Just a month after returning R10bn to shareholders Life Healthcare, one of SA’s largest private hospital groups, has signed a R13.9bn deal to sell its Life Molecular Imaging (LMI) to Lantheus Radiopharmaceuticals UK, with the proceeds set to be returned to shareholders.
The deal also marks a major upside for shareholders after the group invested just $70m (R1.3bn) in the business since buying it. The JSE-listed group will receive $350m upfront, with a potential to earn a further $400m linked to milestones of future sales of LMI products up to 2034, it said on Monday.
Life Healthcare CEO Peter Wharton-Hood said the deal represented a multifold return on investment, adding the timing was right to sell the business.
“We have managed LMI for value. We invested in systems, sales, IT, human resources, governance and tax planning ... if we go back two years ago, shareholders, investors and analysts thought this asset was worth zero,” Wharton-Hood said.
“We are pleased to report this transaction today because it has delivered a substantial return. We bought LMI for $5, we spent another $70m over six years. The return is substantial,” he said.
The relationship between Life Healthcare and Lantheus began last year when the two companies struck a sublicensing deal involving one of LMI’s early-stage novel radiotherapeutic and radio diagnostic products (RM2).
Lantheus made an upfront payment of $35m for the sub-licensing rights to RM2, as per the agreement. Wharton-Hood said the sub-licensing agreement was the seed for the sale announced on Monday.
Life Healthcare, worth R23bn on the JSE, last year sold its UK-based business Alliance Medical Group (AMG) to Icon Infrastructure for R21bn, in a deal that was agitated for by shareholders who wanted to get dividend payouts, of which R10bn was returned to investors in December.
Wharton-Hood said the latest deal was not due to pressure from shareholders.
“We were never under pressure to sell it. As a management team and the board, we wanted to demonstrate the value of the business to shareholders. We went on a detailed roadshow to shareholders in the second half of last year explaining the asset,” he said.
“There was an improvement in market capitalisation of the group following the discussions. We thought it was the right time from a risk perspective to rather take the money and return to shareholders.”
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 in a statement on Monday.
Profit share
The net proceeds from the upfront payment, after settling LMI management’s incentive arrangements of about $18m and Life Healthcare’s obligations under the Piramal profit-sharing arrangement of about $140m, transaction-related costs and estimated taxes were expected to be about $200m.
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, the right to elect to manufacture, commercialise and distribute LMI products in Africa, representing further potential upside.
Cyclotrons
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 elsewhere in the world.
Life Healthcare expects the transaction to be completed in the second half of 2025.
“This acquisition aligns with our strategy to drive long-term growth and value creation by investing in high-potential, complementary assets and research & development capabilities to strengthen our radiopharmaceutical leadership,” said Brian Markison, CEO of Lantheus.
“This is a natural extension of our existing RM2 partnership and we are ideally equipped to collectively grow Neuraceq and advance Life Molecular’s diverse radiopharmaceutical assets.
“We are excited to welcome their exceptionally talented team, whose expertise will further enhance our capabilities in the development and commercialisation of innovative radiodiagnostic solutions.
“With our combined resources and financial strength, we are well-positioned to deliver a meaningful impact for patients and clinicians worldwide.”
Correction: January 13 2025
The headline of this article has been amended to reflect the correct sale amount.
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