TORONTO—PharmEng International Inc. announced that it acquired Rootlink Technic Inc., whose laboratory instrumentation services will augment PharmEng's contract manufacturing and consulting offerings to pharmaceutical and biotech companies.
The merger recognizes PharmEng's lack of drug discovery instrumentation services and completes another step in its vertical integration strategy for establishing a one-stop shop with broad offerings, says CEO Alan Kwong. "It's a tremendous synergy for the two companies. And the size of the company that they have is in the ballpark of what we would like to acquire."
Despite Rootlink's small size—three service engineers—Rootlink president Joe Cheng says the company serves all the biotech and pharmaceutical companies in southern Ontario. "We provide our customers with all the hardware, maintenance of the systems, support, and validation services," he says. Rootlink covers mass spectrometry, gas chromatography, automated dissolution and other equipment.
Rootlink maintains strong expertise in analytical hardware repair service, according to founder Gabriel Lam, who, after nearly 20 years with Hewlett-Packard and Agilent, established Rootlink in 2001 to provide more service options to customers. "If they are not getting it all from the vendor, they will go somewhere else to get that particular service," says Lam. Because Rootlink provides consulting services that go beyond manufacturers', Lam believes he actually increases their product demand.
The acquisition closed in July, with PharmEng spending cash and shares to purchase Rootlink's assets and intellectual property, says Kwong. Lam is senior director for a new Laboratory Instrumentation Services division at PharmEng, and Cheng will work in business development as senior director.
Beyond expanding markets for Rootlink and PharmEng, the merger brings new opportunities and benefits to Rootlink employees, say Lam and Cheng. It also enables Rootlink's engineers to work more with clients, leaving marketing, accounting, and other tasks to PharmEng. "Right now we can get them to focus on the business side," says Kwong. "Don't worry about the overhead… It's going to be a stepping stone to exponentially increase revenue and definitely the profit of the laboratory services."
Revenues have increased steadily at PharmEng, from $116,000 CDN in 1997, its founding year, to $7.5 million in 2006. Kwong expects to continue seeing annual 50 percent growth rates under a business strategy of acquisition and organic growth. PharmEng went public in April 2005, and the Rootlink acquisition is its first.
PharmEng aims to serve a spectrum of customers, from incubator companies to multinationals. PharmEng has been expanding its reach south of the Canadian border, beginning with a new office in North Carolina in late 2005. Three additional offices—Boston, San Francisco, and Philadelphia—will start serving local companies by late 2006. International activity includes acquiring a controlling interest in a Chinese consulting company, Beijing BRD Lixin PharmaTech Co. Ltd., and delivering training on biotech and pharma requirements under a collaborative training program for the Taiwanese Centre for Disease Control and Industrial Development Bureau. "It's very prestigious," says Kwong.
