ERT to Acquire Respiratory Diagnostics Core Lab for $81M
EClinical provider eResearch Technology (ERT) entered into an agreement to purchase the research services division of CareFusion Corporation for $81 million in a deal set to close at the end of June.
CareFusion’s CRS division provides respiratory diagnostics services, manufactures diagnostic devices and also offers cardiac safety and electronic patient reported outcomes (ePRO) services. These services will be integrated into ERT, as will CRS’ 250 employees.
ERT already is a player in the cardiac safety core lab market, but this deal gives the company an entrée into respiratory diagnostics.
Earlier this year, ERT created a new position—the senior vice president of healthcare solutions—to focus on growth opportunities both within the clinical trial industry and in the larger healthcare market. Part of the responsibilities of this new position included looking for acquisition opportunities. The creation of the position seemed to hint that inorganic growth would be an area of high focus for the company in 2010. At the time, ERT president and CEO Michael McKelvey, Ph.D., told CWWeekly that he saw two possible areas for expansion.
“One is what we call ancillary technology vendors surrounding clinical trials—other vendors that do a similar thing to what we do. The second, which is the newer one, is to be able to take those capabilities into the healthcare market,” McKelvey said.
CRS fits both these descriptions as a cardiac safety and ePRO vendor and as a provider and manufacturer of respiratory diagnostics products and services—a new line of business for ERT.
“This transaction delivers on our stated strategy to leverage our cardiac platform and operating model to more broadly support the centralized collection, interpretation and delivery of clinical efficacy and safety information critical for all phases of clinical research and to provide support to leverage our core expertise into the larger healthcare market," McKelvey told investors in a call last Thursday.
CRS has developed more than 20 proprietary diagnostic devices and supporting software platforms for use in the clinical trials industry.
The strategic rationale behind the acquisition, according to ERT, is that it will position the company in a “very attractive clinical end market” and diversify ERT's revenue base. ERT said the CRS acquisition opens up to ERT an estimated $1.3 billion annual market opportunity. CRS also has a strong presence in Germany (230 employees are based there). ERT said this increased European presence will enable the company to expand its international services.
CRS’ estimated 2009 were $49.6 million with operating income of $3.6 million. CRS revenues for the first quarter are estimated to be $16.7 million compared with $6.7 million for the same period a year ago. Its backlog as of March 31, 2010, was approximately $116 million. ERT estimated that CRS will generate revenue growth of between 30% and 35% in 2010. ERT expects the CRS acquisition to be neutral to 2010 earnings per share (EPS) and accretive to 2011 EPS.