Australia's Telix Pharma agrees to buy Germany's ITM Isotope for about $1.65 billion

Sept 21 (Reuters) - Australia's Telix Pharmaceuticals said on Monday it has agreed to acquire Germany-based ITM Isotope Technologies Munich SE for about $1.65 billion on a cash- and debt-free basis, further boosting its radiopharmaceutical ambitions.

After adjustments, ITM shareholders are expected to receive about $1.25 billion in Telix shares at $11.84 per share.

ITM's commercial-scale, profitable isotope production business contributes significantly to cash generation while strengthening Telix's isotope supply chain for its therapeutics pipeline, the Australian firm said. 

The target company's pipeline includes ITM-11 (177Lu-edotreotide), a novel therapeutic candidate for gastroenteropancreatic neuroendocrine tumors, which has completed Phase 3 development.

The deal also includes contingent consideration of up to $700 million, payable upon achievement of specified regulatory approvals and sales milestones for ITM-11.

Upon completion, Telix shareholders will own about 76.3% of Telix shares, while ITM shareholders will own around 23.7%. 

The combined organization is expected to generate unaudited pro forma 2026 revenue and income exceeding $1.3 billion, based on management estimates.

The company expects operating earnings to turn positive from 2027, driven by higher production, cost savings, and improvements to its drug pipeline. Approval of ITM-11 could provide an additional near-term boost from high-margin treatment sales.

Telix's board has approved the transaction, and 90% of ITM stakeholders backed it as of signing. 

Telix shares slipped nearly 6% to A$16.82 per share in early trade.

(Reporting by Sneha Kumar in Bengaluru; Editing by Aurora Ellis and Clarence Fernandez and Rashmi Aich)