Probiotec sells brand assets to iNova Pharmaceuticals

Probiotec ASX PBP sells brand assets iNova Pharmaceuticals Gold Cross David Craig Skin Basics
Probiotec has reached an agreement to sell the Gold Cross, David Craig and Skin Basics portfolio of products and business assets to iNova Pharmaceuticals for $13.5 million.

Pharmaceutical company Probiotec (ASX: PBP) has agreed to sell the Gold Cross, David Craig and Skin Basics brands, including all intellectual property and business assets associated with the brands, to Singapore-based company iNova Pharmaceuticals.

The deal was overseen by accounting and auditing firm PricewaterhouseCoopers and Arnold Bloch Leibler, a leading Australian commercial law firm.

Probiotec said that upon completion of the sale, it will receive $13.5 million in cash, with the completion of the sale expected to occur at the end of September this year.

Product round-up

Gold Cross medicinal remedies are made in Australia and treat a wide range of everyday health concerns. As a brand Gold Cross has established a business that provides a range of pharmacy products treating ailments such as coughs and colds, skin irritations, cuts, abrasions and digestive complaints.

David Craig provides “extemporaneous preparations” otherwise known as “galenicals” and other traditional over-the-counter (OTC) medicines.

Skin Basics is a “soap-free alternative” for dry and sensitive skin that moisturises and protects from future skin deterioration.

“The sale of the assets continues the company’s objective of unlocking shareholder value and focusing on Probiotec’s core manufacturing business,” said Wes Stringer, managing director of Probiotec.

The pharma company manufactures, markets and distributes a range of prescription and over-the-counter (OTC) pharmaceuticals, complementary medicines and consumer health products.

It currently operates two manufacturing facilities in Australia and distributes its products both domestically and internationally. Some of its novel products include proprietary tablet coating, blister packing, solid-dose tablets, sprays, powders and packaging.

Products are manufactured by Probiotec for both its own products and on behalf of others, including major international pharmaceutical companies.

In the past financial year, Probiotec has performed well by achieving 25% growth in sales Revenue to $74.7 million and recorded 69% growth in underlying profit to $4.7 million. The company’s underlying EBITDA for last year was up 42% to $10 million with Probiotec raising its annual dividend up to 2 cents. Its earning per share (EPS) was 7.5 cents, up 43% on the year.

A further significant development in recent months was the acquisition of South Pack Laboratories (SPL) – a deal which Probiotec says is “completed and seamlessly integrated into the Group.”

Looking forward to deal close

South Pack was acquired in October 2017, but the full year impact will only be felt in the 2019 financial year. Probiotec says that South Pack is “performing ahead of expectations” and has confirmed significant new business opportunities and synergies with the wider Probiotec business.

According to Probiotec, without the inclusion of South Pack, its like-for-like growth rate last year was around 13%.

In a presentation given to market analysts, the company said that “in the absence of any structural change to Probiotec’s business or a significant deterioration in economic conditions, we expect to deliver a material increase in both sales and earnings for the 2019 financial year.

With the iNova deal announced, Probiotec said that there still some outstanding conditions that must be satisfied before the deal is finalised, although these additional measures are expected to be a formality.

The company said that it continues to explore further opportunities to unlock shareholder value and will consider appropriate “capital management strategies” for any surplus capital generated from these activities.

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