Sinclair IS Pharma up for sale

Just days after appearing in Interactive Investor's feature AIM's fastest growing companies Sinclair IS Pharma has put itself up for sale. The skin-focused pharma firm has asked Rothschild to help it find a buyer for all or part of the business, and the implication must be that the shares are potentially worth far more than the current market price. They're already up 11% on the news to 36p.

In his AGM statement, chairman Grahame Cook delivers what appears to be a pitch to any potential bidder:

Sinclair has a market leading aesthetics dermatology portfolio. We also have a significant product pipeline which includes Flammacerium that has already been granted orphan drug status in the United States. The board of Sinclair believes the portfolio has significant and sustainable growth potential across the world.

Sinclair is doing well and is trading in line with forecasts. And as we highlighted just days ago, house broker finnCap expects the company to grow earnings per share (EPS) by 37% in the year to June 2015 and 53% the following year. "That's impressive, and a forward PE ratio of less than 17 is an unfair discount to the sector," we said. "Directors certainly think so. They've just spent over £200,000 on shares in the company."

And that's clearly attracted the attention of "a number of international companies, many of which are interested in some form of, co-operation, including: (co)-promotion; licensing of products; repatriation of distribution agreements; development collaborations; and merger and acquisition opportunities."

"As a result of the deliberation process arising out of these opportunities, the board recognises that there may be organisations better placed to build on the successes to date," says Sinclair.

Accordingly, the board has decided to appoint Rothschild to assist it in evaluating the optimum way to realise the considerable value in the company which may, or may not, include the sale of all or part of the company. The board believes that Sinclair has a secure future as an independent business and will only engage with those willing to recognise and support the company's significant growth potential.

The structure of any possible deal, or deals, is unclear, but finnCap still reckons the shares are worth 43p, which would value the business at £214 million. It could, of course, be more. But even at that price the company is valued at less than 17 times 2016 earnings estimates, an enterprise value-to-cash profits ratio of 9.6 and enterprise value-to-sales multiple of 2.3. That's a discount to peers.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.