Ergomed acquires PharmInvent

Background to the acquisition

This acquisition is consistent with Ergomed’s stated strategy to grow its existing, profitable services businesses both organically and through bolt-on acquisitions.

The transaction will expand and complement its existing pharmacovigilance division, PrimeVigilance, which has grown with a CAGR of 40% over the last 4 years and is having a very successful 2016.

PharmInvent is led by an experienced, ex-regulatory agency team that offers drug safety and regulatory consultancy expertise. They also have an extensive network of international pharmacovigilance experts that provide advice and support on both local product safety and offer integrated global support for pharma and generic companies’ products.

Following the completion of the acquisition PharmInvent will continue to be led by its founders, Dr Jan Petracek and Dr Martin Votava. Dr Petracek was formerly a Head of the Risk Management Section at the European Medicines Agency (EMA), while Dr Votava represented the Czech Republic in The Committee for Medicinal Products for Human Use at the EMA.

Combining PharmInvent’s proven expertise with PrimeVigilance creates one of the largest international specialist service providers in the highly regulated drug safety sector.

The enlarged business will have a broad international client list offering significant opportunities to cross sell, as well as an expanded range of services to attract new customers.

From this strong position Ergomed’s strategy is to actively expand the pharmacovigilance and regulatory division, especially in the US, thereby underpinning Ergomed’s planned growth of revenues and group profitability.

Ergomed CEO Miroslav Reljanovic said: “This synergistic acquisition of PharmInvent both complements and consolidates PrimeVigilance’s market-leading position in outsourced pharmacovigilance services for clients developing or selling drug products across the world.

"Combining these companies offers an expert and complete solution for clients and is consistent with our strategy to accelerate further this strongly growing part of our service business that addresses an expanding, multi-billion dollar market. We are therefore confident that this earnings accretive deal will quickly translate into significant and sustainable shareholder value. We are delighted to be working with Jan and his team and welcome them to Ergomed.”

PharmInvent CEO Jan Petracek said: “These are very exciting times for PharmInvent. We have spent the last six years building our business and reputation and now look forward to significantly leveraging our position working alongside PrimeVigilance.

"Together, our skills will allow us to seize significant new opportunities as well as expand our offering to our existing customer base. My team and I are delighted to be joining the Ergomed team.”

Deal terms and PharmInvent trading history

Under the terms of the deal Ergomed is acquiring 100 per cent of the issued share capital of PharmInvent for an initial consideration of €4.8 million (£4.1 million), with contingent consideration based on the achievement of EBITDA targets for 2016, 2017 and 2018 of up to an aggregate further €3.2 million (£2.7 million).

The initial and contingent consideration are both to be satisfied 80% in cash and 20% in new Ergomed ordinary shares. The initial share consideration will be satisfied through the issuance of 640,576 new Ordinary Shares in Ergomed at an issue price of 128.78 pence per share.  Admission of these new Ordinary Shares is expected to take place at 8.00 a.m. on 2 December 2016 (“Admission”). 

Following Admission, the total number of Ordinary Shares in the Company will be 40,504,806. The Company holds no treasury shares and therefore the total number of voting rights is 40,504,806. The deal is expected to be immediately accretive to Ergomed’s 2017 earnings per share.

In the year ended 31 December 2015, PharmInvent reported revenue of €3.0million and adjusted EBITDA of €0.7million and had net assets at 31 December 2015 of €1.1million.

PharmInvent’s revenue is expected to grow 35% to approximately €4.0 million (£3.4 million) for the year ending 31 December 2016. Adjusted EBITDA for the same period is expected to be approximately €0.8 million (£0.7 million).