Guerbet bids to buy Mallinckrodt's contrast business

French contrast agent developer Guerbet plans to acquire the contrast media and injector business of U.S. firm Mallinckrodt. The $270 million deal will double Guerbet's annual revenues, expand its product line, and instantly make the company a player in the U.S. contrast market.

Guerbet made the announcement on July 27, stating that it had signed a definitive agreement with Mallinckrodt to buy 100% of its contrast business, including production sites, intellectual property rights, and distribution subsidiaries in various geographical areas. Guerbet said it planned to pay for the acquisition mostly through cash but also with $50 million in financing.

Mallinckrodt is one of the oldest brands in radiology, with its roots in a company founded in the 1860s by the Mallinckrodt brothers, Gustav, Otto, and Edward. The company in 1913 introduced barium sulfate as a contrast medium for x-ray imaging, and over the years the firm expanded into new markets with products such as its Optiray CT contrast agent and Optimark MRI contrast medium, as well as generators for technetium-99m, which is used in 80% of all nuclear medicine diagnostic procedures.

Mallinckrodt went through a series of corporate ownership changes beginning in 1982, with the company variously passing through the hands of Avon Products, International Minerals and Chemicals Corporation (IMCERA), and Tyco International. Tyco in 2007 spun its healthcare businesses off into an independent company called Covidien, which in 2013 spun Mallinckrodt off into an independent publicly traded company.

Mallinckrodt has experienced tough sledding in medical imaging since the Covidien spin-off, with revenues declining in the radiology segment. In May, the company reported second-quarter revenues of $202.6 million, down 9% compared with $222.4 million in the same period of fiscal 2014. In February, the contrast business reported another 9% year-over-year revenue decline.

The deal offers a number of benefits for Guerbet, which has a similarly long pedigree in medical imaging, going back 90 years. Although Guerbet has a strong position in various European regions, the company has just a small foothold with niche products in Mallinckrodt's core U.S. market.

Guerbet recently began selling its Dotarem MRI contrast agent in the U.S. after getting U.S. Food and Drug Administration approval in 2013, and also sells Lipiodol, a radiopaque medium for lymphography and hysterosalpingography. It also sells the FlowSens contrast injection system.

Guerbet said that it will double its annual revenues by adding Mallinckrodt's sales in contrast media to its own. For the first six months of 2015, Mallinckrodt reported $210 million in sales in the contrast business; the combined entities would have had pro forma revenues of $800 million in 2014 and a workforce of 2,500 employees.

Guerbet is also pointing out other synergies from the deal, with Mallinckrodt's experience in syringe-based delivery systems matching the expertise Guerbet has developed for hydraulic injection techniques for soft bags of contrast. Guerbet will be able to use Mallinckrodt's distribution network in the U.S. to achieve success for its Dotarem MRI agent more quickly, and the company will also reinforce its presence in rapidly developing markets such as China, Russia, and Turkey.

The acquisition is subject to customary closing conditions and is expected to close in the next few months, Guerbet said.

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