Oct 29 Contract drugmaker Patheon Inc
will buy Banner Pharmacaps, which focuses on gelatin-based oral
drug delivery technology, for $255 million, to expand its
presence in the over-the-counter market and gain a foothold in
North Carolina-based Banner, a unit of Dutch food products
company Vion NV, makes easy-to-swallow soft-gelatin capsules,
tablets and chewable gels that drug firms use to coat their
over-the-counter and nutritional drugs. It has labs and
manufacturing plants in the Netherlands, Canada and Mexico.
"(Banner) expands our geographic presence. It gives us ... a
direct-to-market business in Mexico and some of the other Latin
American countries," CEO James Mullen told Reuters.
Patheon finds South America and the emerging economies more
attractive and volume driven than North America and Europe, said
Mullen, who took over as the CEO last February.
"We are certainly interested in India and China as well," he
said from Durham, North Carolina.
Patheon, which provides contract development and
manufacturing services to pharmaceutical companies, said on
Monday its full-year revenue would now be between $740 million
and $745 million. It had earlier forecast revenue of more than
The deal, Patheon's first in the soft-gel drug delivery
market, will also help the company cross the $1 billion revenue
mark, the CEO said.
"On a pro forma basis, we will be there at the end of 2012,
but certainly 2013 on a full-year basis as a combined company,
we should exceed $1 billion in revenue."
Mullen said the acquisition will give Patheon access to
Banner's customers in the direct-to-market private label
business, such as Wal-Mart Stores Inc and Walgreen Co
The company will also benefit from the addition of Banner's
nutritional business - an area where it does not have a
Patheon shares, which have gained about 76 percent in value
in the past six months, closed down at C$3.68 on the Toronto
Stock Exchange on Monday. They touched C$3.90, their highest in
over four years, earlier in the day.
SOFTGEL GETS BIG PUSH
The acquisition of the soft-gel specialist will bring in
additional formats in the oral dosage form that is popular both
in the OTC market as well as among new products, the company
"The softgel technology in the nutritional and OTC market is
quite a desired format ... It is a great product format for
large capsules in nutritionals like fish oil that makes it easy
to swallow," said Mullen, who holds a Bachelor of Science in
chemical engineering from Rensselaer Polytechnic Institute.
Patheon partnered with Colombian softgel capsule maker
Procaps SA in January to manufacture a line of softgel in North
America, Europe and Asia.
It expects the Banner deal to close by the end of the year.
"We believe that Banner's complementary, specialized
technology capability should be a credit to Patheon," said TD
Securities' analyst Lennox Gibbs, who raised his price target on
the Patheon stock to C$4.50 from C$2.50.
UBS Securities Llc advised Patheon on the deal, while
Rabobank International and Rothschild Inc advised Vion NV.
Patheon would take a non-cash charge of $37 million in the
fourth quarter related to debt refinancing and the acquisition,
it said in a statement.
The company also said it had received financing commitments
of about $650 million from Morgan Stanley, UBS, Credit
Suisse and KeyBank.