Demand is stable and predictable, hence there is relatively high visibility of future revenues.
Its core business Bespak is a global market leader in the manufacture of inhaled drug delivery devices for pharma partners.
Below are some of the key motivations for investment in Consort Medical plc.
1 Long Term Contracts
Bespak serves Life Science customers with drug delivery devices for drug therapies which have a long life cycle. The device is defined and licensed as part of the drug master file, and hence the sourcing is protected. The Life Sciences customers invest significant resources in launching, marketing and building the treatment franchises which often have high rates of repeat prescription. The core of the Bespak business is in respiratory therapies, with drugs that alleviate symptoms, and patients adopt preferred drugs on an ongoing basis.
Accordingly demand is stable and predictable, hence there is relatively high visibility of future revenues.
2 Premium Quality and Regulatory Expertise
Over 500 million devices are produced annually by Bespak, in a highly regulated environment. The quality standards required are world class, and Bespak is one of only a handful of players globally who have the process know-how and expertise to consistently deliver 6-sigma quality on such a high volume of components and devices.
As well as significant process and production know-how, Bespak operates a dual strategy of highly regulated contract manufacturing of customer products, and the supply of its own proprietary products which are protected by extensive Intellectual Property (IP).
This value delivery to the customer enables Bespak to command attractive margins.
3 Product Development Portfolio
In 2008 Consort Medical developed a new strategy, a key part of which was diversification of the device type offerings — from respiratory into injectables, nasal, ocular and point-of-care (POC) diagnostics (horizontal) — and of the extent of the service offering — into drug handling and packaging (vertical).
Since then Bespak has assembled an impressive development portfolio of new opportunities, both contract manufacture and own IP based; both organically and via the acquisition of the Medical House. This includes the Nicoventures nicotine inhaler for which the multi-year exclusive supply contract was awarded to Bespak in December 2012.
Of these, the proprietary Integrated Dose Counter (IDC) for Teva's Qnasl, and contract manufactured Chiesi NEXThaler have already been launched.
Significant further growth potential exists from Injectables, Nasal, Nicotine Inhalation, and POC diagnostic cartridges, as well as further core respiratory metered dose inhaler (MDI) and dry powder inhaler (DPI) opportunities. Above and beyond these specific opportunities, the Innovations team in Cambridge are developing a range of novel product offerings, which are expected to evolve into specific commercial opportunities.
4 Inorganic Development
Following completion of the sale of the King Systems business in February 2013, the Group is a more focused Life Sciences provider with a clear strategy for growth. Whilst this will be mostly organic in focus, the Group can also develop in its chosen strategy through selective, relevant and value enhancing acquisitions.
With the proceeds of the King Systems disposal and retention of its banking facilities, it has significant financial resources to do so.
5 Management Team
Consort Medical has a management team which has executed successfully the chosen strategy of sustained/diversified organic growth, selective investments/acquisitions, and cost efficiency. Both Bespak and King Systems have been transformed under this strategy.
The current Consort Medical management has significant M&A experience and competence realising 17.3 x EBITDA for the King Systems disposal, identifying and making key equity investments into Atlas Genetics, and in acquiring injectables technology through the acquisition of the Medical House, from which the first commercial revenues are expected in FY2014.
Following the disposal of King Systems in February 2013, the main business of Consort Medical is Bespak. Bespak has a capable management team across all functions, which is both sustaining its core competencies, and leveraging them in strategic growth initiatives.