Ven­ture Life seeks a step change in growth with ma­jor fundraise and strate­gic ac­qui­si­tion

The health­care com­pany is also aim­ing for at least 10% an­nual or­ganic sales growth

Shares - - CONTENTS - DIS­CLAIMER: The author at­tended a trip to Ven­ture Life’s man­u­fac­tur­ing fa­cil­ity in Italy which was paid for by the com­pany

If you have ever shopped in Boots or Su­per­drug, you may be fa­mil­iar with some of in­ter­na­tional health­care group Ven­ture Life’s (VLG:AIM) prod­ucts.

One of its big­gest brands is

Ul­traDEX, an oral health­care prod­uct range that was in­tro­duced through the ac­qui­si­tion of Periprod­ucts in 2016.

Ven­ture Life de­vel­ops, man­u­fac­tures and com­mer­cialises self-care prod­ucts for com­pa­nies, in­clud­ing health­care prod­ucts ac­quirer Al­liance Pharma (APH:AIM).

The busi­ness was founded in 2010 by Jerry Ran­dall and Sharon Collins, who pre­vi­ously worked to­gether at Sin­clair

Pharma (SPH:AIM). Af­ter merg­ing with Ital­ian con­tract man­u­fac­turer Biokosmes, the com­pany floated on the stock mar­ket in 2014 at 109p.

The shares cur­rently trade 59% lower at 45p de­spite ro­bust rev­enue growth over the last few years and a profit break­through in 2017.

The stock mar­ket per­for­mance has been dis­ap­point­ing yet the stock is ar­guably at a turn­ing point, both fi­nan­cially and strate­gi­cally.

A ma­jor fundraise has now been pro­posed which should strengthen the bal­ance sheet and help pay for the ac­qui­si­tion of Dentyl which comes with mouth­wash and breath fresh­ener prod­ucts.

TAP­PING INTO SELF-CARE TRENDS

One of the big­gest cat­a­lysts for Ven­ture Life is an age­ing pop­u­la­tion, which is ex­pected to in­crease de­mand for self-care prod­ucts as peo­ple look to take bet­ter care of them­selves in old age.

North­land Cap­i­tal an­a­lyst Vadim Alexan­dre ar­gues the bur­den of care is shift­ing to in­di­vid­u­als due to pres­sure on global health­care sys­tems amid the global obe­sity epi­demic.

In Europe, the self-care mar­ket is worth £20bn ac­cord­ing to data from the As­so­ci­a­tion of the Euro­pean Self-Med­i­ca­tion In­dus­try.

Ven­ture Life wants to grow its pres­ence in Europe, China and the US. In a bid to tap into high de­mand, it man­u­fac­tures food sup­ple­ments, in­clud­ing

Neu­roAge to im­prove brain func­tion and the Benecol brand to lower choles­terol.

The com­pany also de­vel­ops med­i­cal de­vices fo­cus­ing on women’s in­ti­mate health through the Vonalei brand and cos­met­ics such as Chi­nese skin care range Lu­batti.

STRONG RE­PEAT REV­ENUES

Ven­ture Life ben­e­fits from loyal cus­tomers as ap­prox­i­mately 90% of its sales are from re­peat or­ders.

Its big­gest client, Al­liance Pharma, ac­counts for 24% of sales and re­cently re­newed a con­tract for the man­u­fac­ture of oral care and der­ma­to­log­i­cal prod­ucts un­til 2025.

The con­tract cov­ers the man­u­fac­tur­ing of Al­liance’s eczema treat­ment Atopi­clair and

mouth ul­cer med­i­ca­tion Alo­clair, and of­fers sales vis­i­bil­ity from a key cus­tomer.

Other cus­tomers in­clude Ja­panese con­glom­er­ate Sun­star, Span­ish pharma com­pany Almi­rall and Swiss pharma group Helsinn, rep­re­sent­ing un­der 10% of sales each.

Ul­traDEX prod­ucts, in­clud­ing mouth­wash and tooth­paste, are priced a pre­mium com­pared to well-known com­peti­tor brands such as Lis­ter­ine and Col­gate.

Ven­ture Life man­u­fac­tur­ing di­rec­tor Gi­an­luca Braguti says

Ul­traDEX prod­ucts should not be com­pared to these other pop­u­lar brands as they are med­i­cated.

AM­BI­TIOUS GROWTH AS­PI­RA­TIONS

Chief ex­ec­u­tive of­fi­cer Jerry Ran­dall says the com­pany is aim­ing for be­tween 10% and 20% an­nual or­ganic sales growth, which could be sup­ple­mented through ac­qui­si­tions.

In­deed, Ven­ture Life has pro­posed the ac­qui­si­tions of mouth­wash prod­uct

Dentyl and breath-fresh­en­ing cap­sules BB Mints for £4.2m, which are ex­pected to be earn­ings en­hanc­ing in the first fi­nan­cial year.

An over­sub­scribed fundrais­ing of £18.7m – if ap­proved by share­hold­ers – will be used to fund the ac­qui­si­tions, ex­plore more M&A and re­pay con­vert­ible bonds and loan notes. The lat­ter will re­sult in its in­ter­est ex­pense fall­ing by £0.3m a year.

Fu­ture ac­qui­si­tion tar­gets must have a well-known brand in a niche mar­ket and be in­no­va­tive and prof­itable, with prod­ucts prefer­ably spe­cial­is­ing in oral health­care.

To achieve higher or­ganic growth, ex­panded global dis­tri­bu­tion is be­ing tar­geted via ex­ist­ing and new busi­nesses, as well as more dis­tri­bu­tion deals for Ul­traDEX.

PART­NER­SHIP TAR­GET

Ul­traDEX is cur­rently part­nered in 14 mar­kets. Ven­ture Life is on track for 30 part­ner­ships by 2020 and new undis­closed prod­ucts are in the pipe­line.

Pan­mure Gordon an­a­lyst Mike Mitchell says the pipe­line of­fers a run­way of new prod­uct launches in 2018 and 2019 with­out risks as­so­ci­ated with clin­i­cal devel­op­ment cam­paigns for pharma prod­ucts.

PO­TEN­TIAL EX­PAN­SION IN THE WORKS

At the heart of Ven­ture Life’s op­er­a­tions is its man­u­fac­tur­ing fa­cil­ity in Italy where 650 prod­ucts and 21m units were made last year.

The fa­cil­ity could be ex­panded to meet de­mand although it cur­rently has 50% spare ca­pac­ity.

Braguti be­lieves cus­tomers are drawn to the com­pany for man­u­fac­tur­ing thanks to its flex­i­ble mix­ing ca­pac­ity. Ven­ture Life can de­velop prod­ucts with ca­pac­ity of at least 8 litres to up to 8,000 litres.

As a pre­cau­tion­ary mea­sure should there be any po­ten­tial de­lays or pro­duc­tion is­sues, a re­cov­ery plan is in place with a backup of ap­prox­i­mately 1,200 for­mu­la­tions.

All goods are cir­cu­lated via part­ner­ships or dis­trib­u­tors with re­tail­ers such as Ama­zon,

Tesco (TSCO) and Ocado (OCDO) re­ceiv­ing dis­counts for sell­ing Ven­ture Life’s prod­ucts.

If tougher im­port tar­iffs on goods from the EU into the UK are en­forced post-Brexit, the Ul­traDEX range would be af­fected, rep­re­sent­ing 20% of sales.

In this sce­nario, the com­pany would move man­u­fac­tur­ing of Ul­traDEX to a sec­ond man­u­fac­turer in the UK. (LMJ)

In­side Ven­ture Life’s man­u­fac­tur­ing fa­cil­ity

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