IPO positions Recipharm as mid-tier CMO with plans to grow through takeovers

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Recipharm has given investors a sneak peak at its finances ahead of its IPO next month that establishes the firm as a mid-tier CMO with plans to grow through acquisitions.

In its prospectus, the Swedish contract manufacturing organisation (CMO) said that it generated revenue of SEK2.1bn ($330m) and earnings, before interest, tax, depreciation and amortization of SEK283m in 2013.

This would place it just behind private peers like Famar, which claims annual revenues of around €380m ($512m), and Aenova, which predicted that the €269m its services business brought in in 2012 would more than double in 2013.

All these figures are some way short of the revenues reported by the current leaders of the contract manufacturing sector, privately owned US firm Catalent, which claimed revenue of $1.8bn in 2013.

New CMO DPx, formed following the merger of Patheon and Royal DSM’s pharmaceutical products business last week, and Fareva would also be some way ahead of the Swedish contractor in terms of 2013 revenue.

Acquisitions

In the prospectus Recipharm said it aims to raise SEK898m through the sale of 10.4 million new shares and 6.3 million existing shares, which would give the CMO a market value of around SEK3.1bn.

CEO Thomas Eldered said the additional finances would better position Recipharm “to complete interesting take overs of new production contracts” and “take part in the ongoing consolidation of the contract manufacturing industry.”

The rational for listing presented in the document also reveals that Recipharm intends to use part of the proceeds for capacity investments “in existing facilities and the majority for future acquisitions,” and explains that the firm has identified potential takeover targets.

“Acquisitions of various size in North America, India and Europe are of interest and prioritised areas are production of potent pharmaceuticals (e.g. cytostatic drugs) and pre-filled syringes.”