Publicly traded SciClone Pharmaceuticals Inc. has acquired China-based NovaMed Pharmaceuticals Inc. The deal includes approximately $24.7 million in cash, and shares of SciClone common stock valued at roughly $37.1 million, the company said in a release. There is also the potential for $43 million in payments, contingent on revenue and earnings targets for the next two years. NovaMed was reportedly backed by investors including Fidelity Asia Ventures and Atlas Venture.
SciClone Pharmaceuticals, Inc. (NASDAQ: SCLN) (“Company”) today announced that it has acquired NovaMed Pharmaceuticals Inc., (“NovaMed”) a China-based specialty pharmaceutical company. The acquisition brings additional broad sales and marketing, as well as regulatory and extensive business capabilities and pharmaceutical assets in the regulatory approval stage to its growing and profitable China-focused specialty pharmaceutical business. SciClone believes this acquisition will further position it as a leader in the rapidly expanding pharmaceutical industry in China.
Under terms of the agreement, NovaMed shareholders are entitled to receive up-front payments of approximately $24.7 million in cash, 8,298,110 shares of SciClone common stock valued at approximately $37.1 million (based upon the closing price of $4.47 on the NASDAQ stock market on April 18, 2011) and the right to additional cash consideration of up to $43.0 million, contingent upon the successful achievement of revenue and earnings targets for the 2011 and 2012 fiscal years.
The Company anticipates that NovaMed and SciClone’s combined revenue for fiscal 2011 on a pro forma basis will be between $140 and $145 million. SciClone’s GAAP revenue for fiscal 2011 will exclude NovaMed’s revenue prior to the closing of the acquisition. SciClone is updating its guidance to reflect the acquisition and anticipates that its 2011 GAAP revenue will be between $133 and $138 million, and cash, cash equivalents and investments at December 31, 2011 to be greater than $45 million. The Company anticipates updating earnings per share guidance with its first quarter 2011 earnings announcement expected in early May 2011.
NovaMed, a privately-held, China-based pharmaceutical company backed by foreign venture capital, has a portfolio of 18 drug products spanning four major therapeutic areas including oncology, cardiovascular disease, central nervous system (CNS) disorders and urology/infection. To support this broad product portfolio, NovaMed has built a sales organization of more than 450 individuals with extensive pharmaceutical industry experience in penetrating the rapidly expanding pharmaceutical market in China. Growing revenues more than 25% annually since inception, NovaMed generated revenues totaling $31.5 million (unaudited) in 2010.
SciClone’s acquisition of NovaMed was completed on April 18, 2011 through a share purchase agreement, which contains additional terms. The terms of the acquisition are described in a form 8-K filed by the Company on April 19, 2011.
“NovaMed represents an excellent strategic acquisition as it allows SciClone, in a single transaction, to dramatically expand our presence in China in five important areas: pharmaceutical products, targeted therapeutic indications, management depth, sales force size and revenue,” stated Friedhelm Blobel, Ph.D., President and Chief Executive Officer of SciClone. “Whereas SciClone had already established itself in China with our successful ZADAXIN® franchise, we have now evolved into a formidable presence in this fast growing market with a combined sales force of more than 680 individuals, nearly 20 commercial stage products spanning several key indications, and an expanded Shanghai based management team with significant pharmaceutical industry experience.”
Jon Saxe, Chairman of the Board of SciClone, added: “The combined entity should be an even more attractive partner for pharmaceutical companies wishing their products to be developed and represented in the Chinese market.”
Among NovaMed’s most successful, exclusively promoted commercial-stage products are Depakine®, the most widely prescribed broad-spectrum anti-convulsant in China, Tritace®, an ACE inhibitor for the treatment of hypertension, and Stilnox®, a fast-acting hypnotic for the short-term treatment of insomnia (marketed as Ambien® in the US), as well as Aggrastat®, a recently-launched intervention cardiology product. NovaMed’s pipeline also includes pharmaceutical assets in the regulatory approval process from partners such as Bio Alliance, Orexo, Meda, and EUSA. In building this broad pharmaceutical portfolio, NovaMed has established exclusive licensing and promotion agreements with a number of the world’s leading pharmaceutical companies, including Sanofi-aventis, Pfizer Inc., and Baxter International Inc.
“The opportunity to join forces with SciClone further advances the work that NovaMed has undertaken to build itself into a leading specialty pharmaceutical company in China,” said Bo Shao, Co-founder of NovaMed. Mark Lotter, Co-founder and Chief Executive Officer of NovaMed added: “By combining the important financial resources and strong sales and marketing capabilities offered by SciClone with NovaMed’s proven experience in in-licensing and marketing novel therapeutics for the China market, we are in a strong position to participate in and benefit from the rapidly expanding pharmaceutical market in China.”
Following the close of the acquisition, SciClone’s current operations in China and the newly acquired NovaMed will continue to operate as separate entities in the China market but under the leadership of Mr. Lotter. The NovaMed unit will continue to lead sales and marketing efforts for its current product portfolio. SciClone’s sales and marketing team will continue to sell and market ZADAXIN.
As part of the transaction, Mr. Lotter and Peter Barrett have been appointed to SciClone’s board of directors. Mr. Barrett served as a director of NovaMed and is a partner of Atlas Venture, one of NovaMed’s principal investors. Mr. Lotter has also been appointed as an officer of the Company and will oversee the China-based operations for SciClone as CEO of the China Business.
Cowen Group, Inc. acted as financial advisor and Katten Muchin Rosenman LLP acted as legal counsel to NovaMed. Piper Jaffray & Co. and Lazard Capital Markets acted as financial advisors and DLA Piper LLP (US) acted as legal counsel to SciClone in the transaction.