Financially strapped drug delivery specialist Vyteris is hoping to tap into new sources of revenue and operational efficiency by taking a left turn into the contract research sector.
The US-based company has completed its previously announced merger with MediSync Bioisciences, Inc, which focuses on acquiring and consolidating high-value, niche contract research organisations (CROs), site management organisations and related businesses such as post-marketing surveillance companies.
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’ current directors, Eugene Bauer and Joel Kanter, were already directors of MediSync and owned minority stakes in the privately held Delaware company.
“MediSync provides us with a platform to broaden our corporate strategy, bringing both a revenue potential and execution expertise,” said Haro Hartounian, chief executive officer of Vyteris. “The combined company represents a distinct opportunity in the life sciences industry that is guided by a team with a strong track record of value creation.”
Formed in 2006 by a group of life sciences executives, MediSync’s strategy is to bring together established and profitable privately held CROs and related consulting firms and to “build a specialised cluster of businesses with complementary services that benefit from centralised administration, enhanced access to expansion capital and cross-selling capabilities”, Vyteris notes.
MediSync is currently pursuing acquisition targets that it intends to progress to closing either this year or in 2012, it adds.
According to Vyteris’ Form 10-K annual report for 2010, these opportunities include a signed letter of intent with a service management organisation specialising in trials requiring a controlled environment; and negotiations with a CRO running a 50-bed research unit, an “international CRO”, and a research company specialising in post-marketing surveillance.
Vyteris’ new CRO business model is expected “to provide cash flow which can assist in funding operations while we continue to develop our drug delivery technologies”, the Form 10-K says. “It will also provide operational synergies as two business operations are combined in one infrastructure, creating efficiencies in administrative functions as well as other areas.”
The intention is to maintain the identity and specialist capabilities of each acquired business while benefiting from operating efficiencies and lower overhead costs. “Because we plan to target small- to mid-size companies, we believe that a consolidation of resources of such companies could significantly contribute to the expansion of operations, resulting in increased revenues,” the Form 10-K states.
Vyteris’ core business, based on its proprietary transdermal ‘smart’ patch technology for drug delivery using low-level electrical energy (iontopheresis), has never made a profit and the company has severe cash flow problems, exacerbated by Ferring’s decision to terminate a licence agreement with Vyteris in December 2009.
Without adequate additional financing, the Form 10-K warns, Vyteris may not be able to execute its MediSync business strategy and may have to cease operations.
The company recorded an operating loss of US$7.29 million in 2010, compared with a loss of US$1.53 for the previous year. Revenues were down from US$.4.56 million in 2009 to US0.12 million in 2010.