Shares in Life Healthcare surged on Monday morning after it announced it had entered into binding agreements with Lantheus Radiopharmaceuticals UK, an entity owned by Lantheus Holdings, for the sale of 100% of the group’s interests in Life Molecular Imaging (LMI).
At 9.30am on the JSE, the company’s shares were 8.24% higher at R16.94, after earlier touching R17.11.
The company said on Monday the purchase consideration comprised an upfront payment of an enterprise value of $350m (R6.47bn) and potential earnout payments of a further $400m (R7.4bn) linked to milestones of future sales of LMI products up to 2034.
Life Healthcare was expected to retain the commercial benefits awarded to LMI under the RM2 sub-licence agreement reached with Lantheus in June 2024, subject to agreeing terms on which the net economic benefit of the agreement would be delivered to Life Healthcare before completion of the proposed transaction, it said on Monday.
The net proceeds from the upfront payment, after settling LMI management’s incentive arrangements of about $18m (R345m) and Life Healthcare’s obligations under the Piramal profit-sharing arrangement of about $140m (R2.68bn), transaction-related costs and estimated taxes were expected to be about $200m (R3.83bn).
LMI is well positioned in Lantheus’ hands: Lantheus is a highly respected industry partner capable of realising the value of LMI’s commercial assets, research & development capabilities and pipeline.
— Alliance Medical Group
Life Healthcare planned to return the net proceeds from the upfront payment to shareholders within 12 months of the completion date, it said.
The group said the transaction provided an opportunity for shareholders to unlock the material value in LMI in the immediate term and achieve a highly attractive return on the LMI investment and derisk the execution of the LMI business plan by partnering with a credible partner.
It would also afford shareholders the opportunity to participate in the future growth of LMI through the earnouts and retain, through their shareholding in Life Healthcare, a right to elect to manufacture, commercialise and distribute LMI products in Africa, representing further potential upside.
As part of its investment in the Alliance Medical Group, Life Healthcare acquired LMI in 2018 to bolster its use of cyclotrons in Europe, with further upside for the manufacturing, distribution and sales of radiopharmaceuticals in other parts of the world.
In the first quarter of 2024 Life Healthcare completed the sale of AMG to iCON Infrastructure and returned R8.8bn to shareholders by way of a special dividend. The sale of AMG specifically excluded the group’s interests in LMI.
“Life Healthcare is not a natural long-term owner of LMI: Life Healthcare’s strategy has been to invest strategically in the upside optionality of LMI (with the group investing $66m (R1.26bn) in the development of LMI since 2018), with a view to realising value after LMI demonstrating traction on its product pipeline,” the group said.
“LMI is well positioned in Lantheus’ hands: Lantheus is a highly respected industry partner capable of realising the value of LMI’s commercial assets, research & development capabilities and pipeline. With more than 65 years of leadership in the field of nuclear medicine, Lantheus is uniquely positioned to invest in and grow LMI’s portfolio of imaging assets and ensure the business meets its growth potential,” it added.
Life Healthcare expects the transaction to be completed during the second half of 2025.
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