ALLIANCE PHARMA PLC

("Alliance" or the "Group")

Acquisition to access US scar treatment market and expand Kelo-cote® footprint

Alliance Pharma plc (AIM: APH), the international healthcare group, is pleased to announce the completion of the acquisition of both "ScarAway®", the largest silicone-based scar treatment brand in the US, and the rights to sell Kelo-cote⁽¹⁾ in the retail consumer market in the US. Alliance has paid Perrigo Company PLC $19.4m (£14.8m) in cash from the Group's existing financial resources for both assets.

Highlights

·      ScarAway is the leading silicone-based scar treatment, and the second largest scar treatment brand, in the US with net 12-month sales of c.$10m and market share of 28%

·      The US is the second largest global market for scar treatments with an estimated current retail value of c.$90m per annum

·      The acquisition accelerates Alliance's strategy in the US, providing another strong consumer brand with an established distribution platform from which to drive further growth

·      The combination of the acquired Kelo-cote rights in the US, together with Alliance's existing rights, creates the Group's first fully global brand

·      Alliance can now pursue a dual-brand strategy in the US scar treatment market whilst further leveraging its existing US infrastructure following the recent acquisitions of Amberen® and Vamousse®

·      The acquisition is immediately earnings enhancing, with further strategic benefits anticipated in future years

Peter Butterfield, Chief Executive Officer of Alliance, commented:

"I'm delighted to have completed such a strategically important and earnings enhancing acquisition for Alliance which creates our first fully global brand in Kelo-cote and significantly enhances our presence in the largest consumer healthcare market in the world."

Strategic rationale

This acquisition is fully aligned with the Group's stated strategy to complement organic growth from its existing international healthcare business with carefully selected acquisitions in the consumer healthcare space in fast growth territories where it already has a presence. The acquisition is also in line with the Group's stated intention to leverage its US infrastructure and operations, which are based in Cary, North Carolina.

With an estimated retail category value of c.$90m, the US market⁽²⁾ is the second largest global market for scar treatments, after China, and yet awareness of treatment options is relatively low, such that only 13% of scar sufferers seek solutions. However, the potential treatment need is strong with 1 in 5 adults suffering a new scar incident annually.

ScarAway is a silicone scar treatment which is currently available in sheet, gel and spray formulations; the brand had net sales of c.$10m⁽³⁾ in the 12 months to 28 February 2022, making it the leader in the silicone category, with a strong consumer following. In the wider scar treatment category, which includes both silicone-based and cream-based solutions, ScarAway is the second largest player with 28% share, behind Mederma® (40% share).

Silicone sheeting or gel is universally considered as the first-line prophylactic and treatment option for hypertrophic scars and minor keloid scars, the efficacy of which has been demonstrated in many clinical studies. Kelo-cote is a global brand which is well respected and recommended by healthcare professionals worldwide and available in both a gel and spray formulation. Under its previous ownership, Kelo-cote had only a small US presence through e-Commerce, with limited promotion, and net sales of c.$1m in the 12 months to 28 February.

The two products, ScarAway and Kelo-cote, generated combined EBITDA of c.$2m in the 12 months to 28 February 2022.

Alliance has significant expertise in driving growth in the scar management category, with Kelo-cote delivering 47% CER growth for Alliance in 2021, predominantly in China (both domestic and CBEC). The Group anticipates increased and sustained investment in US marketing and new product development to accelerate market share growth of both brands. Consequently, the Group believes it can deliver double digit US sales growth, at an initial gross margin slightly below the Group average due to a higher proportion of ScarAway sheet sales.

Acquisition terms and financial impact

Alliance has paid a total of $19.4m (£14.8m) to Perrigo, funded from existing cash and debt, and equivalent to the value of the intellectual property acquired.

Group leverage will increase to c.2x at the date of acquisition, comfortably below the banking covenant of 3x. Leverage is expected to reduce to c.1.5x by the end of FY 2022, reflecting the Group's continued strong cash generation.

The Board expects the acquisition to be enhance earnings immediately, with further strategic benefits anticipated in future years. In the first full year of ownership the acquisition is expected to deliver a return on invested capital in excess of Alliance's weighted average cost of capital.

1) Kelo-coteis a leading silicone-based scar treatment brand

2) US market defined as OTC scar treatment category for brands which have a primary claim of scar prevention and/or treatment. This market is valued at $93.4m on a retail sales basis for both bricks and mortar and e-Commerce using IRI and Jungle Scout data.

3) Net sales of c.$10m relate to sales booked by Perrigo, whereas 28% market share relates to retail sales value.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (withdrawal) act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under article 17 of MAR.

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About Alliance

Alliance Pharma plc (AIM: APH) is an international healthcare group. Our purpose is to improve the lives of consumers and patients through making available a range of clinically valuable healthcare products.

Our core focus is on the marketing of Consumer Healthcare brands, complemented by a smaller Prescription Medicines business. In total, we hold marketing rights to around 80 brands, with revenues generated from a mix of direct, distributor and e-commerce sales.

Headquartered in the UK, the Group employs around 250 people based in locations across Europe, North America, and the Asia Pacific region. By outsourcing our manufacturing and logistics operations, we remain asset-light and focused on maximising the value of our brands.

For more information on Alliance, please visit our website: www.alliancepharmaceuticals.com