Mallinckrodt enters into definitive agreement to acquire Ikaria

Mar 5 2015

Mallinckrodt plc (NYSE: MNK), a leading global specialty biopharmaceutical company, and Ikaria, Inc. a privately-held critical care company, announced today that they have entered into a definitive agreement under which a subsidiary of Mallinckrodt will acquire Ikaria, Inc. from a Madison Dearborn-led investor group in a transaction valued at approximately $2.3 billion.

Subject to customary closing conditions, the parties expect the transaction to be completed early in the second calendar quarter of 2015, Mallinckrodt's third fiscal quarter. Assuming this timing, the transaction is expected to add at least $150 million in net sales and be accretive to Mallinckrodt's fiscal year 2015 adjusted diluted earnings per share by at least $0.25 per share.

Ikaria, Inc. is a global critical care company focused on development and commercialization of innovative therapies and delivery systems to address the needs of critically ill infants in hospital neonatal intensive care unit (NICU) settings. Approved by the U.S. Food and Drug Administration (FDA), Ikaria's lead product, INOmax^® (Inhaled Nitric Oxide), is a vasodilator which, in conjunction with ventilatory support and other appropriate agents, is indicated for the treatment of term and near-term (>34 weeks) neonates with hypoxic respiratory failure associated with clinical or echocardiographic evidence of pulmonary hypertension, where it improves oxygenation and reduces the need for extracorporeal membrane oxygenation.

INOmax is distributed in combination with Ikaria's INOmax DS_IR^® delivery systems and INOmax Total Care™. Independently cleared by the FDA, each INOmax delivery system model has been validated to work in tandem with 79 ventilatory devices commonly used in the ICU; and INOMAX Total Care™ provides clinicians with the "24/7/365" operational support, rapid response logistic capabilities, regular preventative service and maintenance, and access to medical affairs, clinical specialists and technical experts required to meet the needs of critically ill patients. Focused on critical care in areas of high unmet medical need, Ikaria is exploring additional potential applications for INOmax and INOmax delivery systems, and is also advancing other pipeline assets in rare disease.

Strategically Compelling Transaction

• With this transaction, Mallinckrodt is expected to significantly strengthen its footprint in hospitals, extending its presence from its current base of diagnostic radiology and multimodal pain management in surgical specialties to include critical care respiratory therapies in neonatal intensive care units.
• Individually approved and marketed together as a 'drug-device' combination, INOmax and INOmax delivery systems will benefit from Mallinckrodt's larger hospital presence, regulatory expertise, long experience in complex drug and device manufacturing, and support of similar medication-technology pairings.
• The Ikaria transaction also builds potential diversity in Mallinckrodt's nephrology rare disease pipeline with terlipressin (for injection), a portfolio asset being investigated for the treatment of Hepato-Renal Syndrome Type 1 (HRS 1) – a rare life-threatening condition with no currently approved therapy in the U.S. Terlipressin is approved for use and recognized as the standard-of-care treatment for HRS 1 in countries outside the U.S., including several in Europe.
• Ikaria customer experience teams -- which include sales, marketing and other customer service functions -- are expected to augment Mallinckrodt's hospital platform working alongside existing teams.
• Assuming a close early in Mallinckrodt's fiscal third quarter, the transaction is expected to add at least $150 million in net sales and be accretive to Mallinckrodt's fiscal year 2015 adjusted diluted earnings by at least $0.25 per share. Mallinckrodt plans to provide updated financial guidance on its second fiscal quarter earnings call.
• With strong free cash flow generated by its growing portfolio, Mallinckrodt estimates its net debt-to-EBITDA[1] leverage ratio to be approximately 3.6 at the close of these transactions.

"This transaction demonstrates our ongoing commitment to transform Mallinckrodt into a leading, high-performing specialty biopharmaceutical company with a diverse and durable portfolio," said Mark Trudeau, President and Chief Executive Officer of Mallinckrodt. "We continue to move decisively in line with our strategic roadmap – building on key growth platforms and using our unique ability to manage complexity to unlock untapped additional value from diverse products and environments. With this expansion into respiratory neonatal critical care we expect to further broaden our touch points in the hospital market, and at the same time diversify our portfolio with durable assets that play vital roles in the treatment of vulnerable patient populations."

"At Ikaria our mission has been to address the high unmet needs of critical care medicine," said Daniel Tasse, Chairman and Chief Executive Officer of Ikaria. "We have always aimed to develop and deliver innovative therapeutics and interventions that meet the unique and significant needs of critically ill patients, and just as importantly, to be a valuable partner to clinicians and hospitals. We thank Madison Dearborn and our other investors for their partnership and believe Mallinckrodt is the natural owner of Ikaria and can expand further our mission of advancing critical care."

Financing and Close
Mallinckrodt International Finance S.A. ("MIFSA") has entered into debt financing commitments for amounts that, together with cash on hand, are expected to be sufficient to provide funds necessary to consummate this transaction. Mallinckrodt expects that financing for this transaction will consist of cash on hand, borrowing under MIFSA's existing revolver and debt.

Advisors
Mallinckrodt's financial advisor for the transaction is Goldman Sachs, and its legal advisors are Wachtell, Lipton, Rosen & Katz and Arthur Cox in Ireland.

Ikaria, Inc.'s legal advisors are Kirkland & Ellis LLP.