Charlottetown drug manufacturer BioVectra Inc. has agreed to sell out to Questcor Pharmaceuticals of Anaheim, Calif., for up to $100 million in cash and deferred payments, in a deal that will give the P.E.I. company the capital needed to pursue its growth strategy.
BioVectra CEO Ron Keefe said in a phone interview today the acquirer has agreed to let the 43-year-old company run independently in Charlottetown with the same management team.
Questcor will pay shareholders of BioVectra about $50 million when the deal closes, which is expected this month. It has also agreed to pay a further $50 million contingent on management meeting several milestones in the next three years. Keefe said the buyers would assume some debt, but it is not a substantial amount.
Questcor, which produces treatments for serious, difficult-to-treat autoimmune and inflammatory disorders, has been doing business with BioVectra for almost a decade. The U.S. company said in a statement that BioVectra produces the active pharmaceutical ingredient, or API, used in Questcor’s primary product, H.P. Acthar Gel, an injectable drug that is approved in the U.S. for the treatment of 19 conditions.
Founded in 1970 by J. Regis Duffy, then Dean of Science at the University of Prince Edward Island, BioVectra now manufactures APIs for drugmakers around the world. The company has invested about $40 million in upgrading and expanding its facility in the past two years, which it financed through contributions from existing shareholders, working capital and some bank debt. Keefe said BioVectra needs more capital to continue its growth.
“I think it’s a growth story but when you’re growing you often need more capital to continue,” said Keefe in the interview. “This [deal] gives us the access to the capital that we will need to continue to grow.”
For a mature company, BioVectra’s recent growth has been impressive. In the fiscal year ending Aug. 31, 2012, the company booked $28 million in revenue, an increase of 15 percent over the previous year, and added about 40 employees, bringing its staff level to 180 people.
In the current fiscal year, the company will invest a further $7 million to $8 million in its P.E.I. operations and add about 25 to 30 additional employees. Keefe estimates revenue will increase about 40 percent this year.
"We are excited to join efforts with BioVectra as we look to diversify our revenue," said Questcor President and CEO Don M. Bailey said in a statement. "This action puts us in a better position to meet the continuing growth in demand for Acthar, brings to our company a broader depth of technical and scientific expertise, and provides us with a platform for potential international expansion."
Keefe said the management teams of the two companies are completely aligned on its strategy, and that he now hopes to remain with BioVectra through the three-year lock-in period and beyond.
The BioVectra deal is the fifth major exit in the Maritimes in the past two years. The other companies that found buyers are: Radian6 for about $370 million; Q1 Labs reportedly for more than $500 million, GoInstant for more than $70 million; and Ocean Nutrition Canada for $540 million.
It is also the second M&A deal in the P.E.I. biotech segment in the last six months. In July, Neurodyn, the P.E.I. biotech developing early treatments for neurological diseases, bought NeuroQuest, a Halifax-based drug development company spun out of Origin Biomed, for an undisclosed sum.