands)
PROMOTED BRANDS GROWING
NON PROMOTED BRANDS (17) STABLE
Eur
os ‘0
00s
£ ‘0
00s
£ ‘0
00s
Alliance - performance
0
2000
4000
6000
8000
10000
12000
Feb-99 Feb-00 Feb-01 Feb-02 Feb-03 Feb-04 InterimResults to
Aug-04
BrokerForecastFeb-05
Sales Gross Margin EBITDA
21.5%
27.7%30.9%
43.7%
48.4%
52.3%
25.9%
49.6%
Alliance interims (August 2004)£000 Feb-03 Feb-04 Aug-03 Aug-04 Variance
Sales Nu-Seals 880 3,200 1,410 1,775 25.9%
Symmetrel 993 1,138 541 619 14.4%
Derma 1,170 1,303 664 693 4.3%
Other 5,284 4,776 2,319 2,481 7.0%
Total 8,327 10,416 4,933 5,568 12.9%
Gross Margin%
3,64143.7%
5,03948.4%
2,34947.6%
2,91052.3%
23.9%
S G & A 1,486 2,243 833 1,756 110.9%
EBITDA 2,155 2,796 1,516 1,154 (23.9%)
Depreciation 67 83 42 44 3.0%
Interest 1,079 1,502 745 795 6.6%
EBAT 1,008 1,210 729 316 (56.6%)
Amortisation 1,400 902 524 598 14.1%
Adjusted EBT (392) 308 205 (282) (237.7%)
Exceptional Items 339 2,460 0 110
Reported EBT (731) (2,153) 205 (391)
Additional SG&A
£’000
Plc 141
Mktng 587
Dev 100
Total 828
Project Harriercosts
Project Byron - Two separate brand acquisitions
One provides instant boost to P&L; the other long term growth
Forceval Specialist multivitamin and
mineral product used for AIDS, cancer patients etc
Brand has remained solid despite historical sub-optimal management
Sales stable at £2.8m Gross margin 70% Upside potential through revival of
brand and overseas distributors Alliance has agreed contract for
worldwide rights, excluding China (1st option for later acquisition)
Consideration £7m
Periostat Enzyme suppressor as a novel
adjunctive therapy for serious gum disease (periodontitis)
Developed by CollaGenex (US)
Sales currently £347k (£281k UK)
High growth potential – UK sales currently based on 6,000 patients from pool of 3.2m
US sales $45m after 5 yrs
Alliance has agreed contract for EU, Switzerland, Israel, Australia, NZ and S. Africa
Consideration £1.85m
Forceval – resilient cash-generative brand
Forceval• 24 vitamins and minerals in one capsule• The professional and only prescribable brand (not OTC “feel good”
market)• Used by dieticians for AIDS, cancer and convalescence• Brand has been very resilient despite sub-optimal management
Recent history of Unigreg Ltd• Cash extracted by owners• Suppliers unpaid and uncooperative• Into Administration June 2002
Regained confidence of suppliers and distributors Offered assets for sale May 2004
Market research reveals deep prescriber support, but Brand needs major makeover and coherent marketing strategy Overseas distributor network need strengthening and expanding
Alliance acquisition of ForcevalOrganisational Likely termination for current 8 employees (Administrator to cover costs) Recruit Business Unit Head, Export Manager & Supply Chain Manager
UK Marketing Brand makeover Coherent marketing strategy Renew communications with dietetics specialists
Exports Re-energise current distributors with new promotional materials Seek new territories
Prepare for China opportunity Big market in China for a sister product for pregnancy (10m births pa) Current business exists following approach by Chinese government Administrator stabilising situation prior to sale Alliance to have first option
Periodontitis
Periodontitis is a severe form of gingivitis in which the inflammation of the gums extends to the supporting structures of the tooth. Periodontitis results from a long-term accumulation of plaque and tartar between the teeth and the gums.Pockets form between the teeth and gums and extend downward between the root of the tooth and the underlying bone. These pockets collect plaque in an oxygen-free environment, which promotes the growth of aggressive forms of bacteria. The body reacts to the aggressive bacteria with enzymes (collagenases). These enzymes also attack the supportive ligaments and gum tissue holding the tooth in place. The result is loosening and eventually loss of the tooth.
Source: Adapted from the Merck Manual of Medical Information
Role of Periostat
Periostat suppresses the body's own enzymes released as part of the disease process. Conventionally periodontitis is controlled by: Removal of plaque and tartar (scaling and root planing) Reducing infection (antibiotics)
Periostat offers a new third arm in addition to conventional treatments.
Academic Backing Adjunctive sub antimicrobial dose of doxycycline enhances scaling and root planing. It results in statistically significant attachment gains and probing depth reductions over those achieved by scaling and root planing with placebo. Philip M. Preshaw Newcastle University School of Dental Sciences. Journal of Periodontology 2004; 75 1068-1076
American Academy of Periodontology (AAP) 2003 Workshop on contemporary sciences in clinical periodontics concluded the level of evidence rating for Periostat was “Strong”, the highest rating possible.
Periostat is listed on the Dental Practitioners Formulary and is prescribed and reimbursed by the NHS.
Market research
2 studies commissioned, £25k
Findings
7 severe periodontitis patients / wk / surgery (= pool of 3.2m prescribing
opportunities pa)
54% of Users likely to increase prescribing of Periostat
Non-Users did not know enough about the product to prescribe
46% of non-user dentists would use as result of the market research
Conclusions
The potential market is large
Periostat is appreciated by the dentists who use it
Lack of knowledge is preventing the majority of dentists from using it
Periostat sales are likely to respond to promotion
Periostat Sales Potential
Current UK sales represent 6000 patients (0.2% of “pool”)5% of pool would give £6.9m salesCollaGenex promotion has only reached 6% of the 20,000 UK dentists. Periodontologists are a small influential customer groupDentists are readily accessible by representativesUnexploited European markets
Export Sales26%
NHS Sales65%
Direct 9%
2003 £334k
Source: Hillier Hopkins LLP, Extracts from P&L’s 2002-Jul 2004
0
5
10
15
20
25
30
35
40
45
50
1999 2000 2001 2002 2003
US Sales $m
CollaGenex Annual Periostat Sales 99-03
Appendix
Alliance - Management John Dawson, Managing DirectorPharmacist, MSc Finance; 34yrs sector experience, board member, controlling shareholder, 7 yrs with Alliance
Tony Booley, Sales & Marketing DirectorBSc Physiology, MBA, Chartered Marketer; 24yrs sector experience, board member, shareholder, 5 yrs with Alliance
Maddy Scott, Finance Director ACCA; 17 yrs experience across manufacturing and service industries, board member, company secretary, 5 yrs with Alliance
Sam Madden, Technical & Regulatory DirectorBSc Biochem/Toxicol, MSc Biopharmacy, 25yrs sector experience across wide base; board member, shareholder, 7 yrs with Alliance
John Barber, Director of Scientific AffairsBSc Pharmacology, MSc Information Science; 16yrs sector experience, 4 yrs with Alliance
Andrew Dean, Business Development DirectorBSc Chemistry and Business; 11yrs sector experience, marketing & sales management, 2 yrs with Alliance
Michael Gatenby, Non Executive ChairmanMA. FCA ex-director of Hill Samuel and Co, ex-Vice Chairman of Charterhouse Bank. Holds a number of non executive directorships
Paul Ranson, Non Executive Director LL.B Barrister Solicitor. 20 years sector experience, board member
Alliance – Sources of growth
Promoted products Nu-Seals in cardiovascular prevention Symmetrel in Parkinson’s disease Dermatology (portfolio of 8 brands)
Established Brand acquisitions Immediate cashflow and profit
Launches from in-licensing Dermatology products from Barrier Therapeutics Inc Niche hospital antibiotics from GES
Launches from own developments APL 202 (misoprostol) for induction of labour APL 510 (melatonin) for sleep disorders
Growth product - Nu-Seals in Ireland
Rapidly growing market (28% CAGR)Heart disease No. 1 killer in Ireland Government initiatives
Ageing population
Nu-Seals 75 £2.3m sales in Ireland 15% increase year 02/04 70% of antiplatelet market 84% of low dose aspirin
marketIreland highly branded market
2002: 782k people over 55
2010: 833k people over 55
2020: 1m people over 55
Growth product - Symmetrel
Acquired from Novartis in Oct 2001 Current sales £1.2m
Parkinson’s disease market £80m 120,000 patients
Dyskinesias (large involuntary movements) Niche segment 15,000 potential patients Unmet needs
Symmetrel renaissance in PD 50 papers specifically on amantadine in PD in the
last 5 years The only nmda antagonist for PD
Promotion started Dec 2003 Neurologists endorsing the concept Rolling message out to less specialised physicians
Growth project - APL 202 (misoprostol)
Misoprostol originally introduced to reduce gastric acid secretions and prevent ulcers
Extensive published research in obstetrics (cervical ripening and labour induction)
• Early usage was given orally
• Current preference is for vaginal administration
Local action
Reduced side-effects
• Some trials show greater efficacy than dinoprostone (market leader)
• Published trials unsuitable for registration
High awareness amongst obstetricians
• Already used “off-licence”
• But requires 3 serial cuts to the oral tablet (200mcg to 25mcg)
Unlike dinoprostone, does not require refrigeration
Will compete against dinoprostone (ca £13m EU
sales)
Introduction is eagerly awaited
In 2002 Royal College of Obstetricians &
Gynaecologists called for the development
Specialist marketing – low cost
Alliance to market in UK & Ireland
• Existing Specialist Hospital sales force in UK
• Existing GP / Hospital sales force in Ireland
Intend to license out in rest of EU
Commencing clinical trials at end of 2004
Planned launch in H1 2006
NPV about £2m
Growth project - APL 510 (melatonin)
Melatonin – hormone that regulates circadian rhythm (body clock)Therapeutic melatonin has been shown to promote sleep in many different sleep disorders
• large bibliography, but unsuitable for registration
Seen as a “natural” product
High awareness in GPs (ex market research)• 100% awareness• >50% had been involved in its usage via
specialists
Current prescribers (ex market research)• Are very enthusiastic about its results• Biggest complaint is restrictions imposed by
not having a marketing authorisation• Seek a formulation that is quick acting but
has a prolonged release
GPs (and patients) are reluctant to use current “sleeping tablets”
• Benzodiazepines concerns over habituation and hangover effects seen as unsuitable for children
Melatonin freely available OTC in USA
• Classified by FDA as a nutritional supplement
Melatonin sales banned in EU
• Needs to be registered as a medicine
Melatonin used “off licence” in UK
• Initiated by NHS specialists
• Patient-specific usage continued by GPs
• “Named patient” supply regulated by Dept of Health
manufactured under a “Specials” licence
controlled importation
• Usage estimated at £3-4m per annum
Currently melatonin used mainly for sleep disorders in
• Children with Special Needs ( a wide variety of conditions)
• Blind patients
Growth project - APL 510 (melatonin)
Special release formulation has been developed
Phase 1 trials in human volunteers completed
• Rapid production of therapeutic blood levels
• Blood levels then maintained for 5 hours
Phase 3 clinical trials to commence H2 2004
Regulatory submission planned for H2 2005
Possible introduction H2 2006
Will gain 10 yr data protection in EU regulatory
system
Moderate development costs (£4-5m)
NPV about £18m - £30 m
EU Sleep Disorders market estimated at £500m
Melatonin will expand the market
Alliance to market in UK & Ireland
• To Specialists initially to gain endorsement for
GPs
• Will need UK GP sales force to accompany
Hospital sales force
• Will use existing GP / Hospital sales force in
Ireland
GP marketing – significant investment
License out in rest of EU
• Down payments plus royalty stream
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