Life Therapeutics sets out to acquire US firm Pyramid Biological

Sydney-based Life Therapeutics (ASX:LFE) has firmed up its stake in the global plasma supply industry, issuing a definitive letter of intent to acquire privately-held California-based Pyramid Biological for US$13 million, plus assumption of US$7 million debt.

A further US$5 million is subject to milestones. Final settlement is expected to occur in mid-August.

"It makes us, we believe, the largest independent supplier of plasma products in the world, outside the major fractionators like CSL and Baxter, who have their own collection centres," said Life Therapeutics CFO John Manusu.

"It means that we'll be in a situation where we have a nice percentage of the biodiagnostic market place worldwide, which is the market for positive plasma, for example HIV. We will also increase our market share of the hyperimmune market by 40 per cent worldwide," he said.

Pyramid is a hyperimmune plasma and biodiagnostic supplier with 225 employees. The company owns and operates five plasma collection centres in the US.

"Combined with our current operations, the company will now have 13 plasma collection centres in eight US states with 380 staff," said Life Therapeutics CEO and MD Hari Nair in a statement.

The acquisition will be paid for by issuing of Life Therapeutics shares to Pyramid owners following approval at an EGM. US$5 million in shares will be issued at the date of the EGM, US$8 million will be issued two years after the acquisition based on the then share price and a further US$5 million will be issued three years after the acquisition based on the then share price if Pyramid's sales double from US$20 million to US$40 million during this period.

Life Therapeutics forecasts that its annual sales and profits will significantly increase based on the acquisition, with projected sales for the 2006 financial year of AUD$74 million and projected earnings before interest, tax, depreciation and amortisation (EBITDA) of AUD$10 million. The projection is a reflection of significant long-term plasma supply contracts with major plasma fractionators. Manusu said that prior to the acquisition, sales were projected at AUD$54 million and EBITDA was at AUD$4.5 million.

"This is a major acquisition for our company, and directly supports our strategic plan to become a leading manufacturer of niche therapeutics. Essentially this acquisition will complete the turn around for our company from one with limited small R&D revenue to substantial revenues and profits," said Manusu.