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 Life Science partners.
Here 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. Devices are defined and licensed as part of the drug master file, and hence sourcing is protected. Life Science 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 the core business demand is stable and predictable, providing 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 operators globally who have the process know-how and expertise to consistently deliver 6-sigma quality on such a high volume of components and devices.
Bespak leverages this significant process and production know-how, operating a dual strategy of the 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 yields attractive margins, whilst affording protection from potential new market entrants.
3 Product Development Portfolio
A key feature of Consort Medical's strategy is the diversification of the device 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).
Bespak has assembled a broad and diverse development portfolio, both contract manufacture and own IP based; both organically and via the acquisition of the Medical House. This includes exclusive supply contracts for Nicoventures' nicotine inhaler, and DEV610 for a new dry powder inhaler (DPI).
Further organic revenue and earnings growth potential exists from injectables, nasal, nicotine inhalation, and POC diagnostic cartridges, as well as further core respiratory metered dose inhaler (MDI) and DPI opportunities.
4 Innovation Portfolio
Bespak's Innovation team in Cambridge is developing a range of novel product offerings, expected to evolve into specific commercial opportunities. Since established around three years ago, two of its new innovations have progressed to the product development pipeline with specific drug/device development contracts for Life Science partners.
In November 2013 the team unveiled the Syrina®/Vapoursoft® range of auto-injectors, powered by the groundbreaking Vapoursoft® propulsion technology, and the Lila® range of injectors. Both product groups are IP-protected, and have received significant market acclaim. They are proceeding through commercialisation, and present significant organic growth potential.
The Innovation pipeline contains several other candidates with the potential to create further future shareholder value.
5 Inorganic Development
Following completion of the sale of the King Systems business in February 2013, the Group is a more focused Life Science 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 cash on its balance sheet and undrawn banking facilities, it has significant financial resources available to realise this.
6 Management Team
Consort Medical's management team has executed successfully the chosen strategy of sustained/diversified organic growth, selective investments/acquisitions, and cost efficiency. Bespak and King Systems (now sold) have been transformed under this strategy, and Bespak continues to sustain its core competencies and leverage them in strategic growth initiatives.
The management team has significant M&A experience, realising 19.0 × EBITDA for the King Systems disposal, making key equity investments into Atlas Genetics, and acquiring injectables technology through the acquisition of the Medical House, and translating this into the first commercial revenues from INJ300 – the auto-injector for Dr. Reddy's sumatriptan.