One door closes, and another opens

MDS divests Pharma Services business to Ricerca Biosciences

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CONCORD, Ohio—Having worked since September 2009 to focus its business exclusively on medical isotopes, MDS Inc. announced in mid-February the sale of MDS Pharma Services, the company's discovery and preclinical business, to Ricerca Biosciences LLC, a contract research organization (CRO) focused on medicinal chemistry and discovery biology services.

The $45 million purchase price includes a five-year, $25 million note and $20 million in cash that will be adjusted for working capital and other items. After currently projected adjustments, the $20 million cash payment is estimated to result in net cash proceeds of approximately $7 million.

The sale was finalized March 8 and serves as the completion of MDS' repositioning strategy to focus on building its MDS Nordion business, which has leadership positions in medical imaging, radiotherapeutics and sterilization technologies. In September, MDS sold its mass spectrometry business, MDS Analytical Technologies, to Danaher Corp., an instrument manufacturer based in Washington, D.C., for $650 million in cash. Under a separate but concurrent arrangement, Danaher agreed to purchase the portion of AB SCIEX, the Applied Biosystems/MDS Analytical Technologies mass spectrometry joint venture held by Life Technologies Corp. At that time, MDS announced that MDS Pharma Services, which is focused on early-stage discovery operations through Phase IIa, was also up for sale.

"The agreements to divest the MDS Pharma Services business are the last major milestone in the repositioning of the company," said Steve West, CEO of MDS Inc., in a statement. "While the sale agreements have been struck in a difficult environment, we believe we are doing what's necessary to allow us to focus on building MDS Nordion to create shareholder value over the long term."

MDS Pharma Services' early-stage operations include approximately 1,700 employees at 10 sites: Montreal, Canada; Bothell, Wash.; Neptune, N.J.; Tempe, Ariz.; Lincoln, Neb.; King of Prussia, Pa.; Lyon, France; Belfast, Northern Ireland; Zurich, Switzerland; and Taipei, Taiwan. The early-stage business is comprised of discovery and preclinical services, which include pharmacology/drug metabolism and pharmacokinetics (DMPK); drug safety assessment; regulatory services; and early-stage development services, which consist of early clinical research (Phase I to IIa), bioanalytical services and clinical pharmacology.

MDS says it will close its early-stage facility in Montreal. About 275 MDS jobs will be lost over the next 12 months as part of the plant closing. The sale does not include MDS Pharma Services' headquarters in King of Prussia, Pa.

Meanwhile, Ricerca, which says it is working to become a global, preferred provider of discovery and development services, will acquire facilities and almost 600 associates in Bothell, Washington; Lyon, France; and Taipei, Taiwan, adding to its existing headquarters in Concord, Ohio.

"The addition of these facilities and personnel complement Ricerca's existing facility in Concord, Ohio, and position us as a global, preferred provider of discovery and development services," says Ricerca chairman and CEO Ian Lennox. "We have intimate working knowledge of these facilities; all are steeped in decades of experience and expertise."

According to Lennox, MDS Pharma Services' offerings "further propel our unique approach of taking companies in the biopharmaceutical industry from the point of intellectual property (IP) to the submission of an investigational new drug (IND), with capabilities even reaching into the post-IND phases."

Ultimately, Lennox says that Ricerca was attracted to MDS' skills, the quality of its employees, state-of-the-art facilities and its reputation within the biopharmaceutical industry.

"With facilities worldwide combining local experience, immense scientific expertise and a strong commitment to excellent client service, this acquisition fits Ricerca's growth strategy well," he adds. "The expanded Ricerca organization is a research partner clients can rely on to think strategically about projects, anticipate needs and rapidly deliver study results."  

The increased capacity and capabilities, Lennox says, deliver numerous benefits, including: global toxicology allowing coordination of projects between North America, Europe and Asia; access to cGMP and non-GMP API synthesis and process development for IND-enabling toxicology performed in North America and Europe; expanded and enhanced DMPK services and efficacy models; streamlined lead optimization service combining efficacy and biomarker assays with medicinal chemistry; complete pharmacological profiling services, including molecular, cellular, tissue and in vivo assays of development candidates; and radiolabeled compound synthesis available for all locations worldwide.

Lennox points out that scientific and technical capabilities are critical, but the real differentiator in the CRO business is effective communication through a service-and-value proposition.  

"It is imperative for Ricerca to move beyond preferred provider models of procurement to the premier provider of cost effective, high-quality, personalized service—all delivered on time with accurate results," he notes.

Ricerca officials also believe that the acquisition will position Ricerca as an innovator in the drug discovery and development research industry.  

"Innovation has and will always be rewarded," Lennox notes. "It is important to challenge industry leaders to inspire the confidence to discover meaningful new chemical entities for biological systems. We are poised to deliver the services needed today for the discoveries of tomorrow."

When it comes to measuring success of the acquisition, Lennox says the definition is operational.  

"To our clients in the biopharmaceutical industry, success will be providing impeccable science combined with an outstanding services experience," he says. "To Ricerca, it will be the ability to attract and retain clients in conjunction with the retention of our valuable asset in terms of associates—the years of intellectual capital and expertise resident in our operations are the foundation of our business. Ultimately, success will be the culmination of the day-to-day activities combined with our willingness to take risks and focus on innovations yet potentially unknown to our industry."


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