Sinclair and IS agree merger

Merged entity now worth £130m

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Sinclair Pharma, the speciality pharmaceutical company, has agreed to merge with Aim-quoted IS Pharma, creating a business worth £130m.

The deal will allow the merged entity to achieve higher margins through directly distributing products across Europe.

Sinclair has infrastructure in France, Italy, Germany and Spain, while IS Pharma sells directly only in the UK and Ireland.

The combined footprint would give the new company a competitive advantage when seeking to license new products, Sinclair said.

An extensive hospital sales infrastructure would also enable it to market treatments more efficiently than either company could achieve independently.

Sinclair shareholders will own 63.3 per cent of the merged entity, to be called Sinclair IS Pharma, with the remainder going to shareholders of Chester-based IS Pharma, which specialises in medicines for use in critical care, neurology and oncology.

Although Sinclair is listed on the main board of the London Stock Exchange, the new group will be quoted on Aim.

The fortunes of Sinclair, which sells skin and wound treatments, have improved since the 2009 arrival of Chris Spooner as chief executive. A restructuring of the company boosted revenues by 28 per cent to £14.1m in the six months to December 2010, with pre-tax losses narrowing 72 per cent to £4m.

Sinclair’s main products are Flammazine and Flammacerium, a pair of burn wound treatments acquired in 2009, which contributed £3.8m of sales in the first half of the year.

Grahame Cook, Sinclair chairman, said the merger created “good potential” to boost revenues, as well as pursue acquisitions of both products and companies.

John Gregory, chairman of IS Pharma, said the greater scale of the new company would “provide IS Pharma with a direct presence in the top five European markets as well as strengthening the product portfolio and providing in-house development capabilities to both companies.”

The merged company was likely to maintain a focus on acquiring and marketing products, rather than developing them in-house, said Samir Devani, an analyst at Nomura Code Securities.

He said: “These aren’t big research businesses – they have small spend on R&D – and that won’t change dramatically in the medium term. The key for them is to keep building the distribution infrastructure.”

Sinclair Pharma shares fell 1½p to 35.38p, while IS Pharma rose 5p to 90p.

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