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Article updated as of 11:30 a.m., Oct. 31, 2011.
Repligen Corp. of Waltham said late Thursday that it has a definitive agreement to buy the Swedish biopharma business of Novozymes A/S in a cash transaction of 17 million euros ($22.7 million) and future potential milestone payments of 4 million euros ($5.6 million).
The deal is expected to close by the end of the year. Repligen (NASDAQ: RGEN) said the acquisition of Novozymes Biopharma Sweden AB of Lund, Sweden, will give it the potential for sustainable growth and profitability in fiscal 2013 starting April 1, 2012. The combined company is expected to generate total revenue of about $50 million in fiscal 2013, Repligen’s President and CEO Walter C. Herlihy said in a conference call Friday morning. He added that his company saved $1.4 million in the acquisition by locking in a favorable exchange rate compared to today’s rates.
Novozymes will retain the remainder of its BioPharma business, which has manufacturing operations in the U.K. and China and focuses primarily on hyaluronic acid and recombinant albumin products and technologies for pharmaceutical and medical device applications, a spokesperson for Repligen said.
The deal will immediately double Repligen’s product revenue, officials said.
The acquired products are expected to generate $16 million to $17 million in revenue in 2011, and are sold primarily under long-term supply agreements with companies including EMD Millipore, Sigma-Aldrich Corp., and GE Healthcare.
As part of the acquisition, GE Healthcare and Repligen have extended their existing supply agreement term for recombinant Protein A from 2014 to 2021.
The acquisition includes a 45,000-square-foot protein factory that will double Repligen’s manufacturing capacity and established product lines with long-term customers. The products include various forms of Protein A, which is fundamental to the production of monoclonal antibodies and growth factor products used in the large-scale fermentation of cells.
"We are uniting two high complementary product portfolios. This acquisition positions us to be the predominant manufacturer worldwide for native and recombinant Protein A,” Herlihy said. “And it positions Repligen as a leading producer of high-value, consumable products that will directly benefit from the long-term growth of the biologics market.” Earlier this year, Repligen announced a strategic objective to transition into a commercial company, and Herlihy said the acquisition of the Novozymes business will deliver on that goal.
He said Repligen also will be able to expand into the cell culture ingredients market.
Key to the company’s strategy are bioprocessing products, which are consumables used to produce vaccines and biological drugs such as monoclonal antibodies and recombinant proteins. “Bioprocessing products have high gross margins topping 50 percent and low sales, general and administrative expenses. And they’re not regulated by the FDA or EMA,” he said, referring to the U.S. Food and Drug Administration and the European Medicines Agency. He added that by 2013, such products are estimated to be used in eight of the top 10 drugs on the market.
The acquisition also diversifies Repligen’s customer base, Herlihy said. Currently one customer makes up 50 percent of its revenue, but with the purchase it will have three major clients.
Herlihy said Repligen expects to end fiscal 2011 on March 31, 2012 with $35 million in cash and no debt. Repligen yesterday announced results [PDF] for the second quarter ended Sept. 30, with revenue up 18 percent to $8.63 million compared to the previous year’s quarter and a $600,000 profit. Repligen stock was up 8.6 percent in early morning trading Friday.
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