LONDON - Chiroscience Group plc has sold a 30 percent stake in its chiral chemistry arm, ChiroTech Technology Ltd., for £30 million in cash, valuing the subsidiary at about £100 million and almost doubling Chiroscience's cash reserves.
The deal with Ascot plc, a U.K. chemical engineering group, includes the formation of a manufacturing alliance with Mitchell Cotts Chemicals Ltd., Ascot's fine chemicals manufacturing subsidiary, which is based in West Yorkshire.
Mitchell Cotts is the contract manufacturer of a number of ChiroTech products, including single isomer lactam, one the intermediates used by London-based Glaxo Wellcome plc in the manufacture of its new antiviral drug, abacavir.
John Padfield, CEO of Chiroscience, in Cambridge, said the investment will formalize the commercial partnership already developed with Mitchell Cotts and provide ChiroTech with access to the manufacturing infrastructure required to serve its growing range of customers.
The alliance also will give ChiroTech access to provide existing Mitchell Cotts customers with chiral chemistry services.
ChiroTech showed a profit of £7.1 million for the year ended February 1998, up from £1.2 million the previous year. Announcing financial results in April, Chiroscience said it was “reviewing opportunities to maximize return to shareholders from the ChiroTech business.“ One possibility was that ChiroTech, established as a stand-alone subsidiary March 1, 1998, could be sold as a freestanding business.
However, at the same time Chiroscience underlined its dependence on the chiral chemistry skills around which it was formed, disclosing submission of its first new drug application in the U.S. for Chirocaine, a single isomer version of the established anesthetic bupivacaine. The first launch of the drug, which has been licensed to London-based Zeneca plc on an exclusive worldwide basis, is expected before the end of 1998.
The sale to Ascot will allow Chiroscience to retain control of its chiral chemistry expertise while almost doubling the cash resources. At the end of April 1998 the company had £40 million cash with a burn rate of £2 million per month.
Commenting on the deal with Ascot, Padfield said, “The injection of cash into the group's balance sheet provides further flexibility in growing shareholder value from Chiroscience's key assets.“
Under terms of the agreement, which is expected to be completed on Sept. 1, Ascot shares will bear a preferential right to dividends up to £3 million per annum and will have a preferential right to proceeds on a sale of the business. As a 70 percent subsidiary of Chiroscience, ChiroTech's results will continue to be consolidated in the group accounts.
Padfield said, “The deal with Ascot offers a balanced solution, allowing the ChiroTech business to grow while providing Chiroscience with a significant interest in this growth.“
The current order book at ChiroTech stands at £35 million. Apart from the deal with Glaxo for lactam, which is worth £25 million over two years, ChiroTech has agreements with other companies, including Johnson Pharmaceutical Research Institute, a subsidiary of New Brunswick, N.J.-based Johnson and Johnson, Pharmacia and Upjohn, of London, and Triangle Pharmaceuticals Inc., of Durham, N.C. *