Sydney, June 25, 2007 AEST (ABN Newswire) - Life Therapeutics (ASX: LFE) today provided details of an agreement (the "Agreement") with Kedrion S.p.A ("Kedrion"), a leading European speciality pharmaceutical company and Italy's largest fractionator, that will enable the company to deliver on its strategy to become a vertically integrated operator. Under the terms of the Agreement, Life Therapeutics will take up a 5.5% equity stake in Kedrion and will divest assets from its Life Sera business into a new joint venture company with Kedrion ("Newco").
The Agreement enables Life Therapeutics to become a fully vertically integrated company with interests in plasma collection, manufacturing and diagnostics. The existing Life Diagnostics business will continue to be wholly owned by Life Therapeutics.
Importantly, the Agreement provides the company with exposure to high value blood fractionation operations that typically provide consistently higher margin returns compared with the plasma collection business.
Key components of the Agreement are as follows:
- Life Therapeutics will divest 12 of its 14 currently operational plasma collection centres located in the United States into Newco, which will be owned 45% by Life Therapeutics and 55% by Kedrion. Two centres to be opened in California at Sacramento and Long Beach, will also be divested into Newco.
- Life Therapeutics will maintain ownership of the collection centres located at Metarie, Louisiana and San Diego 6 th Avenue, California. The company will also retain full ownership of two new centres proposed for Salt lake City, Utah and Atlanta, Georgia.
- Life Therapeutics will receive a 5.5% equity interest in Kedrion in the form of a convertible instrument earning interest of 10.5% pa. This will convert to share equity upon an Initial Public Offering of shares in Kedrion to take place by 2011.
- LFE's remaining 45% of Newco and the cumulative interest in the convertible note represents a further 6% of Kedrion.
- Life Therapeutics will receive a 12 month exclusive contract with Newco to provide technical services. The company will receive an upfront payment of US$2 million with additional incentive arrangements.
- Life Therapeutics will receive a 5 year exclusive contract with Newco to provide laboratory testing worth US$6 million.
- Life Therapeutics will receive a 5% fee from Kedrion based on annual sales of Anti D red cells, estimated to be worth US$0.5 million in income to the company.
- Newco will be governed by a five person Management Board. Two members will be nominated by Life Therapeutics and three members by Kedrion. Life Therapeutics will also appoint the Chairman of the Newco Management Board. The first Chairman of the Newco Management Board will be Life Therapeutics CEO, Dr Hari Nair.
Kedrion specialises in the development, production and distribution of plasma derived drugs. In the year ending 31 December 2006 Kedrion reported EBITDA of EURO 40.4 million (A$63.8 million) on net sales of EURO 155 million (A$245 million) and employed 589 people. Historically controlled by the Marcucci family who have been involved in the fractionation business for 30 years, in December 2006, Investitori Associati, a leading Italian private equity firm, acquired a 40% stake in Kedrion.
Announcing the terms of the Agreement, Life Therapeutics Chairman Dr Jim Brown said, "This agreement delivers on an important promise to transform Life Therapeutics into a truly integrated company with a global footprint. "The deal structure is quite different to that originally contemplated when we first entered into discussions with Kedrion. The agreement that we have announced today provides Life Therapeutics shareholders with greater exposure over the long term to the benefits of vertical integration and from partnering with such an accomplished industry player as Kedrion.
"The agreement we are announcing today brings together the benefits of our company's significant US based plasma collection business, with Kedrion's European-based manufacturing capacity and technical expertise and the financial and managerial skills of Kedrion's major investor, Investitori Associati," Dr Brown said.
Mr Paolo Marcucci, President and CEO of Kedrion said, "I am delighted that our company will be partnering with Life Therapeutics. I firmly believe that each company brings complementary skills, expertise and operations, motivated by a shared vision for growth and leadership in the global fractionation market. We look forward to our future together with great confidence."
As well as its 45% stake in Newco and the management contracts, Life Therapeutics will continue to directly own the profitable Life Diagnostics business. This business will operate as before and obtain its plasma supply from the fully owned Metarie and San Diego collection centres, both of which are licensed for hyperimmune collection, the highest margin source plasma. Life Therapeutics CEO Dr Hari Nair said, "This transaction represents a significant milestone in the development of our company since the current Board and management team assumed control in late 2003. Over that time, we have a built a significant business which, as a result of this agreement with Kedrion, is set to became a leading global player in the blood fractionation and therapeutics manufacturing business.
'In Kedrion we have an experienced partner with an impressive track record and an aggressive growth strategy on a global scale. These are compelling attributes for our company and complement perfectly our vision for the future of Life Therapeutics," Dr Nair said.
Kedrion is entitled to one representative on the Board of Life Therapeutics. Kedrion's Board will appoint its representative who is likely to be its president and CEO, Mr Paolo Marcucci.
Mr Marcucci has a deep understanding of the plasma-derived products market and has been the senior executive of Kedrion since 2001. In addition, he is a member of the Supervisory Board of KED Pharmaceuticals, a Director of the Banca del Monte di Lucca Foundation, a member of the Association of Entrepreneurs in the province of Lucca and on the Council of Farmindustria. Reflecting the changes to the Life Therapeutics asset base, its growth profile and global footprint, resulting from this agreement, the company will also make further changes to the composition of the Board. In addition to Kedrion's representative, two new non-executive directors will join the Board. Existing non-executive directors Messrs John Manusu, Mike Baronian and Dr Choon Lee will retire from the Board to make way for the new Directors, with immediate effect.
Mr Julian Cooper has accepted an offer to become non-executive director of the company. Mr Cooper has a depth of strategic and operational management experience with particular experience in the fields of human resources and finance. Most recently he was the General Manager, Facility Integration & Strategy for GE Healthcare, a role that encompassed 800 sites located in 50 countries.
The company's Chairman Dr Jim Brown has also indicated his intention to retire from his role with the company at the 2007 Annual General Meeting. As a result, the company has commenced a global search for a suitable candidate for the position of Chairman.
Mr Brown said, "I am delighted to welcome our new board members. They are each impressive individuals in their own right who undoubtedly have a lot to offer Life Therapeutics. Collectively they bring the right mix of commercial expertise, industry experience and financial rigour necessary to support the company as we enter the next stage of its development and growth. "I also take this opportunity to thank each of our retiring directors, John Manusu, Mike Baronian and Choon Lee for their significant contribution and unswerving devotion to Life Therapeutics and its shareholders over a number of years."
Completion of the transaction is subject to assignment of assets and contracts to Newco, final Board approval by each company and the finalisation of documentation.
Upon completion of the transaction, a General Manager will be appointed to Newco, reporting to the Management Board. Dan Yirga will be immediately appointed President, Life Diagnostics. As a result of this new structure, Life Therapeutics CEO Dr Nair will assume the role of Managing Director of the company, in addition to his role as Chairman of the Management Board of Newco.
About Kedrion
Kedrion, an Italian-based blood fractionator and biopharmaceutical manufacturer is one of Europe's leading manufacturers and suppliers of therapeutic proteins. Kedrion currently manufactures and supplies 70% of the Italian blood plasma products. The Company has state-of-the-art manufacturing facilities in both Naples and Castelvecchio Pascoli.
For more information on Kedrion, please visit the company's website at www.kedrion.com.
Download the complete information from:
http://www.life-therapeutics.com/uploads/LFE_HOA_25_June_2007c.pdf
Contact
Prakash Patel
Company Secretary
TEL: +61 2 8977 9000
Media enquiries:
David Lumb
Porter Novelli
TEL: +61 409 990 081
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