This is why Chinese companies are paying $1.9 billion for Australian liver cancer treatment medtech Sirtex

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  • Chinese companies CDH Genetech and China Grand Pharmaceutical and Healthcare are paying $1.9 billion for Australian medtech Sirtex.
  • The buyers see an opportunity to commercialise Sirtex’s liver cancer treatment in China.
  • The $33.60 a share cash offer trumped $28 offered by US firm Varian.

Australian medical device company Sirtex Medical, the maker of a liver cancer treatment, has accepted a $1.9 billion takeover by CDH Genetech, a big Chinese private equity firm, and Hong Kong-listed China Grand Pharmaceutical and Healthcare Holdings Limited, one of the China’s largest pharmaceutical and healthcare manufacturers.

The $33.60 a share cash offer from China, where liver cancer is a leading cause of death, overshadowed the $28 offered by US firm Varian, a radiation oncology treatment and software maker. Sirtex is required to pay a $16 million break fee to Varian.

A short time ago, Sirtex shares came out of a trading halt and jumped 4% to $30.84.

Sirtex, whose liver cancer radiation treatment is supplied in more than 40 countries, has entered a binding scheme implementation deed with the Chinese bidders.

“The Board has undertaken a comprehensive investigation of the merits and risks of the CDH-CGP Proposal, including seeking specialist advice in relation to specific regulatory, legal, funding and other risks,” says Interim Chairman of Sirtex, Dr John Eady.

“Based on the materially higher offer price and our evaluation of the associated risks, the Board of Sirtex has formed the unanimous view that the CDH-CGP Proposal is a superior proposal and is in the best interests of shareholders.”

The Chief Executive Officer of Sirtex, Andrew McLean, said: “The CDH-CGP Scheme represents an exciting opportunity to enhance the growth of the Sirtex business, including through entry into new geographies, and we look forward to working with CDH and CGP to implement the transaction.”

Sirtex in 2017 recorded sales of $234.28 million.

CDH Investments and China Grand Pharma are attracted to Sirtex because China has one of the highest incidence of liver cancer in the world. The opportunity is to commercialise Sirtex’s liver cancer radiation therapy in the China market.

China alone accounts for more than half of the world’s incidences of liver cancer.

However, the effectiveness of prevailing treatments is limited, and Chinese patients have fewer treatment options than those in developed countries.

Sitex’s main product is SIR-Spheres, tiny radioactive microspheres which provide high dose radiation directly to the tumour while minimising damage to normal healthy cells.

A team led from Australian law firm MinterEllison led by PArtner Alberto Colla advised CDH Investments on the joint takeover.

“CDH Investments and China Grand Pharma are ideally positioned to grow Sirtex’s existing global business and unlock the potential of its core product in China, a market where this product is not currently available,” says MinterEllison.

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