The Investment column: Medeva's big gamble should pay off
Thursday 20 February 1997
But Medeva has not been sitting on its hands and the first fruits of its labours were apparent in yesterday's results for the year to December. Operating profits cut from pounds 78.1m to pounds 39.9m were hammered by a pounds 65.2m restructuring charge in the wake of last year's $370m (pounds 239m) deal to buy Fisons' old US businesses based at Rochester, New York, from Rhone Poulenc Rorer.
But Rochester, Medeva's biggest buy to date, should do wonders for the group's credibility. Analysts reckon the additional business has diluted methylphenidate profits to around half the group total and the potential is huge. At its most prosaic, the pounds 47m cash spent on integrating Rochester should have repaid itself by the year 2000, when it could be delivering underlying cost savings of around pounds 25m a year.
More exciting still should be the top line benefits. The merged and restructured salesforce, now raised from around 150 to 272, has already managed in six months to generate $77m of sales from Rochester's 10 products, some three-quarters of the total for the whole of last year. And Medeva says only around 15 per cent of the Rochester site was being used when it was acquired, so if it can find the drugs, the capacity is there to multiply by several times the throughput.
Already, over the past two years, Medeva has picked up some interesting prospects. Maiden contributions from RPR products like Ionamin, the anti- obesity treatment which clocked up sales of pounds 22.4m, and the first full year of earlier acquisitions, like Glaxo's Semprex D anti-histamine for allergies, mean new drugs are already reporting sales of more than half the pounds 108m from methylphenidate last year. Given that many of these are growing in double digits and the high margin Rochester products were in for only half a year, the omens are good that Medeva can survive the onslaught on methylphenidate.
Success in a legal dispute over the marketing of Ionamin could deliver a pounds 20m boost to the bottom line, while further out, Hepagene, the hepatitis B vaccine and treatment, could yet turn into a mini-blockbuster. Lehman's profit forecast of pounds 124m puts the shares, up 3.5p at 283.5p, on a forward p/e of 12. Good value against typical industry multiples in the 20s.
Diving in at the deep end is no excuse for shirking the style stakes
- 1 Game of Thrones author George RR Martin says 'f*** you' to fans who fear he will die before finishing Westeros saga
- 2 Loom bands: Bids for dress made from colourful rubber pass £170,000 on eBay
- 3 Why I'm on the brink of burning my Israeli passport
- 4 L'Oreal cuts ties with Belgium supporter Axelle Despiegelaere after hunting trip photographs
- 5 The true Gaza back-story that the Israelis aren’t telling this week
Game of Thrones author George RR Martin says 'f*** you' to fans who fear he will die before finishing Westeros saga
Loom bands: Bids for dress made from colourful rubber pass £170,000 on eBay
Supermoon 2014: When and why will the moon look bigger and brighter this summer?
Gaza-Israel conflict: The terrible price Palestinian children are paying for Israel’s war with Hamas
Iraq crisis: Government forces execute 255 Sunni prisoners in revenge for Isis atrocities, says report
Sustained immigration has not harmed Britons' employment, say government advisers
War is war: Why I stand with Israel
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Australia facing international condemnation after turning around Sri Lankans at sea
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
iJobs Money & Business
£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...
£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...
£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...
£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...