Midatech: ADR Update
Edison | Jan 06, 2016 11:37AM ET
Midatech Pharma (O:MTP) closed its all-share acquisition of DARA BioSciences on 7 December (first announced in June), thereby acquiring a presence in the US oncology market via DARA’s 20-strong sales force and portfolio of marketed cancer support products. On 18 December, Midatech announced the acquisition of anti-emetic drug, Zuplenz (from Galena, for $3.75m), a strong fit with DARA’s existing anti-cancer support products. The new Midatech shares are listed as ADRs on NASDAQ on the back of its recent IPO in the US. Our valuation for Midatech, with our calculations now including DARA and Zuplenz, moves to $221.0m from $200.7m (or $13.29/ADR from $14.45/ADR due to greater share count).
DARA and Zuplenz bring an existing revenue stream
Midatech acquired DARA through the issue of 5.42m of its own new shares, which valued DARA at approximately $21.7m (£14.4m) at the time of the announced acquisition, or a 51% premium over DARA’s value. We forecast sales for DARA in excess of $30m by 2021 and believe the DARA business could reach profitability in 2017 with the help of ~$500k in annual cost savings. That said, profitability could be reached earlier depending on the ramp-up of Zuplenz sales, which we forecast to peak at $10m in 2021-23.
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