Shares in pharmaceutical maker CSL Ltd, maker of the cervical cancer vaccine Gardasil, have been placed in a trading halt, pending the completion of a huge $1.5 billion capital raising to fund a $3.5 billion deal in the US to expand its dominant presence in the global blood plasma business.
CSL shares closed at $39.00 on Tuesday, having risen 10% since the close of business last Thursday: another example of a bit of well informed pre-announcement trading. We saw the same sort of trading in the shares of Asciano in the lead up to the ‘bid’ from TPG and an international partner.
Subject to regulatory approvals, CSL will acquire Talecris Biotherapeutics Holdings Corp for $3.48 billion to boost its presence in the plasma therapeutics market. It will make CSL a clear number two in the global market by increasing its presence in the US.
CSL also announced a 30% lift in annual profit for the 2007-08 year to $702 million and forecast an increase in earnings for the current financial year to a range of $810 million to $850 million.
Driving the 2008 profit increase was higher royalty income from US drug giant, Merck & Co on the sale of Gardasil, plus increased demand for CSL’s plasma therapy products.
"We continue to anticipate stable market conditions for our plasma therapies business and growing contribution from royalties associated with the international sales of Gardasil," CSL managing director Brian McNamee said.
CSL will buy Talecris Biotherapeutics, a smaller maker of plasma-derived protein therapies, from private equity groups, Cerberus Partners and Ampersand Ventures.
Talecris, which is based in North Carolina in the US, is a leading manufacturer and marketer of plasma-derived protein therapies in North America, operating 56 plasma collection centres and two manufacturing facilities in the United States.
CSL said the acquisition would combine Talecris’s products and manufacturing capabilities with CSL’s plasma collection business, commercial platform, production capabilities and product portfolio.
Analysts said the deal would lift CSL’s 2008/09 earnings per share by 10%, including synergies.
Dr McNamee said the acquisition would give CSL greater scale, breadth of products, geographical presence, low cost base and capacity to increase output.
"The acquisition will make CSL a stronger competitor in the highly competitive plasma therapeutics marketplace," he said in a statement to the ASX.
For the year to June 30, 2008, Talecris generated sales of about $US1.2 billion ($A1.4 billion) and had an adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) of $US258 million ($A290 million).
The acquisition is expected to generate synergies of about $US225 million per annum, to be realised progressively over the first three years, weighted towards years two and three.
"CSL is confident that there is significant scope to increase output and improve the efficiency, profitability and cash flows of Talecris by optimising plasma supply, production flows and removing duplication between the businesses," Dr McNamee said.
CSL expects that one-off restructuring costs of implementing these initiatives will be about $US120 million ($A135 million), to be incurred over 12 to 15 months following completion of the purchase.
CSL also expects to incur transaction costs of about $US80 million ($A90 million), with about $US25 million ($A28 million) in the current financial year and $US55 million ($A62 million) to be booked upon completion.
The purchase price comprises a cash payment of $US3.1 billion ($A3.48 billion) less any net debt that may be assumed by CSL, payable upon completion of the acquisition.
The acquisition will be funded through a mix of equity and debt. The equity funding comprises an underwritten institutional placement to raise $US1.5 billion ($A1.68 billion) and a non-underwritten share purchase plan to eligible shareholders.
CSL’s revenue for the 12 months to June 30 climbed 15% to $3.8 billion, with the company declaring a final dividend of 23c per share. That took the full year payment to 46c a share, up 33% and after adjustment for the 3 for one share split late last year.
Dr McNamee said that "global demand for CSL’s plasma therapies continues as we enter new markets, develop new therapies and find new indications for existing therapies.
“The company’s strategic move towards our new generation liquid IVIg, Privigen®, is well underway with key regulatory approvals received and the construction of manufacturing facilities in Switzerland progressing as planned.
“In excess of 26 million doses of GARDASIL® have been distributed by our licensee Merck who have now submitted an application for filing in the US for adult women through to age 45 and intend to also submit a filing application for males 9 to 26 years of age.
“During the year we entered the US market with our influenza vaccine and started the registration process in a number of other northern hemisphere markets.
"In support of our influenza vaccine growth program we have now completed the capacity expansion of our Melbourne based manufacturing facility to 40m doses per season”, Dr McNamee said.
