Impax executes definitive agreement to acquire Tower Holdings, Lineage Therapeutics

Impax Laboratories, Inc. (NASDAQ: IPXL) today announced the execution of a definitive agreement under which Impax will acquire Tower Holdings, Inc., including operating subsidiaries CorePharma LLC and Amedra Pharmaceuticals LLC, and Lineage Therapeutics Inc. (together, the "Companies") for $700 million in cash, subject to certain customary purchase price adjustments. The privately-held Companies being acquired specialize in the development, manufacture and commercialization of complex generic and branded pharmaceutical products. The transaction will provide Impax with a highly-profitable and growing commercialized portfolio of products that are expected to generate full year 2014 revenues of approximately $215 million to $225 million and earnings before interest, taxes, depreciation and amortization (EBITDA) of approximately $80 million to $85 million on a standalone basis. Assuming a close within the next six months, the transaction is expected to be approximately $0.90 accretive to Impax's 2015 earnings per diluted share. 

"This transaction is an important step forward in executing our plan to drive growth and create value through strategic acquisitions that enhance our existing strategies," said Fred Wilkinson, President and Chief Executive Officer of Impax. "The Companies will add a growing, highly profitable, commercial portfolio of generics as well as a lead product in a new brand franchise, which will enhance our brand division and enable us to utilize our brand commercial infrastructure more efficiently. The acquisition also adds a branded and generic pipeline that includes a number of near-term opportunities. In addition, Impax will gain an established campus in New Jersey focused on R&D, manufacturing, packaging and supply chain management. Further, this accretive transaction will move Impax to a more efficient capital structure, while also preserving our ability to pursue additional external strategic growth opportunities."

Christopher Worrell, Chief Executive Officer of Tower Holdings, Amedra and Lineage, said: "We are pleased with the progress we have made across our Companies with an emphasis on the successful implementation of a Quality Improvement Program, which resulted in recent product approvals from the U.S. Food and Drug Administration. Both Impax and the Companies have a proven record of developing high value specialty products, and we look forward to being a critical contributor to the future growth strategy and value creation for Impax."

"We look forward to working closely with the talented individuals from the Companies and leveraging the opportunities created by our combined organization," Wilkinson continued. "We believe that this strategic acquisition will further strengthen our dual business model in an effort to create value for our shareholders."

Transaction Benefits to Impax
This acquisition will provide Impax with important strategic and financial benefits, including:

• A Portfolio of Growing, High-Margin Commercial Products: This highly-profitable portfolio consists of four branded products, including the branded Albenza^® franchise, seven complimentary commercialized generic products, and an epinephrine auto-injector product. This portfolio, in combination with several products that the Companies plan to launch during the fourth quarter of 2014, are expected to generate 2014 revenues of approximately $215 million to $225 million and EBITDA of approximately $80 million to $85 million, with gross margins comparable to Impax's 2014 estimated gross margins.
• A Leading Franchise in a New Specialty Brand Therapeutic Area: Albenza is the leading treatment for invasive tapeworm infections. This niche product has attractive margins and a record of strong sales growth with well-developed lifecycle management strategies to support continued returns. The addition of this new therapeutic area will allow Impax to more efficiently utilize its brand commercial infrastructure and provide upside growth potential.
• A Generic Pipeline with Near-Term Opportunities: Impax will acquire 5 approved generic products not yet marketed, 11 applications pending approval, and more than 35 additional products in various stages of development. Impax will evaluate all these opportunities as part of its combined portfolio prioritization process. According to IMS Health (NSP), this pipeline of 50 plus products represents approximately $10.7 billion in U.S. brand and generic sales for the last 12 months ended August 2014.
• Diversifies and Expands Manufacturing, Packaging and Supply Chain Capabilities: The transaction will provide Impax with a DEA and FDA licensed manufacturing, packaging and warehousing campus in Middlesex, New Jersey, and will strengthen Impax's global Quality Improvement Program with the addition of the experienced team from the Companies.
• Financially Attractive with Operational Synergies: The transaction is expected to be immediately accretive to Impax's earnings per share after closing. Impax expects to achieve operational synergies of more than $10 million within the first year after the transaction closes. Savings are expected to come largely from research and development efficiencies, prioritization of the combined portfolio, and reduced selling, general and administrative expenses.
• Maintains Capital Efficiency, and Maintains Financial Strength and Flexibility: Impax intends to fund the acquisition through a combination of approximately $270 million of cash on hand and a new $430 million term loan pursuant to a commitment from Barclays. This financing combination will enable Impax to move towards a more efficient capital structure while also allowing the flexibility to continue to pursue strategic business development and merger and acquisition opportunities.

Approvals
The transaction is expected to close within the next six months, subject to the satisfaction of customary closing conditions and regulatory approvals, including antitrust approvals in the U.S.

Advisors
Impax's financial advisor for this transaction is Barclays, and legal advisors are Sullivan & Cromwell LLP, Latham & Watkins LLP and McDermott, Will & Emery LLP. Credit Suisse Securities LLC served as financial advisor to Tower Holdings, Inc. and RoundTable Healthcare Partners LLC, and Sidley Austin LLP served as legal advisor.