There’s something fishy about Coloplast’s latest megadeal—literally. The Danish medtech announced (PDF) plans on Friday to acquire Kerecis, which uses fish skin as the basis of its wound care products for humans.
Coloplast has offered up 8.9 billion Danish kroner, or around $1.3 billion, in the deal. The vast majority—8.2 billion kroner ($1.2 billion)—will be doled out as an upfront cash payment. Coloplast intends to finance the acquisition with help from an equity capital raise.
The blockbuster price tag is about double the size of Kerecis’ recent valuation. Last July, as it closed a $100 million financing led by Kirkbi, the family-owned holding and investment company behind Lego, Kerecis noted that the funding boost had upped its valuation to $620 million.
Coloplast’s offer is based on assumptions that Kerecis will see grow revenues about 50% this year, and 30% over the next three years, according to the announcement. For its most recent fiscal year, the Icelandic company brought in 510 million Danish kroner ($74.7 million).
For Coloplast, meanwhile, the acquisition is expected to add about 1% to its own organic growth rate starting next year, and will be increasingly accretive to annual earnings per share beginning the year after that.
Coloplast is expecting to close the acquisition by the fourth quarter of its current fiscal year, which ends Sept. 30. To do so, it’ll need to rally support from at least 90% of Kerecis shareholders. To date, 77% have agreed to sell their shares to Coloplast.
Once the remaining shareholder support has been clinched, the necessary regulatory bodies have given the greenlight and the deal is sealed, Kerecis will retain its own name and branding. Though it’ll operate as a standalone business unit, having Kerecis under the Coloplast umbrella will open new doors for the company, Kristian Villumsen, Coloplast’s president and CEO, said in the announcement.
“The advanced wound care market holds significant untapped potential, and today Coloplast is only present in the advanced dressings segment and mostly outside of the U.S. Chronic, surgical, burn and other hard-to-heal wounds are a major area of unmet clinical need and a growing social and economic challenge,” Villumsen said.
“With the acquisition of Kerecis, we obtain a differentiated product offering and strong commercial U.S. infrastructure, allowing us to expand into the fast-growing biologics wound care segment and at the same time expand our position in the U.S.,” he continued.
Indeed, Kerecis is “the fifth-largest company in the U.S. biologics wound care segment,” according to Fertram Sigurjonsson, its founder and CEO.
The company’s technology centers around intact fish skin taken from North Atlantic cod harvested and processed in Iceland. According to Kerecis, because there are no known risks of viral transfer between the cod and humans, the fish skin needs to be only gently processed before being used for human tissue transplants, allowing it to retain its skin-like qualities—compared to commonly used human and porcine transplants that have to undergo heavier processing to eliminate potential disease risk, and which may also remove many of their natural components along the way.
Kerecis’ fish-skin technology has been cleared by the FDA to help heal chronic wounds since 2013. Additional regulatory nods since then have allowed the Omega3 technology to be used to strengthen surgical staple lines and, most recently, as an implantable graft for use in plastic and reconstructive surgeries.
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