Vyteris, the financially precarious drug delivery specialist that last month completed a merger with MediSync BioServices, a US company engaged in acquiring niche contract research organisations and site management organisations, has decided to go the whole hog and exit its drug delivery business, repositioning as a diversified speciality CRO.
The original plan, detailed in Vyteris’ Form 10-K annual report for 2010, was for a new CRO business model that would provide cash flow for operational funding while the company continued to develop its drug delivery technologies.
Now the Vyteris board has opted for a strategy of transforming the company into a niche operation that will focus all of its efforts on consolidating specialty businesses in the contract research organisation (CRO), site management organization (SMO) and related services industry.
“As a result, the Company is currently discontinuing its drug delivery business and plans to monetise its proprietary active transdermal drug-delivery assets as soon as possible,” Vyteris noted.
Cluster of businesses
The aim is to bring together established and profitable privately-held CROs, SMOs and related consulting firms to “build a cluster of businesses with complementary specialised services that benefit from centralised administration, enhanced access to expansion capital and cross-selling capabilities”, Vyteris explained.
The company said it was pursuing multiple acquisition targets “that it intends to advance to closing in 2011 and 2012”.
According to Vyteris’ Form 10-K, MediSync already had a number of opportunities in its sights, including a signed letter of intent with an organisation specialising in trials requiring a controlled environment, as well as negotiations with a CRO running a 50-bed research unit, an “international CRO”, and a research company focused on post-marketing surveillance.
Ripe for consolidation
With more than 1,100 CROs operating worldwide, “we believe this industry is ripe for consolidation”, commented Haro Hartounian, chief executive officer of Vyteris.
“Our plan is to acquire small, private CROs with successful track records that lack the capital raising power, business development resources and scale to compete with large CROs,” he added. “We expect to leverage operating synergies among these acquired entities to increase efficiencies and profitability.”
The terms of the merger agreement announced last year were that MediSync would become a wholly owned subsidiary of Vyteris in return for around 27 million shares of Vyteris common stock and the appointment of two additional MediSync directors to Vyteris’ board of directors.
A couple of Vyteris’ existing directors, Eugene Bauer and Joel Kanter, were already directors of MediSync and owned minority stakes in the privately held Delaware company.
Vyteris’ core business, based on its proprietary transdermal ‘smart’ patch technology for drug delivery using low-level electrical energy (iontopheresis), never made a profit.
That left the US-based company with severe cash flow problems, exacerbated by Ferring’s decision to terminate a licence agreement with Vyteris in December 2009.