Vivalto Partners’ Equity Investment in Laboratoires Delbert

Laboratoires Delbert is a Parisian laboratory founded in 2002 and acquired by Marc Childs and Thierry Hoffmann in 2013. The laboratory specialises in the acquisition and maintenance of major and essential drugs as identified by the World Health Organisation. Laboratoires Delbert is best known for its expertise in securing production chains, limiting supply disruption risk and acting as a reference partner for regulatory authorities and large pharmaceutical firms.

Founded in 2021 by Vivalto Santé clinic group founder Daniel Caille, Vivalto Partners is an investment management firm active in the French healthcare space. Its investment in Laboratoires Delbert will enable the firm to advance its progress in a new phase of development, supporting its rapid international growth and helping to address drug shortages. Laboratoires Delbert has declared its goal of being recognised as a mission-driven company in the near future, as has Vivalto Santé.

LPA-CGR avocats advised Laboratoires Delbert on this secondary LBO with a team comprising partners Raphaël Chantelot and Mathieu Selva-Roudon, as well as associates Maxime Ponsan, Céline Guo and Déborah Théry.

Lawyer Monthly had the pleasure to speak with Raphaël Chantelot and Mathieu Selva-Roudon, Partners at LPA-CGR avocats to give us some further insight into this transaction:

Can you please share some background into the transaction and your team’s role during it?

Raphaël: Certain medicines and drugs are very important for the public health. All of these medicines were created through R&D conducted by ‘big pharma’ companies a long time ago, and now these companies are changing the way they operate. There is less and less R&D, for one thing. They are also no longer taking care of the marketing for these products, because the market is too small and the profit pool too limited. So they are disposing of these products, and this is an issue for patients, because they literally need these drugs to survive.

The way is therefore open for smaller laboratories like Laboratoires Delbert to take over the production and marketing of these medicines at reasonable prices to satisfy the vital needs of the public. That is where they are coming from, and the two founders are dedicated to providing critical services and drugs to patients. That is why it is a pleasure to work with them, and how they convinced investors to work with them.

Mathieu: Exactly. We have assisted Laboratoires Delbert for many years now. In 2013, the founders wanted to create a French leader in the essential medicine sector. As Raphaël said, big pharma is now slowing the production of pharmaceutical products which still have vital effects for the public. At least in the French pharmaceutical market, the legislation is more favourable to innovative companies, because the new products that are considered to have better effects on health can be distributed in the market for higher prices. This is why big pharma companies purchase biotechs and medtechs; they buy innovation and sell new products, so the mature products sometimes disappear despite still being beneficial for health and cheaper.

Laboratoires Delbert have since become a very visible actor in the French market. This transaction showed a significant increase in valuation of the company when compared to 10 years ago, which proves that value can emerge from activities of social interest.

How did your work as part of this transaction fit the profile of your law firm, and what unique skills and experiences did you use to ensure its success?

Mathieu: I have historically worked with Laboratoires Delbert because taxation is very complex in France. They also generate R&D tax credits, so we assist them in this area. In the framework of this private equity transaction, I worked on the tax aspects of the management package and other tax aspects in relation with the founders. It is quite a complex secondary LBO with many investors and different types of securities, requiring a lot of post-transaction structuring. Tax issues are very prevalent in France for companies, individuals and investments, and the client requires that tax aspects be handled carefully, in full compliance with the law.

Raphaël: My own work was in implementation – helping to organise contributions, sales, shareholders’ agreements and other aspects, and to coordinate with the fundraising involving debt. In this transaction, there was a reinvestment by all the investment funds that were involved in the previous rounds, which was quite remarkable. There was also a new player at the table, a new investment firm which proves to be very active in the healthcare sector: Vivalto. There was also the need to refinance the pre-existing debt, so it was quite a transaction in general.

What significance may this transaction have for the wider French healthcare sector?

Raphaël: To go back to the trend that we mentioned earlier, I think that this is a signal to the market that investment firms active in the healthcare sector have to retarget laboratories performing this very important function. In terms of marketing and ESG, firms like Laboratoires Delbert are attractive to investment firms. Its symbolic potential is also a good thing for smaller laboratories in the French market, as other firms will invest into laboratories performing the same very important function for the healthcare industry. It will help bring together willing funders and the mission of the laboratories.

Mathieu: This is, in my opinion, quite an emblematic transaction on the French private equity market as the life sciences and healthcare sector become better regarded by investment firms. This transaction shows that there is a strong appetite from such firms to invest in this type of company. I would add that this transaction also highlights a very contemporary subject matter relating to the drug shortage, because the activity of Laboratoires Delbert is concerned with putting medical products back onto the market.

Raphaël: This shortage is more and more acute in France, as the COVID crisis demonstrated that drugs as common as aspirin and paracetamol were in short supply. The French state has since realised that big pharma is no longer performing the role of ensuring the supply of basic and critical medicines on the market and has decided to push the industry to reinvest in France and re-establish French production facilities. Transactions like this are of great interest to the public interest.

Mathieu: Adding to that, Laboratoires Delbert has a recognised expertise in securing the production chain to meet the risk of supply disruptions. The firm has positioned itself as a reference partner for healthcare and regulatory authorities.

Prior to this transaction, we historically assisted Laboratoires Delbert in a previous fund raising in order to finance the company’s external growth ambitions, simultaneously with the acquisition of Lepticur (a major antiparkinsonian drug) from SANOFI-AVENTIS in 2020. This contribution of €20 million of equity was supplemented by unit-branch financing provided by BPIFrance and CIC Mezzanine, also for €20 million, which gave the laboratory the means to accelerate the pace of acquisition of new marketing authorisations as well as its internationalisation.

In terms of marketing and ESG, firms like Laboratoires Delbert are attractive to investment firms.

Two years later, LPA-CGR avocats assisted Laboratoires Delbert in the acquisition of TERALITHE 250mg, scored tablet, and TERALITHE LP 400mg, extended-release scored tablet, from SANOFI, and its financing. The company pursued its commitment to invest in medicines of major therapeutic interest (MITM) and reinforced the execution of its strategy to ensure the availability of essential medicines for patients.

What other services does your firm offer in the healthcare sector?

Raphaël: In addition to pharmaceutical laboratories, we also support drug and medical device manufacturers and healthcare service providers as well as investment funds, entrepreneurs and public and private healthcare institutions.

With more than 230 lawyers in 12 offices, including 11 abroad, LPA-CGR avocats is one of France’s top 10 independent law firms that offers a comprehensive range of services in all the main areas of business law and in several business sectors, including healthcare. That is why our cross services offer includes IP/IT, distribution, litigation, corporate law and M&A, tax law, labour law, public law and regulatory/compliance, in France and abroad.

Mathieu: Within the life sciences sector, our team of 15 lawyers is deeply dedicated to the healthcare industry to cover our clients’ legal needs. With the arrival of Morgane Morey in November 2022, we reinforced our strategic approach of the market by integrating the regulatory aspect.

As Morgane has been working for more than 10 years on regulatory matters throughout the life cycle of health and health-related products, including medicinal products, medical devices, cosmetics and food supplements, she has developed an expertise on legal and regulatory counselling, contracts and audits, in particular on mergers and acquisitions, mainly upon demand of the industry. She also intervenes in commercial and product liability litigation.

For example, in addition to the issues that arise throughout the life cycle of healthcare products, Morgane is currently working on a serial defective product dispute, a dispute challenging an ANSM decision on the banning of HHC and is assisting a client with criminal proceedings that are just getting underway.

How does your offer differ from that of other firms?

Raphaël: We are involved in various health initiatives. For example, the team is an active member of France Biotech, a French association created in 1997 that brings together the main innovative entrepreneurs in HealthTech and their expert partners. France Biotech’s primary mission is to support the development of this industry in France. We are part of their numerous committees.

Mathieu: We have also a strong relationship with unions of the sector (LEEM, SNITEM, GEMME, AFAR, etc.) as well as with opinion leaders to influence the content of future legislation.

Raphaël: As the life sciences / healthcare area is one of our priority development sectors, we are doing our utmost! LPA-CGR avocats desires to position itself at the heart of its clients’ strategic issues by providing them with a comprehensive, cutting-edge life sciences and healthcare offer.