Otsuka Holdings will pay ICU Medical (Nasdaq: ICUI) an upfront payment of $200 million as part of a joint venture to enter the U.S. IV products market, which has been facing hurricane-related shortages this fall.
The partnership — which involves ICU Medical providing commercial services for Otsuka’s Otsuka Pharmaceutical Factory (OPF) subsidiary — also includes performance-based milestones at the end of 2026, and a backend put-call option in 2030 and beyond.
ICU Medical’s IV solutions plant in Austin, Texas, will be transferred into the joint venture, company officials explained during a call with analysts yesterday evening.
In a news release posted around the same time, Shuichi Takagi, president and representative director of OPF, said that entering the North American market has always been part of Otsuka’s long-term ambition and that the joint venture with ICU Medical is the perfect way to do that. “It will allow us to bring our innovative PVC-free technologies — including admixtures, parenteral nutrition in advanced multi-chamber bags, and premix IV antibiotics — to a market with an established customer base.”
The move comes more than a month after Hurricane Helene’s remnants hit western North Carolina with heavy rain and flooding. In the process, the storm took out Baxter’s North Cove plant in Marion, North Carolina. Baxter describes the facility, which is its largest, as the largest manufacturer of intravenous and peritoneal dialysis products in the U.S. Since then, hospitals across the country have faced disruption in the supply of some sterile intravenous fluids used in everything from intravenous dialysis care to some surgeries.
Baxter recently restarted the highest-throughput IV solutions manufacturing line at the North Cove facility.
ICU Medical and Otsuka officials see an opportunity to provide extra supply for the U.S. market, as well as supply chain redundancy. They plan to seek import authorization if necessary for the U.S. market while focusing on accelerating new product development. Over the longterm, they plan to seek FDA approval of overseas manufacturing sites.
Otsuka is the 26th largest pharmaceutical company in the world, according to our sibling Drug Discovery & Development site’s Pharma 50 report, while ICU Medical is 49th in Medical Design & Outsourcing‘s MedTech Big 100.
“Otsuka’s scale, experience with U.S. partnerships, and demonstrated long-term investment horizon made them the ideal partner,” said ICU Medical CEO Vivek Jain. “Their financial strength and dedication to portfolio expansion will provide the stability and choice the North American market needs. Through this joint venture, we’re committed to delivering clinical and economic value for ICU Medical customers and giving this critical product category the innovation and attention it deserves.”
Investors are reacting positively to the ICU Medical partnership with Otsuka
As of midday trading today, ICUI shares are up more than 1% to $180 apiece on the news.
ICU Medical also reported Street-beating third-quarter results after the market close yesterday. For the quarter ended Sept. 30, 2024, the company swung to a loss of $33.0 million, or $1.35 per share, versus a profit of $7.2 million, or 30¢ per share in Q3 2023. Revenue grew 6.5% to $589.1 million.
Adjusted to exclude one-time items, ICU Medical had Q3 earnings per share of $1.59. The result was 34¢ ahead of the Wall Street analysts’ consensus of EPS of $1.25 and revenue of $574.7 million.
“Third-quarter results were generally in line with our expectations,” Jain said.
ICU Medical upped its adjusted full-year EPS guidance from a range of $4.95 to $5.35 to a range of $5.40 to $5.70.
Mike Matson, senior research analyst at Needham & Co. noted ICU Medical’s continued margin progress but kept his Hold rating on ICUI shares.
