The latest watchword for the pharmaceutical industry is “specialization,” as in “specialization is a safer bet than diversification.” A lot of big-name pharma companies are divesting their non-core businesses in order to target specific therapeutics and disease areas.
The most recent example is Mallinckrodt plc (NYSE:MNK), which has sold off approximately $893 million of its assets in the past six months, in order to focus on its specialty pharmaceutical platforms in autoimmune and rare diseases.
In August 2016, Mallinckrodt sold its nuclear imaging business for $690 million to IBA Molecular, a global manufacturer and distributor of radio-pharmaceutical products. The assets included a portfolio of diagnostic imaging products and two manufacturing plants in the United States and the Netherlands.
Although the business was “making progress” towards profitability, Mallinckrodt president and CEO Mark Trudeau said at the time that Mallinckrodt’s “strategic priorities [are] focused on enlarging our portfolio in the high-growth specialty pharmaceuticals space.”
Then, on January 30, 2017, Mallinckrodt sold its intrathecal therapy business to Piramal Critical Care Inc. for $203 million. The business had net sales of $44.6 million in fiscal 2016 and were reported as part of Mallinckrodt’s Specialty Brands segment within the “Other” line. The business includes products for the treatment of spasticity via intrathecal (spinal column) drug delivery, including its key asset, Gablofen®, an FDA approved treatment for severe spasticity of cerebral or spinal origin.
“While net sales for our intrathecal therapy business have increased approximately 50% since 2012 and it has become significantly more profitable, the products have limited commercial synergy with other parts of our growing Specialty Brands segment,” Trudeau said in a press release. “The sale of this business to Piramal is the best solution to meet patient needs and will free resources for us to invest in additional growth.”
The approximately $203 million transaction will consist of $171 million of fixed consideration of which 10%, or $17 million, will be paid at closing, and an additional $154 million will be paid on the first anniversary of the close date. The remaining total consideration of up to $32 million is contingent, based on the gross profit of the Gablofen products in 2018 and 2019. The transaction is subject to customary closing conditions, and Mallinckrodt expects to complete the transaction in the first quarter of 2017.
