Medical Device Daily Associate

Cambrex (East Rutherford, New Jersey) reported that it has entered into a stock purchase agreement with Lonza Group (Basel, Switzerland), a global supplier of active ingredients, chemical intermediates and biotechnology solutions, for the sale of the businesses that comprise its Bioproducts and Biopharma segments, for $460 million in cash.

Cambrex — which will now focus its efforts on its Human Health business — said it expects to realize net proceeds of about $450 million, and use it to repay all outstanding debt under its credit facility and help fund a dividend to stockholders. The sale of the bio businesses, subject to customary regulatory approvals, is expected to close in 90 to 120 days.

With sale completion, Cambrex said it will pay a special dividend plus an additional $125 million to $150 million from new lines of credit, secured after closing. Assuming financing approval, Cambrex expects the dividend to be $13.50-$14.50 a share.

The sale is the result of a decision in February to explore “strategic alternatives” for the company.

James Mack, president/CEO and chairman of Cambrex, said during a conference call on the transaction, that the company had explored selling the Human Health business but that none of the offers “adequately reflected its underlying value.”

“Going forward, Cambrex will focus on growth opportunities in the markets we currently serve through our Human Health business,” he said. “Our robust portfolio of products and services in value-added niches, coupled with our proven capabilities and first-rate regulatory record, uniquely position Cambrex to support both branded and generic manufacturers throughout the drug development life cycle.”

“Concurrently, we will be working to aggressively reduce our corporate overhead in light of the decrease in both the size and complexity of Cambrex’s operations,” Mack added.

Upon completion of the bio businesses sale, Cambrex said it will focus on maximizing the Human Health business by reducing overhead by about $8 million a year and “refocus and streamline” the business.

The company also recently reported the sale of its subsidiaries based in Cork, Ireland, and Landen, Belgium (see Report from Europe, front page this issue).

As buyer, Lonza expects integration costs “of $25 million to $30 million overall from the Cambrex takeover, and we will book the bigger part of that in 2007,” according to CFO Toralf Haag.

Lonza CEO, Stefan Borgas, said he expected a turnaround at the Biopharma business — the smaller of the two units it bought from its U.S. sector peer — in two to three years.

“For Lonza, this is the largest acquisition in our long company history and represents a significant commitment and leap forward toward achieving our long-time goal of becoming one of the world’s leading suppliers to our existing and new customers in the pharmaceutical, healthcare and other life science industries,” Borgas said.

Lonza said life sciences will account for close to 90% of its sales after the deal and the initial public offering for itspolymers unit,Polynt (Milan, Italy), later this week.

“These acquisitions and the IPO of Polynt accelerate the delivery of Lonza’s strategic shift towards life sciences that we mapped out two years ago,” said Borgas.

Lonza raised its sales forecast to 8% to 12% per year and for annual operating growth to the mid-to-high teens. The acquisitions will add projected earnings per share as of 2008, it said.

The bio businesses transaction is not subject to any financing conditions but is subject to approval by Cambrex stockholders and customary regulatory reviews.

Cambrex has three business segments: Human Health features products and services for process development and manufacturing of about 120 pharmaceutical ingredients, advanced pharmaceutical intermediates and specialty intermediates for animal health, X-ray diagnostic and other applications; Bioproducts manufactures research, therapeutic and analytical testing products based on cell biology and used in drug discovery and biotherapeutic manufacturing; Biopharma offers process development services and contract manufacturing for therapeutic proteins, vaccines and other biologic drugs. Combined 2005 sales from the businesses accounted for 42% of the company’s total gross sales of $452 million.

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