Alliance Pharma plc
Project Byron
John Dawson Maddy Scott
October 2004
Contents
1.
2.
3.
4.
Brief Alliance Update
Alliance Interims (Aug 2004)
Project Byron (2 brand acquisition projects)
Appendix on Alliance
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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
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
Project Byron
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
In-house: transformational project
Total consideration £8.8m
(APL 510 for sleep disorders)
Bank debt secured £5.2m
•
£500m EU prescription market
Alliance Acquisitions
Naseptin
Occlusal
Pragmatar
Pentrax
Project Byron
Slow-K
Biorphen
16 brands
Apr
1998
Fostering
arrangement
Broflex
Jan
1999
£2.1 M
Potassium
deficiencies
Distamine
Aquadrate
Meted
Symmetrel
Alphaderm
Nu-Seals
Acnisal
Periostat
Forceval
Rheumatoid
arthritis
Parkinson’s
disease
Creams for
dry skin and
eczema
Enteric
coated
aspirin
4 Derma
Brands
Periodontitis
Rx MultiVitamin
Aug
2001
Oct
2001
Apr
2002
Feb
2004
Oct
2004
Oct
2004
£0.5 M
£4 M
£0.9 M
£1.8 M
£2.1 M
Sep
2002
£9 M
£7.0 M
Alliance Brands – Sales Progression
PROMOTED BRANDS GROWING
Symmetrel
4,500
1400
MAT Cash 28 + 56
Acquisition
from
1200
1000
3,000
£ ‘000s
Euros ‘000s
3,500
2,500
2,000
800
600
1,500
400
1,000
200
500
0
0
2
n-0
Ja
2
l-0
Ju
3
l -0
Ju
3
n -0
Ja
8
9
0
1
2
3
4
9
0
1
2
3
4
l-9 an-9 ul-9 an-0 ul-0 an-0 ul-0 an-0 ul-0 an-0 ul-0 an-0 ul-0
Ju
J
J
J
J
J
J
J
J
J
J
J
J
4
l-0
Ju
4
n-0
Ja
NON PROMOTED BRANDS (17) STABLE
7,000
6,000
4,000
3,000
2,000
1,000
Ju
n04
ar
-0
4
M
De
c03
Se
p03
Ju
n03
ar
-0
3
M
De
c02
0
Se
p02
£ ‘000s
5,000
£000s
4,000
Dermatology (8 brands)
1800
1600
1400
1200
1000
800
600
400
200
0
Ap
r- 9
9
Oc
t- 9
9
Ap
r- 0
0
Oc
t- 0
0
Ap
r- 0
1
Oc
t- 0
1
Ap
r- 0
2
Oc
t- 0
2
Ap
r- 0
3
Oc
t- 0
3
Ap
r- 0
4
Nu-Seals (Ireland)
Alliance - performance
12000
10000
8000
49.6%
6000
48.4%
43.7%
4000
52.3%
2000
25.9%
27.7%
30.9%
21.5%
0
Feb-99
Feb-00
Feb-01
Sales
Feb-02
Feb-03
Gross Margin
Feb-04
EBITDA
Interim
Broker
Results to Forecast
Aug-04
Feb-05
Alliance interims (August 2004)
£000
Sales
Feb-03
Feb-04
Aug-03
Aug-04
Variance
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%
3,641
5,039
2,349
2,910
23.9%
43.7%
48.4%
47.6%
52.3%
Additional SG&A
Gross Margin
%
SG&A
1,486
2,243
833
1,756
110.9%
EBITDA
2,155
2,796
1,516
1,154
(23.9%)
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%)
339
2,460
0
110
(731)
(2,153)
205
(391)
Depreciation
Exceptional Items
Reported EBT
£’000
Plc
141
Mktng
587
Dev
100
Total
828
Project Harrier
costs
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 Forceval
Organisational
 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 oxygenfree 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
CollaGenex Annual Periostat Sales 99-03
50
2003 £334k
Direct
9%
45
40
Export Sales
26%
35
30
25
20
15
10
5
NHS Sales
65%
0
1999
2000
2001
2002
US Sales $m
Current UK sales represent 6000 patients (0.2% of “pool”)
5% of pool would give £6.9m sales
CollaGenex promotion has only reached 6% of the 20,000 UK dentists.
Periodontologists are a small influential customer group
Dentists are readily accessible by representatives
Unexploited European markets
Source: Hillier Hopkins LLP, Extracts from P&L’s 2002-Jul 2004
2003
Appendix
Alliance - Management
John Dawson, Managing Director
Pharmacist, MSc Finance; 34yrs sector experience,
board member, controlling shareholder, 7 yrs with
Alliance
Maddy Scott, Finance Director
ACCA; 17 yrs experience across manufacturing
and service industries, board member, company
secretary, 5 yrs with Alliance
Tony Booley, Sales & Marketing Director
BSc Physiology, MBA, Chartered Marketer; 24yrs
sector experience, board member, shareholder, 5 yrs
with Alliance
Michael Gatenby, Non Executive Chairman
MA. FCA ex-director of Hill Samuel and Co, ex-Vice
Chairman of Charterhouse Bank. Holds a number of
non executive directorships
Sam Madden, Technical & Regulatory Director
BSc Biochem/Toxicol, MSc Biopharmacy, 25yrs
sector experience across wide base; board member,
shareholder, 7 yrs with Alliance
John Barber, Director of Scientific Affairs
BSc Pharmacology, MSc Information Science;
16yrs sector experience, 4 yrs with Alliance
Andrew Dean, Business Development Director
BSc Chemistry and Business; 11yrs sector
experience, marketing & sales management, 2 yrs
with Alliance
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
2020: 1m people over 55
2010: 833k people over 55
2002: 782k people over 55
Nu-Seals 75
 £2.3m sales in Ireland
 15% increase year 02/04
 70% of antiplatelet market
 84% of low dose aspirin
market
Ireland highly branded market
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
Will compete against dinoprostone (ca £13m EU
Extensive published research in obstetrics (cervical
ripening and labour induction)
Introduction is eagerly awaited
•
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
sales)

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
•
Already used “off-licence”
Commencing clinical trials at end of 2004
•
But requires 3 serial cuts to the oral tablet
(200mcg to 25mcg)
Planned launch in H1 2006
Unlike dinoprostone, does not require refrigeration
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
EU Sleep Disorders market estimated at £500m
Phase 1 trials in human volunteers completed
Melatonin will expand the market
•
Rapid production of therapeutic blood levels
•
Blood levels then maintained for 5 hours
Alliance to market in UK & Ireland
•
To Specialists initially to gain endorsement for
GPs
Phase 3 clinical trials to commence H2 2004
•
Regulatory submission planned for H2 2005
Possible introduction H2 2006
Hospital sales force
•
Moderate development costs (£4-5m)
NPV about £18m - £30 m
Will use existing GP / Hospital sales force in
Ireland
Will gain 10 yr data protection in EU regulatory
system
Will need UK GP sales force to accompany
GP marketing – significant investment
License out in rest of EU
•
Down payments plus royalty stream