Controlled drugs maker plans pounds 17.5m flotation

BY TOM STEVENSON

Deputy City Editor

Britain's leading manufacturer of opiates and other controlled drugs is coming to the market next month, five years after its management bought the business from Glaxo.

Meconic, the only company licensed in the UK to make a range of pain and cough relief drugs, plans to raise about pounds 17.5m from the float and will be capitalised at about pounds 40m.

The narcotics included in its highly-regulated portfolio include codeine, morphine, pethidine, methadone and cocaine.

As well as a dominant position in the UK, Meconic sells its drugs to pharmaceutical and industrial customers in 69 countries.

Tracing its history to an 18th century surgeon apothecary, the company, previously known as Macfarlan Smith, was bought by Glaxo in 1963 and sold by the drugs giant to its management in 1990.

Equity funding for the buyout was provided by a consortium led by 3i, with the debt coming from Bank of Scotland.

Macfarlan Smith was investigated by the Monopolies and Mergers Commission between 1987 and 1989 because of its dominance of the UK market. At the time the MMC concluded that it was of prime importance to increase competition in the market by encouraging imports.

The company says it believes there is unlikely to be a significant opening of the UK market before 1997 and it is pressing for a clarification of the European regulatory system so that any easing of import regulations into the UK would be matched by reciprocal measures elsewhere in the European Union.

Meconic has forecast profits for the year to April of pounds 4.18m, compared with the pounds 2.83m it made in the 12 months to April 1994. It said orders had been strong since the year-end although growth was expected to be slower this year than last.

Dr Marshall Smalley, managing director, said: "Meconic is the world leader in the supply of opiates with a track record of profitable growth and strong cash generation. The flotation will provide us with a more flexible capital base."

The funds raised from the flotation are expected to be used to add to Meconic's portfolio of drugs both by spending on research and by buying in existing products. It also plans to invest in its contract manufacturing operation, expected to grow fast as pharmaceutical and biotechnology companies place greater importance on securing access to external facilities for small-run specialised products.

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