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BTG plc (BTG.L) Buys Ekos for Up to $420 Mllion


5/23/2013 8:02:27 AM

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BTG PLC ACQUISITION OF EKOS

23 May 2013 -- A fast-growing and profitable interventional vascular business BTG plc (BTG or the Company), the specialist healthcare company, is pleased to announce that it has entered into an agreement to buy EKOS Corporation (EKOS) a fast growing and profitable interventional vascular business on a debt free cash free basis for an initial cash consideration of approximately US$180 million(1) (£120 million(2)) and up to US$40 million (£27 million2) in future milestone payments (the EKOS Acquisition).

EKOS is headquartered near Seattle, WA. It owns, manufactures and distributes the EkoSonic® Endovascular System (EkoSonic®), a differentiated interventional product using a locoregional approach in the treatment of severe blood clots. EkoSonic® is cleared for use in the US and EU.

The rationale for the acquisition of EKOS and the EkoSonic® product is:

· Complementary transaction in line with BTG's strategy of growing its interventional medicine business;

· Significant addressable market opportunity in a growing treatment area;

· Differentiated technology protected by granted patents through 2022 with additional filings to 2030 and extensive manufacturing know-how;

· Potential revenue benefits from a shared customer base with BTG's Interventional Medicine and Specialty Pharmaceuticals field forces;

· Enhancement of the planned Varisolve® (PEM) vein clinic field force by accessing in-hospital interventional physicians and vascular surgeons who carry out varicose vein procedures through EKOS's existing sales force;

· Attractive financial impact with an estimated ROI in line with BTG's target for this type of acquisition of 15% to 20% in year five(3)

Louise Makin, CEO of BTG, said:

"There is increasing recognition of the benefits of interventional treatment of severe blood clots. EKOS is a fast-growing and profitable business, and the acquisition provides an exciting opportunity to build on our existing interventional medicine business and to enter an area with a significant addressable market opportunity. Furthermore, we see significant revenue benefits from the shared customer base both with our existing interventional medicine and specialty pharmaceuticals field forces and with our planned Varisolve® field force."

Market Opportunity for the interventional treatment of severe blood clots

There are approximately 500,000 cases of deep vein thrombosis (DVT), pulmonary embolism (PE) and peripheral arterial occlusion (PAO) in the US each year. The current standard treatment is systemic anticoagulation therapy, which prevents additional clots but does not reduce the existing clot burden.

Each year in the US, there are an estimated 60,000 deaths resulting from DVT and PE and a significant burden placed on the healthcare system through serious medical consequences related to these conditions, such as post thrombotic syndrome for DVT and chronic pulmonary hypertension in patients who have experienced 'sub-massive' PEs.

Of the 500,000 total cases, approximately 150,000 cases are considered to be severe. There is a growing trend to use interventional measures for more aggressive treatment of these severe cases, for which EKOS is well positioned. The total US market opportunity for locoregional treatment of blood clots is estimated to be approximately US$500m. BTG believes that EKOS has potential to have revenues of over US$100 million.

Information on EKOS

EKOS is a private US corporation owned by its employees and certain venture capital investors including, EGS Healthcare Capital Partners, MedVenture Associates, Morgan Stanley Expansion Capital and NGN Capital.

EkoSonic® combines a locoregional approach to thrombolysis (blood clot removal) with ultrasound acceleration. It is a differentiated product that offers potential safety, efficacy and economic advantages over alternative techniques. It uses ultrasound to thin and loosen fibrin strands, allowing for greater penetration of the thrombolytic drug into the clot. This has a number of advantages:

· Faster procedure, with significantly shorter overall treatment times;

· Uses up to 70% less thrombolytic drug;

· Completely dissolves obstructive clots;

· Treats clots in difficult to reach places;

· Does not break the thrombus, reducing the risk of distal embolism;

· No haemolysis (avoids compromising renal function).

EkoSonic® is cleared as a medical device in the US and the EU with the following indications:

· US (510k): The EkoSonic Endovascular System with Rapid Pulse Modulation is intended for the controlled and selective infusion of physician-specified fluids, including thrombolytics, into the peripheral vasculature. The EkoSonic Endovascular System with Rapid Pulse Modulation is intended for the infusion of physician-specified solutions into the pulmonary arteries.

· OUS (CE Mark): The EkoSonic Endovascular System with Rapid Pulse Modulation is intended for the controlled and selective infusion of physician-specified fluids, including thrombolytics, into the peripheral vasculature. Intended for the treatment of pulmonary embolism patients with = 50% clot burden in one or both main pulmonary arteries or lobar pulmonary arteries, and evidence of right heart dysfunction based on right heart pressures (mean pulmonary artery pressure = 25 mmHg) or echocardiographic evaluation.

EkoSonic® is protected by granted patents through to 2022, with additional patent applications to 2030. It is also protected by extensive manufacturing know-how.

At present, EkoSonic® is used in 490 hospitals in the US and in approximately 100 hospitals outside the US. The business model is focused on catheter sales and since launch in 2006, over 45,000 catheters have been sold.

EKOS employs 150 people and has a US field force of 45, including 17 clinical specialists. All employees are expected to transition to BTG on completion.

The EKOS field force calls on hospital-based interventional radiologists, interventional cardiologists and vascular surgeons. The shared customer base with BTG's Interventional Medicine field force offers wider coverage and cross-selling opportunities, and BTG's Specialty Pharmaceuticals field force provides additional promotional opportunities in the hospital critical care and emergency room settings.

In addition, BTG's planned Varisolve® (polidocanol endovenous microfoam (PEM)) vein clinic field force will be enhanced by the EKOS field force's access to in-hospital physicians who treat varicose veins. PEM was accepted for full review by the US Food & Drug Administration (FDA) on 12 April 2013. Based on standard review timelines, BTG anticipates potential US approval and launch of PEM during H1 2014.

EKOS is undertaking clinical trials and has the opportunity to undertake further clinical trials which have the potential to provide further indications and new products.

The table below sets out the EKOS summary financial information for the periods indicated and which has been prepared in accordance with EKOS's accounting policies and USGAAP.

The gross assets of EKOS are US$13 million (£9 million(2)).

Principal terms of the EKOS Acquisition

On 22 May 2013, BTG International Inc, a subsidiary of BTG, and EKOS entered into an agreement in respect of the EKOS Acquisition.

The initial consideration payable for the EKOS Acquisition will be approximately $180 million(1) (£120 million(2)) on a debt free cash free basis.

BTG will make further contingent payments dependent on the achievement of revenue targets. This will comprise up to US$20 million (£13 million(2)) payable in respect of 2013 and up to US$20 million (£13 million(2)) payable in respect of 2014 and 2015 in aggregate. Total contingent payments will not exceed US$40 million (£27 million(2)).

As at 31 March 2013, BTG had cash and cash equivalents of £158.7 million. In addition to the EKOS Acquisition, BTG announced separately today the acquisition of the Targeted Therapies division of Nordion Inc (the Targeted Therapies Acquisition) for a total cash consideration of approximately US$200 million (£133 million(2)). The EKOS Acquisition and the Targeted Therapies Acquisition will be funded in part from BTG existing cash resources, with the balance being funded by part of the net proceeds of a placing of up to approximately 32.8 million new ordinary shares, representing up to 9.99 per cent. of the BTG's existing issued ordinary share capital, announced separately today (the Placing).

Closing of the EKOS Acquisition is conditional on Hart-Scott-Rodino (HSR) approval in the US.

Deutsche Bank AG, London Branch (Deutsche Bank) is acting as financial adviser and corporate broker to BTG.

In addition, BTG was advised by Stephenson Harwood and Morgan Lewis. N.M. Rothschild provided general corporate advice to BTG.

A conference call for analysts will be held this morning at 8am BST. For details please contact Mo Noonan at FTI Consulting on +44 (0) 20 7831 3113.

Enquiries:

BTG Plc

+44 (0) 20 7575 0000

Louise Makin - Chief Executive Officer

Rolf Soderstrom - Chief Financial Officer

Andy Burrows - Director of Investor Relations

+44 (0) 20 7575 1741

Deutsche Bank

+44 (0) 20 7545 8000

Darren Campili

Ben Lawrence

FTI Consulting

+44 (0) 20 7831 3113

Ben Atwell

Simon Conway

(1) Subject to Net Working Capital adjustment at closing

(2) Converted at an exchange rate of 1.506 as at 22 May 2013

(3) This statement is not intended as a profit forecast or profit estimate and related to future actions and circumstances which, by their nature, involve risks, uncertainties and other factors. This statement should not be interpreted to mean that the future earnings per share of the enlarged group for current or future financial years will necessarily match or exceed historical or published earnings per share of BTG.

Disclaimer

This announcement and the information contained in it is not for publication, release or distribution, in whole or in part, directly or indirectly, in or into the United States, Australia, Canada, Japan or South Africa or any other state or jurisdiction in which publication, release or distribution would be unlawful. This announcement is for information purposes only and does not constitute an offer to sell or issue, or the solicitation of an offer to buy, acquire or subscribe for shares in the capital of BTG plc (the Company) in the United States, Australia, Canada, Japan or South Africa or any other state or jurisdiction in which such offer or solicitation is not authorised or to any person who whom it is unlawful to make such offer or solicitation. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdictions. The shares to be issued by the Company under the Placing (the Placing Shares) have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act) or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered, sold or transferred, directly or indirectly, within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. The Placing Shares are being offered and sold outside the United States in accordance with Regulation S under the Securities Act. No public offering of the shares referred to in this announcement is being made in the United States, United Kingdom or elsewhere.

This announcement has been issued by, and is the sole responsibility of, the Company. No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by Deutsche Bank AG, London Branch, J.P. Morgan Securites plc or by any of their affiliates or agents as to or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed.

Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin - Federal Financial Supervisory Authority) and authorised and subject to limited regulation by the Financial Conduct Authority in the United Kingdom. Details about the extent of Deutsche Bank AG's authorisation and regulation by the Financial Conduct Authority are available on request. J.P. Morgan Securities plc is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Deutsche Bank AG, London Branch and J.P. Morgan Securities plc are each acting solely for the Company and no one else in connection with the Placing and they will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients nor for providing advice in relation to the Placing and/or any other matter referred to in this announcement. Apart from the responsibilities and liabilities, if any, which may be imposed of Deutsche Bank AG, London Branch and J.P. Morgan Securities plc by the Financial Services and Markets Act 2000 or by the regulatory regime established under it, neither Deutsche Bank AG, London Branch nor J.P. Morgan Securities plc nor any of their respective affiliates accepts any responsibility whatsoever for the contents of the information contained in this announcement or for any other statement made or purported to be made by or on behalf of Deutsche Bank AG, London Branch or J.P. Morgan Securities plc or any of their respective affiliates in connection with the Company, the Placing Shares or the Placing. Deutsche Bank AG, London Branch and J.P. Morgan Securities plc and each of their respective affiliates accordingly disclaim all and any liability, whether arising in tort, contract or otherwise (save as referred to above) in respect of any statements or other information contained in this announcement and no representation or warranty, express or implied, is made by Deutsche Bank AG, London Branch or J.P. Morgan Securites plc or any of their respective affiliates as to the accuracy, completeness or sufficiency of the information contained in this announcement.

The distribution of this announcement and the offering of the Placing Shares in certain jurisdictions may be restricted by law. No action has been taken by the Company, Deutsche Bank AG, London Branch or J.P. Morgan Securities plc that would permit an offering of such shares or possession or distribution of this announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession this announcement comes are required by the Company, Deutsche Bank AG, London Branch and J.P. Morgan Securities plc to inform themselves about, and to observe, such restrictions.

This announcement contains (or may contain) certain forward-looking statements with respect to certain of the Company's current expectations and projections about future events. These statements, which sometimes use words such as "aim", "anticipate", "believe", "intend", "plan", "estimate", "expect" and words of similar meaning, reflect the directors' beliefs and expectations and involve a number of risks, uncertainties and assumptions that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement. Statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this announcement is subject to change without notice and, except as required by applicable law, the Company does not assume any responsibility or obligation to update publicly or review any of the forward-looking statements contained in it. You should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement. No statement in this announcement is or is intended to be a profit forecast or profit estimate or to imply that the earnings of the Company for the current or future financial years will necessarily match or exceed the historical or published earnings of the Company.

The Placing Shares to be issued pursuant to the Placing will not be admitted to trading on any stock exchange other than the London Stock Exchange.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement.



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