Encorium announces acquisition and merger

The US-based CRO said it has signed a letter of intent to buy Prologue Research International for $13m, of which $4.5m will be paid in cash.

In order to do so the company plans to take out a $5m loan from Chardan Capital.

The remainder will be paid in a combination of non-convertible, non-redeemable senior subordinated debt and convertible, redeemable senior subordinated debt.

The transaction is now subject to the completion of due diligence and approval by both parties' Board of Directors and the signing of a definitive agreement.

All being well, the deal is expected to close in the third quarter of 2008.

In the meantime, Encorium has made a $500,000 non-refundable cash payment to Prologue in exchange for the CRO granting an exclusivity period to the company.

Prologue was established in 1998 as a not-for-profit CRO focused exclusively on providing clinical research services for oncology trials from Phase I to Phase IV, with support from The James Cancer Hospital and the Solove Research Center of The Ohio State University (OSU).

For the year ended December 31, 2007, Prologue reported net revenues of $12.2m and an operating profit of $0.9m. Following the completion of the deal, Prologue's president and CEO Tom Ludlam will manage the new combined entity's oncology practice and "play a significant role in the integration of the business", Encorium said.

Commenting on the firm's motivation to buy Prologue, Kai Lindevall, Encorium's CEO said that the company's goal has always been to grow into a global, midsized CRO with " expertise in multiple targeted therapeutic areas, including oncology ".

" Prologue represents a compelling strategic acquisition opportunity for Encorium for many reasons ", he said, including its historical growth and strong market position and reputation within the increasingly important oncology therapeutic area; the multiple future organic growth opportunities offered by the combined organisation; the cross-selling opportunities to the clients of both companies; and the potential for a growing collaboration with The James Cancer Hospital and Comprehensive Cancer Center of the OSU, " whose recognition in the area of cancer therapy has grown globally over the last several years ".

Meanwhile, Encorium has also just announced that it will soon merge Fine Success Investments into the firm, in order to broaden its global reach.

Fine Success, which does business as Linkcon, is a British Virgin Islands company and by the time of the merger - which is still subject to the usual formalities, including due diligence - it will have acquired CROs in India, Latin America and China, Encorium said.

The integration of Fine Success into Encorium is expected to add $11m to the CRO's annual revenues, with the joint entity likely to reap in $50m to $55m a year.

Commenting on the planned merger, Lindevall said: " CROs must be global in order to be competitive ".

" Regulatory authorities worldwide are requiring more safety data, and the size of clinical trials continues to increase.

CROs require access to large, multiethnic populations with a wide variety of disease states ."