Wound Care and medical solutions firm ConvaTec (CTEC) has agreed to acquire Triad Life Sciences Inc for an initial $125 million, strengthening the company’s US Advanced Wound Care business.
Investors gave the acquisition a warm reception, marking the shares up 1.3% to 170.2p.
ConvaTec said the deal gives it entry into the large and fast-growing biologics segment of the wound care market which is worth around $1.8 billion a year.
Biologic wound healing treatments can restore natural repair mechanisms using active agents. For example, researchers are looking at integrating anti-microbial compounds into the wound dressing itself.
Chief executive Karim Bitar commented: ‘Triad Life Sciences has innovative and differentiated products and an exciting pipeline which is consistent with our vision - Pioneering trusted medical solutions to improve the lives we touch.’
Triad’s innovative products are based on pig placental tissue, which it said offers ‘attractive characteristics’ for treating hard-to-heal wounds.
BIG PRICE TAG
In addition to the initial payment of $125 million there are two potential short-term milestone payments of $25 million and two longer-term earnout payments conditional on business performance in the first two years. The maximum earnout based on stretching financial performance is $275 million.
The business is expected to be ‘sales accretive’ immediately and to exceed the group’s cost of capital in the third year.
Triad is estimated to generate sales of $23 million in 2021 and last year the business made a pre-tax loss of $2.8 million. The purchase price represents 7.6 times revenues assuming the short-term milestone payments are made and almost 20 times if the longer-term earnouts are achieved.
There appears to be a lot of expected growth baked into the purchase price.
