US contract research organisation Covalent Group has changed the terms of its $20 million acquisition of Finnish rival Remedium and will no longer have to raise funds to finance the deal.
The change to the transaction, which will create a new company known as Encorium BioSolutions with activities on both sides of the Atlantic, came about after an audit of Remedium’s financial results between 2003 and 2005.
Covalent said in March it intended to buy Remedium for $16 million in stock and $4 million in cash, with Remedium’s shareholders receiving $14 million in Encorium stock and $4 million in cash. The new terms mean they will get $11 million in stock and $2.5 million in cash.
The deal will create a CRO with broad expertise across pharmaceuticals, biologic drugs and medical devices, with a particular specialty in operating in cardiovascular medicine, oncology and biologics and vaccines for infectious diseases. It will operate in 26 countries, including the growth markets of Central and Eastern Europe, and have a joint client base comprising 11 of the top 15 biopharmaceutical companies.
“Previously, new business contracts of significant dimension and scope had been difficult to win for either company due to size and geography limitations,” commented Kenneth Borow, Covalent’s president and chief executive.
“Since this agreement was announced, it has become apparent through discussions with potential new business clients that the size and scale of Encorium will increase our competitive position for larger, more profitable Phase II and Phase III contracts,” he added.
Another benefit of the merger is a further expansion into large-scale, Phase IV studies though patient registries and surveillance studies, he noted. Fort example, Covalent recently won a $2.1 million contract to set up a patient registry for patients with hyponatremia, low blood sodium levels associated with a number of clinical conditions.
This form of post-marketing study has been one of the key drivers of growth in the CRO sector, prompted by regulatory demands for increased safety data for products on the back of high-profile cases such as Merck & Co’s withdrawal of Vioxx (rofecoxib) in 2004.
At closing, Encorium is expected to have annual revenues in the region of $21-$23 million and a backlog - sales of services for future clinical trials - of $35-$40 million.