Proposed acquisition and vendor share placing

Alliance Pharma plc (AIM: APH), the speciality pharmaceutical company, announces that it has conditionally agreed to buy the trade and certain assets of Cambridge Laboratories (Ireland) Limited and Cambridge Laboratories Limited (together the “Vendors”) for total consideration of between £14.3m and £16.4m plus the value of inventory held by the Vendors at completion (the “Acquisition”).  Completion of the Acquisition is expected on 22 February 2010 (“Completion”).

Included in the Acquisition are 18 prescription products across a range of therapeutic areas, including:

·         ImmuCyst^®, an immunotherapy for superficial bladder cancer;

·         gelclair^®, an oral gel for the management of oral mucositis caused by chemotherapy and radiotherapy;

·         procarbazine, a treatment of Hodgkin’s Lymphoma as part of chemotherapy treatment; and

·         a liquid formulation of Vitamin E, the only one licensed in the UK.

The rights included in the Acquisition are primarily for the United Kingdom and the Republic of Ireland.

The portfolio also includes a toxicology product that is purchased by the UK government for a stockpile, which is replaced on a 2-3 year cycle.  The Vendors have been awarded the contract, worth £5.6m, for the current stockpile replacement, which is taking place between October 2009 and January 2011.  In the year ended 31 December 2009 (based on the Vendors’ unaudited management accounts for that period), total sales, excluding the toxicology product, were £10.6m and the pro forma gross margin was £4.9m.

The Acquisition is expected to be significantly earnings enhancing to Alliance in the financial year ending 31 December 2010.

The oncology products (ImmuCyst^®, gelclair^® and procarbazine) within the Acquisition portfolio represented approximately 40% of the portfolio by sales in 2009 and together their sales have been growing at around 18% per annum over the past three years.  Alliance intends to keep in place the specialist sales force of five that is currently promoting these products.

Certain of the products being acquired by Alliance are on licences from various third parties and these licences are typically due for renewal every five years.  The timing of the transfer of one of the products from the Vendors to Alliance (the “Deferred Transfer”) is dependent on a related supply contract being executed.  The Deferred Transfer product has pro forma annual gross margin of approximately £0.4m.

Under the terms of the Acquisition, the offices in Dublin and Newcastle from which the Vendors operate will transfer to Alliance, together with around 30 staff employed by the Vendors.  The Company currently proposes to merge the support functions into its existing offices in Chippenham, Wiltshire, resulting in approximately 25 positions being put at risk of redundancy. The Company will be entering into a period of consultation with the affected employees in connection with the potential redundancies.

Continued Part 2