Sharps Technology (STSS) To Enter The Copolymer Prefillable Syringe Market With Strength And Ahead of Plan Through Pending Manufacturing Facility Acquisition and $400M Nephron Deal
Detroit, Michigan
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October 06, 2023 08:50 AM Eastern Daylight Time
By Meg Flippin, Benzinga
Sharps Technology Inc. (NASDAQ: STSS) is pushing into the copolymer prefillable syringe market thanks to a deal with Nephron Pharmaceuticals Corp., a leader in contract manufacturing of generic medications and 503B outsourcing that includes prefillable sterile syringes. Sharps announced the signing of an Asset Purchase Agreement (APA) to acquire Nephron’s InjectEZ specialty syringe manufacturing facility for $50 Million. This includes a 10-Year purchase agreement for over $400 Million from Nephron Pharmaceuticals for Sharps’ next-generation copolymer prefillable syringe systems. Product delivery is scheduled for the first quarter of 2024 with revenue totaling approximately $30 Million for the first twelve months of production and subsequent revenue of over $45 Million per year beginning in 2025, and continuing through 2033.
“With this landmark purchase agreement in place for our copolymer prefillable syringes, we will accelerate the realization of our shared goals, transition the company to revenue, and propel Sharps into a new phase of growth and sustainability,” commented Robert Hayes, CEO of the medical device and pharmaceutical packaging company specializing in developing and manufacturing copolymer drug delivery systems. “At the forefront of our growth trajectory are our copolymer-based prefillable syringe systems, a sector that is experiencing escalating market demand and is poised to shape the future of Sharps.”
Owning Manufacturing For A Market Poised For Growth
Market research is forecasting significant growth within the prefillable syringe segment, with product demand outstripping supply for the foreseeable future. The market for prefilled syringes is projected to grow at a compound annual growth rate of ~12% from 2022 to 2030, according to Grand View Research. The prefilled syringe market is a niche sub-industry within the healthcare sector and Sharps will serve both Nephron and other customers within the copolymer segment of the market. Contributing to the demand for copolymer-based syringes are the glass-like features without breakage, and the market could be ripe for growth due to the global lack of capacity for these products and technical challenges in production that Sharps’ team reports a wealth of experience in.
Under the terms of the deal, Sharps is paying $50 million for the InjectEZ specialty copolymer syringe manufacturing facility, which is one of the only fully dedicated facilities to manufacture these types of syringes in North America. Located on Nephron’s campus in West Columbia, South Carolina, InjectEZ has fully automated prefillable syringe system manufacturing capabilities that utilize ISO cleanrooms for all key areas including injection molding, high-speed automated assembly, and specialty packaging lines that are equipped with Husky molding machines and Hahn automation. With full control of the InjectEZ facility through this transaction and the capacity from the Company’s wholly-owned manufacturing facility in Hungary, Sharps will have the ability to supply Nephron with their prefilled syringe needs and also commercialize products to the broader healthcare syringe market. The company expects the deal to generate “significant” short and long-term revenue.
Nephron Inks 10-Year Purchase Agreement
As a result of this deal the Company’s first customer will be Nephron, which inked a 10-year purchase agreement for Sharps’ next-generation copolymer prefillable 10 mL and 50 mL syringes. Minimum orders will be over $400 Million during that period. Sharps expects to begin delivering products to Nephron in the first quarter of 2024, representing about $30 million in revenue for the first 12 months of production. Starting in 2025, Sharps expects revenue of at least $45 million per year through 2033 from Nephron, with additional revenue from its capacity to serve the broader market for its products.
“As a company that is transitioning from research and development to commercialization, this is a significant development that will have a meaningful impact on Sharps’ revenue and profitability,'' states Mr. Hayes. We anticipate Nephron's start-up volume to be approximately 60% of our initial planned manufacturing capacity, which will provide Sharps with the ability to fully service Nephron’s needs and to also sign purchase orders for our products from other companies in the healthcare market.”
To finance the acquisition of InjectEZ, Sharps retained Lampert Capital Advisors, a provider of financing solutions to public and private companies. Lampert is engaged in a financing process that has resulted in a signed term sheet with a leading middle-market lender for up to $75 Million in debt financing to be used for the acquisition of InjectEZ, production line enhancements, working capital, transaction fees and expenses, and general corporate purposes.
Continuing Relationships and Growth
Sharps announced a manufacturing and research partnership with Nephron Pharmaceuticals in November 2022 to support the manufacturing of its innovative prefillable syringe systems. Through the successful completion of the new Asset Purchase Agreement and the 10-year purchase agreement, Sharps is poised to have a full partnership and a U.S. footprint that will provide a strong baseline of revenue for Sharps for many years.
The new agreement will leverage synergies from both companies and enable Sharps to commercially enter the prefilled syringe landscape with manufacturing strength and ahead of plan. These developments are the culmination of a strong partnership developed in 2022, and may be just the beginning: “We are excited about the opportunities that lie ahead as we strengthen our relationship with Nephron and will update our shareholders as the transaction advances,” said Mr. Hayes.
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