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DEFA14A
ACETO CORP filed this Form DEFA14A on 10/20/2017
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Dear Fellow Shareholder:

 

On behalf of the Board of Directors and our approximately 280 employees located in ten countries, we present to you our fiscal year 2017 Annual Report on Form 10-K and the associated corporate proxy statement. The highlight for Fiscal 2017 was the successful acquisition of generic products and related assets from entities formerly known as Citron Pharma LLC and Lucid Pharma LLC. The assets acquired in this transaction expand, complement, and strengthen our existing and future product offerings. In what has become a difficult generic drug business environment, one key for long-term success is having an ever-growing commercial portfolio of generic products, a strong internal drug development pipeline and capable, reliable manufacturing partners. This transaction adds significantly to the Rising Pharmaceuticals business platform in all three crucial areas.

 

In what was a competitive merger and acquisition environment we were able to complete this transaction in late calendar 2016 at an attractive EBITDA multiple through a $270 million up-front payment, a $50 million unsecured deferred payment to the seller, and the issuance of 5.122 million shares, which become unrestricted beginning in late December 2019. The purchase agreement also provided for a 5-year potential earn-out of up to $50 million in cash, based on the financial performance of four pre-specified pipeline products that are in development. At this point we anticipate filing ANDA applications with the FDA on these products by the end of Fiscal 2018.

 

This transaction is another step in the transition of the Company to one focused on human health. The overall revenue of ACETO grew to $638 million in fiscal 2017, a 14% increase compared to Fiscal 2016, with human health related business revenue increasing year-over year by 22 % and accounting for 74% of total company revenue.

 

Notwithstanding the strategic value that this transaction brought the Company, overall competitive pressures, consolidation within the generic drug distribution networks and the political environment, individually and combined, contributed to a 3% decrease in Adjusted EBITDA to $71.7 million, a 21% decrease in Adjusted Diluted Earnings Per Share to $1.19 and a 70% decline in GAAP Reported Earnings per share of $0.35.

 

As you will read in the Company’s Form 10-K, the balance of our business segments experienced relatively flat year-on-year performance in revenue and earnings. Ongoing attention to improving margins and seeking expansion of business through new products and customers coupled with cost containment are ongoing efforts. We continue, however, to believe that the future growth engine for the Company is tied to its activity in human health. While we had a seventh consecutive year of growth in revenue, albeit due to the product acquisition, the Company’s financial performance for Fiscal 2017 was disappointing. We faced many headwinds that we were not able to overcome. The past year needs be viewed, in part, as a reset, or new beginning.

 

 

 

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