A Medical Device Daily

Encorium Group (Wayne, Pennsylvania), a CRO that provides design, development, and management capabilities for clinical trials and patient registries, reported its intention to acquire Prologue Research International (Columbus, Ohio), a CRO that specializes in clinical research services for Phase I through Phase IV trials in oncology and oncology-related studies. The company also reported its plans to combine with Fine Success Investments, a British Virgin Islands company doing business as Linkcon.

Encorium said it would acquire all of the issued and outstanding shares of Prologue for $13 million, consisting of $4.5 million in cash and $8.5 million in a combination of non-convertible, non-redeemable senior subordinated debt and convertible, redeemable senior subordinated debt.

The company said it intends to fund the cash portion of the deal with a $5 million loan from Chardan Capital. The loan is expected to bear interest at a rate not greater than 10% per annum and will be senior unsecured debt. Principal and all accrued interest will be payable upon the earlier of the consummation of Encorium's merger with Linkcon, or 12 months from the date of the note.

In addition to the $13 million in consideration that Encorium will pay to the existing Prologue security holders, the company has made a $500,000 non-refundable cash payment to Prologue in exchange for Prologue's granting an exclusivity period to the company. The closing of the deal is subject to completion of Encorium's due diligence, approval of the transaction by both parties' boards and the signing of a definitive agreement. The closing is expected to occur in the 3Q08.

"We believe that this acquisition, along with our announcement this afternoon of Encorium's letter of intent to combine with Linkcon, creates a firm foundation for Encorium to become a leading global service provider to the biopharmaceutical and medical device industries," said Kai Lindevall, MD, PhD, Encorium's CEO. "As we have discussed in the past, our goal has always been to grow into a global, midsized CRO with expertise in multiple targeted therapeutic areas, including oncology."

Lindevall said Prologue represents a "compelling strategic acquisition opportunity" for many reasons including: its historical growth and strong market position and reputation within the increasingly important oncology therapeutic area; the multiple future organic growth opportunities offered by the combined organization; the cross-selling opportunities to the clients of both companies; and the potential for a growing collaboration with The James Cancer Hospital and Comprehensive Cancer Center of The Ohio State University (OSU; Columbus), whose recognition in the area of cancer therapy has grown globally over the last several years.

Prologue was established in 1998 as a not-for-profit CRO focused exclusively on oncology trials, with support from The James Cancer Hospital/Solove Research Center of OSU.

In the company's other deal, Linkcon will merge with and into Encorium. Linkcon shareholders will be issued roughly 12.5 million shares of Encorium common stock. According to the company, Chardan, a merchant bank and founder of Linkcon, is expected to oversee the raising of $25 million on behalf of Linkcon in exchange for about 10 million shares of the combined entity. The $25 million raised on behalf of Linkcon will be used to fund the acquisitions, repay a portion of the debt incurred in connection with the proposed acquisition of Prologue and for working capital. Following the merger and the investment, Linkcon and its investors will own about 22.5 million shares of the combined entity, and Encorium shareholders will own roughly 23.6 million shares (inclusive of up to 3 million shares issuable upon conversion of the convertible notes to the existing security holders of Prologue). The total number of shares of Encorium issued and outstanding at the time of the merger is expected to be about 46.1 million.

Closing is subject to approval by Encorium's board and stockholders, Chardan's ability to raise $25 million for investment in the combined entity and Encorium's ability to obtain a fairness opinion relating to the purchase price for Linkcon.

At closing, the annualized revenue of the combined company (including Prologue) is expected to be in the range of $50-$55 million, supported by a backlog at closing of about $65 million to $70 million.

In other dealmaking activity:

• Langer (Deer Park, New York) reported the sale of the membership interests of Regal Medical Supply (Granbury, Texas) to a group of private investors, including a member of Regal's management. The purchase price was roughly $501,000 paid in cash at closing.

Langer provides medical products for the long-term care, orthopedic, orthotic and prosthetic markets.

• 3M (St. Paul, Minnesota) said it has agreed to acquire TOP-Service f r Lingualtechnik (Bad Essen, Germany) an orthodontic technology and services company offering the Incognito brand system, a digital lingual orthodontic solution. Financial terms were not disclosed.

TOP will produce synergies with Lingualcare (Dallas), which was acquired by 3M Unitek last year (Medical Device Daily, Nov. 2, 2007) and sells lingual orthodontic solutions under the iBraces brand. TOP and Lingualcare both address the exploding demand for effective and invisible orthodontic solutions with the same custom appliance system. Unlike conventional braces, the Incognito and iBraces systems are bonded to the tongue side of teeth so they are "invisible." And unlike clear aligners, the Incognito system can treat the vast majority of orthodontic cases, the company said.