Avista Healthcare Public Acquisition Corp. (AHPAC) said today it will merge with the nonclinical contract research organization (CRO) Envigo International Holdings in a deal designed to speed up growth for Envigo by tapping into publicly traded AHPAC’s access to capital markets.
The combined company would command an enterprise value of approximately $924 million, AHPAC and Envigo said—representing 10.6 times privately held Envigo's estimated pro forma adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for 2018.
Envigo offers nonclinical R&D services and research models for the life sciences, chemical, crop protection, and academic markets. The company says its scientific support is designed to enable pharmaceutical companies, universities, governments, and other organizations carrying out research to reduce costs, increase speed, and enhance productivity and effectiveness in drug discovery and development.
Envigo employs more than 3800 people across more than 50 locations in 14 countries worldwide. The company is headquartered in Huntingdon, Cambridgeshire, U.K., with divisional headquarters for its research models and services business in the U.S.
Envigo was formed in 2015 through the merger of Huntingdon Life Sciences, Harlan Laboratories, and three subsidiaries: “Envigo has demonstrated the ability to execute on its acquisition growth strategy to broaden service capabilities and realize efficiencies,” David Burgstahler, AHPAC’s president and CEO, said in a statement.
In March, Envigo committed to developing and internally validating five to seven ion channel In vitro tests for measuring cardiac risk potential, in anticipation of Comprehensive In Vitro Proarrhythmia Assay (CiPA) recommendations expected by year’s end. Envigo said at the time its assays will form an integrated suite of tests that include the company’s existing hERG (Human Ether-à-go-go-Related Gene) assay. Starting in 2018, Envigo said, it expects to create between five and 10 new in vitro and in silico tests on average per year.
Focus on De-Risking Drug Development
Two months earlier in January, Envigo announced the £350,000 ($451,280) refurbishing of its three ecotoxicology laboratories in Shardlow, Derbyshire, U.K., a project that included improvements to the air conditioning, water supply, equipment, and general working environment.
That project reflects what GEN noted earlier this year as Envigo’s focus on derisking drug development using nonanimal technologies to mitigate toxicity and other major drug development risks.
“(Envigo) represents an ideal partner for AHPAC given its leading position in the global nonclinical contract research industry, attractive financial profile, and numerous avenues for growth,” Burgstahler said. “We believe the Company is well-positioned to benefit from the industry tailwinds driving growth in the nonclinical CRO sector.
The deal—to be funded through a combination of cash, stock, and rollover debt financing—is expected to close before the end of the year, subject to customary and other closing conditions that include regulatory approvals and approvals from AHPAC's shareholders.
Once the deal is closed, Envigo will become a wholly owned subsidiary of AHPAC, which will be renamed Envigo International Holdings, and is expected to be listed on the NASDAQ stock exchange.
Envigo president and CEO Adrian Hardy, Ph.D., will hold the same position in the combined company and also serve on its board of directors. The board will also include at least two representatives of AHPAC sponsor Avista Acquisition Corp. and some members of the current Envigo’s board.
AHPAC went public last year through a $300 million initial public offering in which it sold 30 million shares at $10 per share on the NASDAQ Capital Market.
Investors in AHPAC's IPO will hold 48% of stock in the combined company, while existing equity owners of Envigo would retain 46% and AHPAC founders 6%. Envigo's key existing shareholders have agreed to remain committed long-term partners by rolling over a “significant” portion of their equity, the companies said, in return for being entitled to future cash payments pursuant to a tax receivable agreement.