Athlone-based Elan Corporation has agreed to acquire Carnrick Laboratories, a privately owned US pharmaceutical company, for $150 million (£107 million). The bulk of the consideration will be in cash but a small proportion will be a promissory note.
The deal is expected to be earnings neutral in 1998. However, it could add between 3 cents and 6 cents per share next year. While it is a reasonably sized deal for Elan, it will have only a marginal impact on its cash mountain. Without the deal, Elan was expected to end this year with cash of some $1 billion following the raising of $325 million in a convertible bond issue last November. After paying for the latest acquisition, it will have cash of almost $900 million.
Carnrick, founded in 1899, markets and distributes its products mainly to general medical practitioners and pain specialists in the US and Puerto Rico. Its main product is Skelaxin, used for the relief of acute painful musculoskeletal conditions. Carnrick recorded net sales of £51.2 million in 1997. Profits amounted to $7.1 million. The consideration represents almost treble the sales. Elan considers it a very good deal for the company, particularly as Carnrick has such a well established sales force.
The deal, Elan said, will provide further promotional opportunities through the addition of Carnrick's 130 sales force, bringing the enlarged group's network to 280 sales representatives. "The transaction," said Mr Donal Geaney, chairman and chief executive of Elan, "accelerates the development of our US pharmaceuticals business by increasing the range of products we offer and will enhance our capability to fully exploit our pipeline of late-stage products in development." The deal is subject to approval from Carnrick's 16 shareholders, who are all members of the Carnrick family, and from regulatory authorities. It is expected to be closed in the second quarter of 1998.
Carnrick will be a separate unit of Athena Neurosciences, Elan's neurology division. This subsidiary is focused on the development and marketing of therapeutic products and diagnostic services for patients with neurological disorders.
Mr Ed Bergeron, chief executive officer of Carnrick, will remain in that position. He said the takeover will allow Carnrick to expand the marketing of its products through Elan's neurology sales force.
Elan generated revenue of $389.2 million last year, up from $235.6 million in the previous nine months. Pre-tax profit amounted to $180.6 million, compared with a loss of $352,000. That loss, however, arose because of a provision of £18 million for a loss on the sale of a business. First-quarter results are due out today. They are expected to show good growth, with a rise in earnings per share from $0.35 to an estimated $0.45. Analysts generally welcomed the deal. "This company (Carnrick) has a strategic value," said NCB analyst, Mr Shane Nolan. "It looks like a logical deal for Elan."
Mr Nolan said there was no overlap in the product range and the deal would boost sales of Elan's Zanaflex drug, an oral drug used for the treatment of spasticity, through Carnrick's US sales force.
"It looks like a reasonable price in the context of prices that other companies are paying simply for products," Goodbody Stockbrokers analyst Ms Joan Garahy said.
Elan's shares reacted little to the announcement, closing slightly lower in Dublin at 4493p, from 4502p the previous day.
They were trading around $63 in New York last night, slightly up on the previous day's trade.
