Columbia Labs Buys Molecular Profiles For $25M

Columbia Laboratories said today it acquired Molecular Profiles for about $25 million, in a deal that expands the buyer's business beyond drug development by combining it with the global provider of pharmaceutical development, clinical trial manufacturing, advanced analysis, and consulting services.

"This transaction represents an exciting step in Columbia's ongoing transformation, and has numerous strategic advantages," Frank Condella, Columbia's president and CEO, said in a statement. "We are deploying our capital to acquire a growing, cash-flow positive, and profitable company with a large customer base that strengthens and significantly diversifies Columbia's revenue stream. We look forward to its continued growth as Molecular Profiles further penetrates the growing pharmaceutical outsourcing market for formulation development and manufacturing services."

Columbia said it expects to realize operational synergies of up to $400,000 annually, as well as a "double digit" impact to its earnings before interest, taxes, depreciation, and amortization (EBITDA).

Molecular Profiles' CEO and co-founder, Nikin Patel, Ph.D., MRPharmS, will join Columbia's Board of Directors as part of the deal.

"Our senior technical staff's breadth of industrial and CRO experience spanning formulation, manufacturing, and analytical and materials science should enable Columbia to realize significant efficiencies in its management of the Crinone manufacturing process," Dr. Patel said.

Crinone is the progesterone gel supplied by Columbia and sold mostly by Merck KGaA's Merck Serono division, which holds marketing rights worldwide except the United States, where Actavis markets the product. In April, Columbia said it extended its license and supply agreement for five years, through 2020, in return for remaining the sole supplier of Crinone to Merck Serono and continuing to sell the gel to Merck Serono on a country-by-country basis.

Crinone accounts for most of Columbia's total net revenues. For the first half of 2013, total net revenues increased 18% to $14.3 million from $12.1 million in January-June 2012. However, a $4 million increase in net product revenues from Merck Serono and higher royalty revenues from Actavis were offset by the absence of net product revenues from Actavis.

Columbia said it will shift Crinone quality management and technical support to Molecular Profiles, capitalizing on close proximity to Columbia's manufacturing sites and supply chain management in Europe: "We anticipate significant improvements in efficiencies and greater responsiveness to Merck Serono, our largest customer for Crinone," Condella said.

The companies said no additional approvals are anticipated to be needed for the acquisition, which has received unanimously approval by the boards of both companies, as well as the approval of Molecular Profiles' shareholders.

Of the purchase price, Columbia will pay $16.7 million in cash and 1,051,323 shares of its common stock, representing 10 to 11 times Molecular Profiles' projected EBITDA for its fiscal year ending July 31, 2014. The newly-issued shares will be subject to a 12-month lock-up period.

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