Lab Research signs LOI with US buyer

03-Feb-2011 - Last updated on 03-Feb-2011 at 10:16 GMT

Lab Research has signed a non-binding letter of intent (LOI) with a US private equity group interested in acquiring the preclinical contract research organisation (CRO).

Under the deal the, as yet unnamed, US group would pay $13m (€9.4m) to acquire Lab Research, its assets, finance operations and repay some of its debts which were C$39m as of September 30, 2010.

Lab Research, which has agreed to negotiate exclusively with the US investment group until February 23, said that, if the deal is completed, its shareholders will not receive any of the proceeds from the transaction.

In a press statement, CEO Luc Mainville said that: “the transaction, once completed, will result in the continuation and growth of the activities of the Company within the new entity and therefore be beneficial to our employees, key suppliers and customers.”

The firm has also withdrawn the C$10m its marketed public offering that it announced in October last year.

Strategic review

Lab Research has had a difficult few years. In 2008 Akela Pharma sued the firm after preclinical trials of fentanyl taifun it conducted on Akela’s behalf were deemed invalid by the US Food and Drug Administration (FDA).

The case was settled the following March when Lab Research agreed to pay Akela C$2m and issue warrants entitling the firm to 500,000 of its common shares.

These problems have been compounded in recent years by a continued low level of industry demand for early-phase development services, which has impacted on Lab Research’s earnings.

For 2008, for example, the firm posted a net loss of C$6.6m, which increased to C$10.4m the following year and, in 2010, were C$7.14m as of September 30 last year.

In response the Quebec, Canada-headquartered preclinical CRO began a strategic review of business operations in October last year.

It secured a C$4m credit facility with its Canadian lender to fund ongoing operations during the review process, which was originally due to be completed by December 17 last year.

However, late last week, Lab Research announced that the process would continue and revealed that it had been granted an extension to its credit facility through to January 31, with an option to extend further.