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04.23.10: PHARMSOURCE Bio/pharmaceutical Outsourcing Report
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Ricerca Expands Discovery Capabilities with Finalization of MDS Pharma Services Acquisition
Featured in Volume 15, Number 3, March 2010
This month, Ricerca Biosciences, LLC (Concord, Ohio, USA), finalized its deal with MDS Pharma Services (MDSPS – Saint-Laurent, Quebec, Canada) to purchase the discovery and preclinical business of MDSPS for USD 35 million. The acquisition allows Ricerca to add molecular profiling, pharmacology/DMPK and drug safety assessment services to its portfolio, which already includes capabilities in discovery and medicinal chemistry, API process chemistry, cGMP manufacturing and scale-up, as well as IND-enabling toxicology.
“Over the past five years, Ricerca has been making an attempt, quite successfully, to differentiate our capabilities in the marketplace, in contrast with other key providers. We offer a very interesting mix of chemistry and biology services and [we recognize that] it is unique to have a CRO with competencies in both,” commented Ian Lennox, chairman and CEO of Ricerca, to PharmSource. “Our goal has been to offer our clients services very early on from the IP stage all the way through the delivery to IND.” The company has been in the middle of a deliberate attempt to assemble both chemistry and biology capabilities and offer these services to its target clientele, mid-size pharma companies down to smaller biotech firms. Ricerca executives believe that this sector of the market has the strongest growth potential over the next five years.
While it may appear as if Ricerca is backward integrating into discovery services with this acquisition, Lennox asserts that this is not the case. “We are not backward integrating into discovery but rather adding the ability to screen the compounds before making them. It will enable us to be more involved with our clients [as] we will be able to screen compounds in vitro to determine which will move forward. This capability fits nicely with the front end of our chemistry business,” Lennox explained.
“Previously, we also couldn’t take our clients to the next step of making [small quantities of] the compound for preliminary safety testing. Clients would have to use another contract service provider for this; [however,] now [they] have the opportunity to outsource with one provider and get drug candidates without having to go to two or three different sources.”
As a part of the acquisition, Ricerca gains facilities in Bothell, Washington, USA; Lyon, France; and Taipei, Taiwan. The Bothell and Taipei sites offer discovery services, while the Lyon site specializes in preclinical toxicology and safety pharmacology testing. “Our clients were looking for these services. [Plus, we] now have drug safety assessment capabilities in Europe. Not only does this provide us with a geographical advantage, but it will significantly improve our drug safety and toxicology services in North America as well,” Lennox stated.
A Larger Geographic Reach
The MDSPS acquisition also allows Ricerca to nearly triple its workforce to 850 employees worldwide and serves to radically enhance Ricerca’s geographic reach while diversifying its mix of clients. “We have added a European presence and doubled our Asian presence with this deal,” emphasized Lennox.
In fact, prior to the acquisition, Ricerca’s clientele was approximately 85% to 90% North American and 5% to 10% Asian. The company had no European clients. However, with the MDSPS deal, the company’s clientele will be more evenly distributed and better mimic the overall industry, with 50% of its clients coming from North America, 35% from Europe and 15% from Asia.
The MDSPS deal is also a crucial aspect of Ricerca’s strategy for the Asia-Pacific region. In fact, 20% of its workforce will now be based in Asia. “Taiwan is an important element in Asia, which is continuing to develop and will have a strong pharma basis. We now have capabilities in their time zone and will be well-positioned for the significant growth expected in Asia. The Taipei facility is an important element in our five- to ten-year strategy and [provides us with a] foothold in the region,” explained Lennox.
The Taipei facility currently does a significant amount of in vitro profiling with a turnaround time of five to seven days. “With 80% of our business now in North America and Europe, the Taipei facility provides us with fast turnaround, knowledge and information needed to screen compounds quickly,” said Lennox. Over the next 18 months, Ricerca plans to build up its capabilities at the Taipei site, providing it with the ability to synthesize compounds as well. “The Taipei facility will eventually look like the Ricerca facilities in North America. We want to provide both chemistry and biology services to take care of clients in that area as well,” explained Lennox, who is currently planning a trip to the site in April or May 2010 to determine which capabilities need to be added to reach the company’s goals for the facility.
Strong and Moving Forward
Ricerca believes that the MDSPS deal leaves it well positioned for the future and makes it more competitive among other providers that offer services to small and mid-size bio/pharma companies. In fact, not only did the MDSPS acquisition allow Ricerca to expand its service offerings, but the company did not sacrifice its financial health to do so and believes this to be an important part of its overall position in the industry. “We incurred no debt with this transaction; it was completely financed through our equity partners. The Ricerca balance sheet of financial health is very good. While many of our competitors are getting hurt with limited access to capital, Ricerca is fully financed and debt-free. This is a huge competitive advantage for us,” concluded Lennox.