U.S. CRO MedSource Consulting Acquired for 19X Earnings by UK-based Ergomed

On December 14, 2020, UK-based Ergomed plc (AIM:ERGO) announced its acquisition of Texas-based MedSource Consulting, Inc., a full-service clinical research organization (CRO) focused on complex diseases and study designs. Under the terms of the transaction, Ergomed agreed to acquire 100% of MedSource for total consideration up to $25 million, which is comprised of both initial and deferred cash and shares. The initial consideration consists of a $16.2 million cash payment and $1.8 million in Ergomed shares, issued at a price based on the average daily closing price for 30 days preceding the acquisition and within 15 months of closing of the acquisition. The deferred consideration is up to $7 million, contingent on fiscal year 2021 financial results, and if achieved, consists of 90% payable in cash and 10% payable in Ergomed shares.

For the fiscal year ending December 31, 2019, MedSource reported revenue and adjusted EBITDA of $31.3 million and $1.3 million, respectively, translating to acquisition multiples of 0.799x revenue and 19.23x adjusted EBITDA. Once finalized, MedSource expects 2020 revenue to come in slightly lower due to COVID-19 related delays, but anticipate those delays to unwind in 2021, returning to growth.

MedSource was founded in 1997 in Houston, Texas as an oncology focused CRO. Today, MedSource has participated in over 700 clinical trials globally, across oncology, neurology, and other rare diseases. The MedSource team of 130 professionals, located across offices in the U.S., Canada, and the UK, are consistently recognized for being life science leaders.

The acquisition of MedSource provides Ergomed with a significantly expanded presence in the CRO sector, growing Ergomed’s CRO business by 70%. In combination with Ergomed’s earlier acquisition of Ashfield Pharmacovigilance from UDG Healthcare (now PrimeVigilance USA), Ergomed has created a strong foothold in the North American market. Dr. Miroslav Reljanović, Executive Chairman of Ergomed, stated, “The addition of MedSource and its complementary expertise in oncology and rare disease will further establish Ergomed as a specialized services provider in the strategically important U.S. market, building on the successful acquisition and integration of Ashfield Pharmacovigilance earlier this year. We look forward to developing the potential of this new business to offer truly global clinical research services to our international customer base.”

The acquisition is funded through Ergomed’s existing cash resources and is expected to be immediately accretive to earnings.

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Sources:

https://www.contractpharma.com/contents/view_breaking-news/2020-12-15/ergomed-acquires-medsource/

https://www.appliedclinicaltrialsonline.com/view/ergomed-acquires-medsource

https://www.fiercebiotech.com/cro/ergomed-buys-up-cancer-rare-disease-cro-medsource