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Charles River Laboratories' (CRL, Wilmington, MA) acquisition of Inveresk Research Group Inc. (Edinburgh, Scotland and Research Triangle Park, NC) is this summer's major financial event. CRL will pay Inveresk shareholders more than $38 per share (0.48 shares of CRL stock plus $15.15 in cash for each share of Inveresk stock) for a total of $1.5 billion.

James Foster, CEO of CRL, says the deal will be "transformative" for the company. With the addition of Inveresk's revenue, CRL's profit will increase by more than 40%, pushing the company over the $1-billion-per-year mark. In addition, CRL will gain two large facilities totaling more than 725,000 [ft.sup.2], broad offerings in general toxicology, strong positions in inhalation and infusion toxicology, and a first-tier position in the preclinical services market.

CRL acknowledged Inveresk's strong position in the preclinical market (and in the clinical market, where CRL has no position) by announcing that the development services businesses will operate under the Inveresk name and will be managed by Inveresk executives. Inveresk CEO Walter Nimmo, MD, will become vice-chairman of the board and chief scientific officer of CRL, and will oversee the development services business.

With the acquisition of Inveresk, CRL will enter the Phase I-IV clinical business for the first time. Poster says the company will try to expand the business in a "focused way," concentrating on the spectrum from Phase I through early Phase III. Some industry analysts expect CRL will acquire more clinical research companies in the near term.

CRL doesn't foresee major synergies from the acquisition, projecting it will reduce costs by $10 million in 2005 and by an additional $10 million in 2006. Expected major benefits include cross-selling capabilities across the discovery-preclinical-clinical arc. The increased heft should result in a greater following for CRL's stock on Wall Street.

PRA files for initial public offering

PRA International (McLean, VA), a CRO with offerings in Phase I-IV clinical research, launched its initial public offering this summer. The next most recent major CRO offering was Inveresk's in June 2002, raising $156 million.

PRA International's S-1 filing did not provide details about the number or price of shares, but the company said it hoped to raise as much as $144 million in the offering. Shares will be sold by the company and its current shareholders, of which Genstar Capital III L.P. (49% stake) and Caisse de depot et placement du Quebec (10% stake) are the largest. The company will use its share of the proceeds to retire a $57-million long-term debt and for general business purposes.

PRA International's services include clinical pharmacology (Phase I), Phase II-IV trial management, and regulatory services, with particular strength in treatments for oncology and central nervous system diseases. In 2003, revenues grew by 41% (to $248 million in revenues and $31-million in operating profits) because of organic growth and the full effect of the 2002 Cromedica and Staticon acquisitions.

In the meantime, Sigma-Aldrich (St. Louis, MO) is on an acquisition binge. In June, the company announced the acquisition of Tetrionics (Madison, WI), whose services include synthesis and scale-up, analytical chemistry, regulatory support, and GMP manufacturing of active pharmaceutical ingredients with a focus on high potency and cytotoxic compounds. The Tetrionics deal follows Sigma-Aldrich's May acquisition of Ultrafine, a UK-based process development and manufacturing services provider for pharmaceutical chemicals.

Although neither acquisition is big (acquisition prices weren't announced and the acquired entities' revenues probably are less than $20 million each), they stand out because the pharmaceutical chemical industry has been suffering. The Sigma-Aldrich deals will probably be successful because they are in niches that are experiencing strong demand.

aaiPharma files 10-K

aaiPharma (Wilmington, NC), the parent company of AAI Development Services, filed its delayed Form 10-K with the Securities and Exchange Commission (SEC) in June. The company delayed its year-end audit and 10-K filing while the board of directors investigated problems with channel stuffing in its proprietary products business (i.e., selling products to wholesalers in quantities well in excess of what consumers buy).

The investigation led to a restatement of aaiPharma's 2003 financial performance, as announced in February 2004. February's reported $283-million revenue dropped to $225 million, and the company reported a $21-million operating loss rather than the previously reported $69-million profit. Despite the losses, the company says it has adequate cash flow and credit facilities to meet its operating requirements.

The 10-K and 10-Q (for Q1 2004 results) filings brought aaiPharma up-to-date on its SEC filings. NASDAQ subsequently removed the threat of delisting its stock. In addition, the company revamped its financial controls and replaced its chief financial officer. Challenges from the sales brouhaha still remain, however, including an ongoing federal investigation and shareholder lawsuits.

With the changes in aaiPharma's proprietary products business, its AAI Development Services business now accounts for nearly 50% of corporate revenue. Contract services revenues increased nearly 20% in the first half of 2004. According to the president of AAI Development Services, Vijay Aggarwal, the services business has received greater senior management attention since the return of company founder Fred Sancilio, PhD, as CEO. Aggarwal notes that the company recently expanded its stability storage capabilities and plans to add bioanalytical capacity as soon as capital spending loosens. Aggarwal, who has kept in close touch with clients throughout the crisis, says of the current situation, "it's our [AAI Development Services] time to show the company what we can do."