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Ergomed plc, a company focused on providing specialized services to the pharmaceutical industry, has announced the acquisition of Ashfield Pharmacovigilance Inc. (“Ashfield PV”), a specialist pharmacovigilance services provider based in Cary in the Research Triangle, North Carolina, USA from UDG Healthcare US Holdings, Inc., the US operating subsidiary of UDG Healthcare plc (“UDG” or the “Seller”). Ergomed has acquired the entire issued share capital of Ashfield PV for a total cash consideration of $10 million.
Dr Miroslav ReljanoviÄ, Executive Chairman of Ergomed, said, “The acquisition of Ashfield PV is a major step forward for Ergomed in the strategically important US market. It provides a significant US pharmacovigilance presence and access to a genuinely global offering for customers. It also strengthens the US platform for the Ergomed CRO business as we continue our drive towards becoming a leading mid-tier pharmaceutical services specialist with a global presence. We are enthusiastic about bringing together the specialist skills and expertise of both businesses and providing the full benefit of the combination to our clients. We look forward to welcoming the Ashfield PV team into Ergomed’s PrimeVigilance division and to working with them to grow the combined business.”
Lee Chaiken, Senior Vice President and General Manager of Ashfield PV, said, “We are delighted to join the PrimeVigilance business and to have the opportunity to work with the whole Ergomed group. With our existing strong service and loyal clients in North America, we are confident that combining with PrimeVigilance will provide a platform to grow the combined pharmacovigilance business through additional services, market- leading systems and extended coverage globally.”
Ashfield PV is a provider in the pharmacovigilance services sector. It was founded as Drug Safety Alliance (DSA) in 2000 and was acquired by UDG in 2012. The company has maintained an excellent reputation as a leader amongst a small field of expert independent specialist pharmacovigilance providers in North America.
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:
Expanded geographic coverage for PrimeVigilance and enhanced growth.The combined business will enable coverage of North America to be offered to PrimeVigilance’s existing customers and global coverage to Ashfield PV’s existing customers. Both Ashfield PV’s and PrimeVigilance’s existing clients and potential new clients in North America are expected to find the increased global capabilities of the combined business more attractive. The Acquisition is therefore expected to further enhance the already strong growth rate in the existing PrimeVigilance business and to be revenue enhancing in the acquired client base of Ashfield PV.
Economies of scale and leverage of prior investments. PrimeVigilance’s strong history of investment in technology, infrastructure and systems has ensured that it is a market leader, offering highly effective and compliant solutions to all its clients. The Acquisition is expected to drive economies of scale, as prior investments and existing support functions are leveraged across Ergomed’s entire customer base.
Enhanced platform for broader services business. The Acquisition will support Ergomed’s drive to further develop its broader combined CRO and PV business globally, adding to the existing US presence in its CRO business and providing a platform for potential further growth in North America.
The Acquisition will be funded using the Company’s existing cash resources, without significant detriment to the Company’s ability to fund future potential acquisition opportunities. The Company is expected to continue to generate strong positive cash flow from its contracted order book, which at its interim results in September were reported to be 26.9% up on the prior year, as well as from significant recent new business wins.
Acquisition terms and Ashfield PV trading history
Under the terms of the sale and purchase agreement (the “SPA”), Ergomed has acquired the entire issued share capital of Ashfield PV for a total cash consideration of $10 million. The SPA includes customary provisions relating to normalized working capital together with warranties and indemnities to be provided by the Seller in favor of Ergomed, with any claims under these being subject to certain customary financial thresholds and caps, as well as to matters disclosed by the Seller. A transitional services agreement is in place to ensure continuity to Ashfield PV of certain services provided to it by the Seller.
In its financial year ended 30 September 2019, Ashfield PV reported revenue of $11.6 million and adjusted EBITDA of $0.9 million and had net assets of $2.8 million. The order book of contracted future revenues was $9.8 million.
The acquisition is expected to be accretive to Ergomed’s 2020 earnings per share.