Ricerca Biosciences agrees to buy drug discovery, development unit from MDS Pharma Services

Ricerca Biosciences logoUpdated 3:46 p.m.

CONCORD TOWNSHIP, Ohio — Contract drug development organization Ricerca Biosciences LLC has agreed to acquire the discovery and preclinical business of MDS Pharma Services for $35 million, less normal working capital and a two-year capital expenditure reserve, according to Ian Lennox, Ricerca’s chairman and chief executive.

The drug discovery and development business, which MDS Pharma in King of Prussia, Pa. is selling as part of a market repositioning, has locations in Bothell, Wash.; Lyon, France; and Taipei, Taiwan. The proposed transaction is “subject to customary regulatory and closing conditions.” Ricerca said in a statement.

“We have intimate working knowledge of these facilities; all are steeped in decades of experience and expertise,” Lennox said in the statement. “The addition of these facilities and personnel complement Ricerca’s existing facility in Concord, Ohio and position us as a global, preferred provider of discovery and development services.”

The acquisition would more than double Ricerca’s workforce, adding 585 employees in the United States, France and Taiwan to the company’s 265 in Concord. That’s 850 employees. “We intend to keep everyone,” Lennox said in an emailed response to a reporter’s questions. His company will own the Lyon and Taipei facilities and lease those in Bothell.

“Lyon is a premier site with over 40 years of experience performance drug safety assessment studies for biotech, academic and pharmaceutical companies,” Lennox said. “The Bothell and Taiwan sites have over 25 years of experience serving pharmaceutical clients in North America, Europe and Asia.”

Ricerca bills itself as a contract research organization that offers all the discovery and development services needed to take a pharmaceutical company’s target or drug candidate from intellectual property to an Investigational New Drug application with the U.S. Food and Drug Administration.

“My strategy, supported by investors, has been ‘one-stop shopping’ for clients in chemistry, as well as biology,” Lennox said, pointing to his company’s tagline: “Taking you from IP to IND.”

In its own release, MDS, a publicly traded company, said it is selling not only its discovery and preclinical business but also its early stage business, which provides discovery-through-Phase IIa clinical trial services to biotechnology and pharmaceutical companies, for $45 million and “certain minority equity interests.”

When the sale closes in the next two months, MDS will have completed its repositioning strategy and be focused on building its MDS Nordion business, which has leadership positions in medical imaging and radiotherapeutics, and sterilization technologies, MDS said.

“While the sale agreements have been struck in a difficult environment, we believe we are doing what’s necessary to allow us to focus on building MDS Nordion to create shareholder value over the long-term,” Steve West, MDS chief executive, said in his company’s statement.

Sounds like Ricerca — and Bain Capital Ventures and SV Life Sciences, the private equity firms that largely own a new corporation buying the early stage business –  have gotten a deal.  Bain Capital and SV Life Sciences are also Ricerca investors.

After a $50 million financial restructuring in early 2007, Ricerca set its sights on a growth strategy. “In early 2008, we felt Ricerca could continue to grow organically. The cost of acquisitions was too high,” Lennox said. “In mid-2009, our board supported my initiative to seek acquisitions that ‘fit’ our strategy, but also diversified both our mix of clients as well as our geographic reach of clients.”

The acquisition of the MDS units moves Ricerca from 85 percent biotech clients to 50 percent; 10 percent global pharmaceutical clients to 35 percent, he said. It also moves the company from having 90 percent of its clients in North America, to having 45 percent in North America, 45 percent in Europe and 10 percent in Asia.

“The acquisition is strategically brilliant and at a reasonable cost,” Lennox said.

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