RxElite Inc. (Bulletin Board: RXEI) has acquired Haifa-based FineTech Laboratories Ltd. for $6.2 million in cash and 18.6 million RxElite shares, currently worth about $10 million.
RxElite, a developer and manufacturer of specialty generic prescription drug products, said that FineTech's ability to develop and manufacture complex active pharmaceutical ingredients (APIs) with RxElite's generic manufacturing and distribution capability was a major step for the company. It added that FineTech had $6 million revenue in 2007.
FineTech president Dr. Arie Gutman founded the company in 1990 in collaboration with the Technion Israel Institute of Technology, where he teaches. Some of the company's APIs bypass patents. The APIs are usually intended for generic drugs that are either on the market or undergoing clinical trials. The company has five APIs on the market and six under development.
After leaving Technion Entrepreneurial Incubator Co. Ltd. (TEIC), FineTech raised several million dollars from Clal Industries and Investments Ltd. (TASE: CII), Lumenis Ltd. (Pink Sheets:LUME), and several venture capital funds. By 2001, the company had $25 million in annual turnover and a staff of 70. In 2001, International Specialty Products Inc. acquired the company for $30 million, and it was subsequently acquired by Pharmaceutical Resources Inc. for $109 million in 2002.
FineTech's acquisition by RxElite is the fourth acquisition of the company in its history, and the current price tag is less than a fifth of the value in that deal. However, Pharmaceutical Resources never completed the deal or made the payments on time, resulting in the cancellation of the sale. FineTech received just $3 million in compensation.
In late 2002, generic drug maker Par Pharmaceutical Companies Inc. (NYSE:PRX) paid FineTech $32 million for the company's activity in Haifa, offices in Ohio, and some facilities owned by Pharmaceutical Resources in Eastern Europe, with the result that Pharmaceutical Resources made no money on the deal.
FineTech failed to thrive under its new ownership, and, in 2005, Par Pharmaceuticals handed the company back to Gutman, who never left the company and always served as the manager of the Haifa facility, which was costing Par $4 million in losses a year. By this time, FineTech had 42 employees at Haifa, a figure that has since fallen to 29. For FineTech, the best consequence of its time as a subsidiary of Par was that the US Food and Drug Administration (FDA) certified the Haifa facility as compliant with current good manufacturing practices (cGMP) standards.
Gutman succeeded in streamlining FineTech, turning it around, and making it profitable. Sales are still low, however.
RxElite said that FineTech would operate as an independent facility in Haifa, probably under Gutman's management. FineTech will also be allowed to sell APIs that are not produced for RxElite's specializations to other companies.
Published by Globes [online], Israel business news - www.globes-online.com - on January 14, 2008
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