14 Dec 2020
Ergomed acquires MedSource, a US-based specialist oncology and rare disease CRO
  • Further expansion of Ergomed’s presence in the strategically important US market
  • MedSource’s complementary capabilities in oncology and rare disease build on Ergomed’s internationally recognised specialist expertise
  • Addition of over 20 new clients to the CRO business with over $41 million order book of future contracted revenue
  • MedSource recorded $19.3 million service fee revenue and $1.3 million adjusted EBITDA in 2019
  • Acquisition expected to be immediately accretive and earnings enhancing

Guildford, UK – 14 December 2020: Ergomed plc (LSE: ERGO) (“Ergomed” or the “Company”), a company focused on providing specialised services to the pharmaceutical industry, today announces the acquisition of MS Clinical Services, LLC (“MedSource”), a specialised clinical research organisation (CRO) based in Houston, Texas, USA.

Dr Miroslav Reljanović, Executive Chairman of Ergomed, said: “We are delighted to have delivered on our strategic goals in 2020 with the expansion of our US footprint in both the CRO and PV businesses. The addition of MedSource and its complementary expertise in oncology and rare disease will further establish Ergomed as a specialised services provider in the strategically important US market, building on the successful acquisition and integration of Ashfield Pharmacovigilance (now PrimeVigilance USA) earlier this year. We look forward to developing the potential of this new business to offer truly global clinical research services to our international customer base. We are excited to welcome the MedSource team to Ergomed and are eager to work alongside our new colleagues to leverage our combined expertise in complex therapeutic areas for the benefit of our clients and patients worldwide. Looking ahead to 2021 we expect to see continued momentum across the business as we look to increase our footprint in key geographies, and firmly establish Ergomed as a leading global provider of specialist services to the pharmaceutical industry.”

Eric Lund, founder of MedSource, who will continue in his current role as President of MedSource after the acquisition, said: “I am delighted to be joining the Ergomed Group and continuing my current role. We are confident that this is an important strategic step and natural fit for MedSource, as Ergomed is an exciting, fast-growing global company with a strong reputation in the CRO industry. Our own extensive experience in oncology and rare disease drug development and across product types, clinical trial phases and study designs will complement the services already offered to Ergomed’s international client base. The combined business will be of great benefit to our US clients and employees, providing a seamless service offering into Europe and globally.”

Acquisition benefits

MedSource is a full-service CRO with a focus on complex diseases and study designs. MedSource delivers high-quality clinical trials specialising in oncology and rare disease. With over 20 years’ experience, MedSource has participated in more than 200 oncology and rare disease clinical trials.

The acquisition aligns with Ergomed’s strategy to grow its existing profitable services business both organically and through acquisition and advances a number of important strategic objectives for Ergomed, including:

Complementary specialism in oncology and rare disease. The two businesses have core expertise in complex disease areas. The combined business will enable an even greater degree of specialist expertise in high growth sectors of the overall pharmaceutical services market in which Ergomed specialises.

Expanded US presence. The acquisition will further accelerate Ergomed’s growth in the North American market, with additional offices in Houston, Raleigh and Boston in the USA, and Newcastle upon Tyne in the UK. The increased US presence, with the addition of over 110 US-based employees, is expected to drive substantial new awards in the region and increase Ergomed’s pipeline in both the CRO and PV businesses.

Significantly increases Ergomed’s order book. MedSource joins Ergomed with an existing order book of over $41 million, adding to Ergomed’s £151.4 million order book as reported in September 2020 in its H1 2020 interim results, providing high forward visibility of contracted future revenue.

Acquisition terms and MedSource trading history

Under the terms of the equity purchase agreement (the “EPA”), Ergomed has acquired MedSource for an initial consideration comprising $16.2 million in cash paid at the closing of the transaction, up to $1.8 million in Ergomed shares to be issued at a price based on the average daily closing price for 30 days preceding the acquisition and within 15 months of the closing of the transaction, subject to reduction for breaches of representations and warranties, and up to a further $7.0 million payable 90% in cash and 10% in shares depending on MedSource’s financial results in the year to 31 December 2021. The EPA includes customary provisions relating to normalised working capital and representations, warranties and indemnities.

The acquisition will be funded using the Company’s existing cash resources without significant depletion of cash available to fund future organic and inorganic growth.

In its financial year ended 31 December 2019, MedSource recorded total revenues of $31.3 million, comprising service fee revenue of $19.3 million and pass-through revenue of $12.0 million. In 2019 adjusted EBITDA was $1.3 million and net assets were $2.6 million.

The transaction is expected to be immediately accretive and earnings enhancing, with further growth and strategic benefits expected in future years.

Webcast and conference call for analysts:

A webcast and conference call for analysts will be held at 1pm GMT on Monday 14th December.

Webcast link: https://edge.media-server.com/mmc/p/a9nxy8n4

Conference call details

UK Participant Local Dial-In: 0800 279 6619

US Participant International Dial-In: +1 6467 413167

International Dial-In: +44 (0) 2071 928338

Event Plus Passcode: 3755635

A copy of the presentation will be made available on the Ergomed website before the webcast, under Reports and Presentations, here: https://ergomedplc.com/investor-relations/reports-and-presentations/

Enquiries:

Ergomed plc Tel: +44 (0) 1483 402 975
Miroslav Reljanović (Executive Chairman) 
Richard Barfield (Chief Financial Officer) 
  
Numis Securities LimitedTel: +44 (0) 20 7260 1000
Freddie Barnfield / Huw Jeremy (Nominated Adviser) 
James Black (Broker) 
  
Consilium Strategic Communications – for UK enquiriesTel: +44 (0) 20 3709 5700
Chris Gardner / Sue Stuartergomed@consilium-comms.com
Matthew Neal / Olivia Manser 
  

About Ergomed plc

Ergomed provides specialist services to the pharmaceutical industry spanning all phases of clinical development, post-approval pharmacovigilance and medical information. Ergomed’s fast-growing services business includes an industry-leading suite of specialist pharmacovigilance (PV) solutions, integrated under the PrimeVigilance brand, a full range of high-quality clinical research and trial management services under the Ergomed brand (CRO), and an internationally recognised specialist expertise in orphan drug development, under PSR. For further information, visit: https://ergomedplc.com. For further information on MedSource, visit: https://medsource.com/.