This Irish oil company has just turned itself into a pharma business

Fastnet ditched its exploration plans when oil prices plunged.

By Paul O'Donoghue Reporter, Fora

AN IRISH COMPANY that was focused on oil and gas exploration has done an abrupt about-face – switching its trade to the pharmacy sector.

Dublin-based Fastnet Equity, which was listed on junior stock markets in both Ireland and England, has announced a takeover of privately-owned drug development company Amryt Pharmaceuticals.

The takeover marks the final phase in Fastnet’s plan to get out of the exploration industry. The company, formerly called Fastnet Oil and Gas, floated on London’s junior AIM exchange in 2013 and raised £20 million to fund exploration in the Celtic Sea and Morocco.

Fastnet chairman Cathal Friel, who is also a shareholder in Amryt, told Fora that the company decided to exit the sector when farm-out deals, where a small oil firm partners with a larger one to develop an exploration site, became more difficult to secure.

“Small and medium oil companies live and die by farm outs. 18 months ago we started to find doing farm outs unbelievably difficult,” he said.

“We asked big companies why they weren’t farming in. They were concerned at the oil price, which was at about $100, $110 a barrel then.

“They hadn’t seen the prices that high for a while and said until they saw the price stabilise at $100 a barrel they would go easy on new commitments.”

The oil-price plunge

The fears of the large oil companies proved well founded as the price of oil plunged over the next year and a half, dipping below $30 a barrel by the start of 2016.

oil price chart 1 april The price of crude oil has plunged
Source: Nasdaq

Fastnet decided to halt exploration, however it still had about $15 million of cash left in the bank.

“The options were to return the cash to shareholders or look for a new business venture which had similar potential returns to oil and gas,” he said.

“We consulted with shareholders and the resounding opinion was to find a new business venture.”

That new business venture was a shift into the health industry with the money it had left over. It will now acquire Amryt for just under £30 million (€37 million at today’s rates), which it will pay for by issuing new shares.

Because Fastnet is a listed company and Amryt is a private company, the takeover allows the new combined company to be listed on the stock markets while avoiding the often-difficult process of an IPO.

Amryt 

Rather than developing its own drugs, Amryt will focus on acquiring other companies and fast-tracking the development of their medicines. It has already agreed to buy two other pharma companies, German firm Birken and Swiss-based SomPharmaceuticals.

Although SomPharmaceuticals is in the early stage of development, Birken developed a drug with EU approval that treats a specific type of wound in adults.

Amyrt’s chief operating officer Rory Nealon told Fora that the drug, called Episalvan, is targeting a potential market worth €150 million. However, he said that the company is working on another drug to treat a condition called epidermolysis bullosa (EB).

It is a rare genetic condition that causes extremely fragile skin that easily blisters or tears from minor contact or friction.

“We want to do a phase three study to show our drug works on EB in pediatrics (children),” he said. “It is an 18-month study and, if approved, it could be brought to market in about six to nine months in Europe and six to 12 in the US.

“It’s a $1.5 billion market and the drug will hopefully improve their quality of life.”

Amryt was set up in August with Friel and Nealon, who previously held senior roles at NASDAQ-listed pharma firm Trinity Biotech, as two of its directors.

The chairman of the combined company, to be called Amryt Pharma and based in Dublin, will be Harry Stratford, the founder of FTSE 100 pharma giant Shire.

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