BioWorld International Correspondent

MediCult A/S is broadening its footprint in the assisted reproductive technologies (ART) market by paying approximately DKK126 million (US$23 million) in cash for Humagen Fertility Diagnostics Inc.

Jyllinge, Denmark-based MediCult, which is quoted on the Oslo Stock Exchange in Norway, also is raising NOK82.5 million (US$13.7 million) in a rights offering fully underwritten by Oslo-based Orkla Invest. It will use a debt facility, provided by Dankse Bank A/S, of Copenhagen, to fund the rest of the transaction, which is expected to close during the current quarter.

MediCult, which was established in 1987 by a trio of Norwegian investors, has focused up to now on producing media for use in in vitro fertilization (IVF). Charlottesville, Va.-based Humagen, which was founded in 1992, manufactures special micropipettes that also are used during IVF procedures.

Both companies target the same decision maker - the embryologist - within IVF teams. The acquisition will therefore offer immediate sales synergies, MediCult CEO Jesper Funding Andersen told BioWorld International, since the enlarged entity will be able to offer a stronger product package. And while Humagen had a direct sales force in the U.S., MediCult also will sell its product line directly through its sales operations in Scandinavia, the UK, France, Germany and Italy, Andersen said.

The two organizations also will be able to share regulatory know-how - even though the manufacturing processes they employ are very different. "The two plants will be maintained - no changes," Andersen said.

The combined company is expected to post pro-forma revenues of DKK165 million in 2007. Last year, Humagen booked $3.1 million in earnings before interest and taxes on sales of $9.4 million.

MediCult issued guidance indicating it would generate free cashflow of DKK5 million to DKK10 million from operations this year, Andersen said, although a planned real estate project will account for part of that figure.

The Humagen purchase is Medicult's first technology acquisition - the company previously acquired a number of distribution partners to bolster its sales capabilities. The company has several pipeline projects under way. "Our technology is also lending itself nicely to the creation of well-defined, protein-free media for stem cells," Andersen said.

The company claims around one-fifth of the world market for ART media. Three big players dominate the supply of fertility hormones. They include Organon BioSciences N.V., of Oss, the Netherlands, which Kenilworth, N.J.-based Schering-Plough Corp. is acquiring for approximately €11 billion (US$14.4 million) in cash; Merck Serono International S.A., of Geneva; and Ferring Pharmaceuticals S.A., of Saint Prex, Switzerland. However, the rest of the IVF market, including that involving the supply of disposables, is highly fragmented. "That's a small company game," Andersen said. "We're now the biggest."

The upcoming fund raising involves the issue of 5 million shares, priced at NOK16.5 each. Existing shareholders are entitled to subscribe for one new share for every share currently held. Orkla will subscribe for a minimum of 2.7 million shares, but also will acquire shares that are not taken up by existing shareholders. On completion of the transaction, the new shares will represent 18 percent of the company's enlarged equity base.

News of the deal pushed MediCult's stock up to NOK16.00 on the Oslo Stock Exchange last Thursday, up by NOK0.50 on the previous day's close.