AXCAN DISCLOSES DETAILS OF SCANDIPHARM OPERATIONS
AND ACQUISITION FINANCING
ME, TSE SYMBOL: AXP
(Montreal and Toronto Stock Exchanges)
MONT SAINT-HILAIRE, QUEBEC, Nov. 9 /CNW/ - Axcan Pharma announces that it has entered into detailed commitments with financial institutions for equity and debt financing aggregating CAN $107 million.
Proceeds of these financings are being used principally to refinance bridge financing obtained in connection with the acquisition last August of Alabama-based Scandipharm, Inc. with the remainder being dedicated to working capital and general corporate purposes.
The price paid for Scandipharm amounts to approximately CAN $152 million, before deducting Scandipharm's excess cash on hand of approximately CAN $50 million.
The equity portion of the financing, totalling CAN $55 million, is
provided by Sofinov, Société Financière d'Innovation Inc. a subsidiary of the Caisse de dépôt et placement du Québec. Sofinov has purchased 2,103,787 common shares of Axcan at $7.13 per share or CAN $15 million. Sofinov currently holds 3,752,587 common shares of Axcan, or 20.91% of the outstanding common shares of Axcan Pharma.
Sofinov has further agreed to purchase 40.4% of the capital stock of Scandipharm for CAN $40 million. Subject to regulatory approval, the Scandipharm shares issued to Sofinov may be exchanged for common shares of Axcan at an exchange price of $7.13 per Axcan share. In addition, unless Axcan shall have completed by August 2001 one or more equity offerings satisfying specified criterias, the exchange price shall be the lower of $7.13 and the current market price upon exchange.
The debt portion of the financing totals CAN $52 million and is being provided by a Canadian bank in the form of a senior debt of US $25 million and an operating line of credit. The operating line of credit is not being used to refinance the Scandipharm acquisition. Both equity and debt financings are subject to usual conditions including execution of formal documentation.
''This financial structure will allow Axcan to maintain a debt level that will be reasonable and that will allow us to focus on new projects,'' indicated Leon Gosselin, President & CEO of Axcan Pharma. ''Our goal in the near future is to acquire the small number of remaining shares of Scandipharm, in order to merge it with Axcan's US subsidiary'' he added. ''After all is said and done, we are left with approximately $10 million in cash and, since we generate approximately $4 million of cash earnings per quarter, we are in a good financial position,'' he concluded.
Scandipharm's principal business is the marketing of pharmaceutical and medical products with particular focus on gastrointestinal diseases as encountered in cystic fibrosis, HIV/AIDS and cancer. Scandipharm operates as a distributor and contracts for the manufacturing of its products with FDA approved manufacturers. The Company also sells its products worldwide and has established sales and marketing offices in the U.K. and in Argentina. For 1998 and 1997, sales outside the United States accounted respectively for 10% and
12% of the Company's total sales.
MANAGEMENT
Scandipharm is skillfully led by John R. (Bob) Booth, President and General Manager. Mr. Booth, a 30- year veteran of the pharmaceutical industry, joined Scandipharm in January 1992, and was most recently, Director of International Business and External Operations. Prior to his career with Scandipharm, Booth was Vice President of U.S. Sales and Marketing at Medicopharma and Director of Marketing at D.M. Graham Laboratories. Mr. Booth is seconded by an exprienced management team which includes: Mrs Martha Donze, Vice President, Corporate Administration, Alan Stanton, CPA, Controller, John Cipriano, RPh, Director, Regulatory Affairs, Frank Tortorici, Director of Sales and Thom Rhowland, Director of Marketing.
US MARKETING STRATEGY
Scandipharm built its leadership on the professionalism of its sales force. In the last two years, the Company expanded its sales force to 54 sales representatives, 5 territory managers and a national director of sales. Scandipharm is currently reorganizing this group to improve its sales effectiveness by creating a double-level sales force: a specialty team comprising 10 to 15 therapeutic specialists that will exclusively visit cystic fibrosis centers of excellence, hepatologists and transplant centers and a medical team that will total 60 representatives by the end of fiscal 2000. The role of this second team will be to support the previous group and to increase
exposure of the Company's products throughout the United States.
This sales force will promote products that were part of the Scandipharm portfolio as well as VIOKASE(R)and URSO(R), two of Axcan products approved in the United States.
SCANDIPHARM'S PRODUCT LINE
ENZYMES
Scandipharm's enzyme product, ULTRASE(R) accounts for approximately 80% of the Company's gross sales.
Physicians prescribe enzyme products for chronic and acute pancreatitis, malabsorption of various causes and irritable colon. One of the most frequent malabsorption diseases is cystic fibrosis (CF), a hereditary disease affecting several organs and frequently blocking pancreatic enzyme release. There are about 32,000 CF patients in the United States, of whom 15,000 to 20,000 are treated in specialized centers affiliated with metropolitan hospitals.
About 85% of CF patients take enzyme supplements. In addition to
Scandipharm, two other companies have a major presence in this market (Ortho McNeil and Solvay). According to 1998 statistics, total retail digestive enzyme sales in 1998 (exclusive of hospital sales) were approximately US $95,000,000. The same statistics for the first quarter of 1999 show ULTRASE(R) with an 11.5% market share of total prescriptions in the pancreatic enzyme market, and a 19.3% market share of the total dollar value of prescriptions.
This is an increase from 6.8% in market share of total prescriptions and 15.6% in the total dollar value of prescriptions for the same period last year. ULTRASE(R) prescriptions for the first quarter of 1999 were: CF: 62%, HIV/AIDS: 25%, gastrointestinal: 6% and other: 7%.
Scandipharm has directed its marketing efforts for ULTRASE(R) to three market segments:
CYSTIC FIBROSIS: Scandipharm has its strongest position and highest market shares in this segment. Through its efforts, Scandipharm has developed a strong relationship with the American CF Foundation and the physicians and caregivers associated with the approximately 200 CF Clinics in the United States. The Company estimates that it has about 34% market share for these enzymes for CF patients. The goal of the Company is to continue to build on this market leadership position.
HIV/AIDS: Scandipharm was the first pharmaceutical company to actively promote pancreatic enzyme therapy as an aid to controlling steatorrhea, a symptom of the disease or a side effect from the use of protease inhibitors. There are an estimated 600,000 people in the United States with HIV/AIDS.
GASTROENTEROLOGY: Both gastroenterologists and primary care physicians prescribe ULTRASE(R) for several digestive problems. Scandipharm provides its sales representatives with lists of physicians who prescribe high volumes of pancreatic enzymes and anti-diarrheals. The sales force has traditionally targeted these physicians. As a result, the Company has seen strong growth in
prescriptions in this segment.
OVER-THE-COUNTER PRODUCTS
Scandipharm markets a number of non-prescription product lines, the main ones being ADEKs(R) vitamins and Scandishake(R) calorie supplements.
ADEKs(R) vitamins are formulated to contain vitamins A, D, E and K, fat-soluble vitamins that CF patients have difficulty absorbing. The vitamin tablet ADEKs(R) accounts for approximately 4% of the Company's net sales and management also believes that ADEKs(R) might provide appropriate vitamin supplements for people taking the recently FDA-approved Xenical(R), (anti-obesity drug).
Scandishake(R) is a good-tasting, high-calorie weight maintenance product that comes in several flavours and is useful to patients with CF, cancer and HIV. Due to the condition associated with their illness, patients require calorie supplementation to maintain their weight. Scandishake(R) offers a high calorie milk shake in a pleasant tasting form that provides the calorie supplementation that is needed by these patients.
FLUTTER(R)
FLUTTER(R) is a medical device that is used in CF and is used for other similar disease states with pulmonary problems requiring the removal of excess mucus from the lungs. In the United States alone, it is estimated that 10 to 15 million people could benefit from FLUTTER(R). |
