Only two years after its flotation on London’s AIM alternative investment market, Synexus, the UK company that has pursed a ‘hub site’ strategy for recruiting patients into late-stage clinical studies, has agreed to a private equity buyout as the most viable means of continuing on its ‘buy-and-build’ path to a global clinical trial platform.

The agreed cash offer of 78 pence per share values Synexus at around £18.1 million (25.6 million). It comes from Lyceum Capital, acting through Sigma Acquisitions – a vehicle created specifically for making the acquisition. The offer represents a premium of 52.9% on the closing price of Synexus’ shares on 18 October. This was the last business day before the company announced that it had received an approach about acquiring its entire issued and to-be-issued share capital.

In aggregate, Sigma Acquisitions has received irrevocable undertakings to accept or procure acceptance of the offer in respect of 12,544,868 Synexus shares, representing 54.18% of the company’s existing share capital. The offer will now be put to Synexus’ shareholders. If it goes through, key members of the company’s existing management team will remain in their current roles, with Michael Fort, chief executive of Synexus, and Paul McCluskey, finance director, expected to join the board of Sigma Topco, the ultimate holding company for Sigma Acquisitions.

According to Fort, the deal “allows Synexus to complete its international roll-out plans and provide our customers with a truly competitive offering”. Jeremy Hand, managing partner of Lyceum Capital, commented: “Synexus is a great business. It operates in a growth market with a differentiated offering and has the potential to achieve significant and rapid expansion. We look forward to working closely with the Synexus team, providing expertise and further capital to fast-track the company’s development.”

While Synexus has expanded its hub site model at home and abroad, with new site openings or acquisitions of existing research facilities in South Africa, India, Poland, Hungary and Bulgaria, recently the company has run into problems with delayed start dates for contracted clinical trials, which cut its turnover and profit for the year ended 31 March 2007. Turnover from continuing operations was almost flat against the 2005/2006 financial year at £9.55 million, while operating profit dropped from £1.53 million to £328,000.

Lacks critical mass
Despite being recognised “by many of the leading global pharmaceutical companies as a cost-effective patient recruiter and clinical trials manager, Synexus still lacks critical mass in a global multi-billion dollar market”, the company noted. “In an industry where, typically, there is a very long lead time from initial enquiry through to signing and execution of contracts (often extending to a year or more) Synexus’ financial performance can be disproportionately affected by delays which extend such lead times even further.”

The drastic impact of this performance on its share price has ruled out pursuing any further acquisition opportunities on a largely equity-financed basis, the company added. Following the publication of its annual results in June, and prior to the release of a more optimistic trading update in late September, Synexus’ share price dropped from a high of 104.5 pence at the close of business on 22 January 2007 to a low of 30 pence on 19 September.

The effect, the company added, was further exacerbated by “similar changes in investor sentiment affecting the share prices of comparator stocks such as Premier Research Plc and ClinPhone Plc”. Synexus was first approached by Lyceum Capital with a proposal to formulate an offer in conjunction with the former’s management team on 20 August.