BioWorld International Correspondent
LONDON - ML Laboratories plc is buying pulmonary drug formulation specialist Quadrant Technologies Ltd. for £46.7 million (US$85 million) in cash and shares, and changing its name to Innovata plc to reflect the transformation the acquisition will bring.
Two months ago, ML Labs said it would close five business units and move its headquarters from Warrington to St. Albans. Now it has ditched that plan in favor of the Nottingham base of Quadrant, which boasts laboratories recently kitted out at the expense of its erstwhile owner, Elan Corp. plc, of Dublin, Ireland.
ML Labs' portfolio ranges from Adept, for the prevention of surgically induced adhesions, to clinical-stage cancer and gene therapy treatments. Now it intends to focus on pulmonary delivery of existing and novel compounds.
CEO Kieran Murphy told BioWorld International, "Obviously, you only get one shot at a significant restructuring like this. If you told me three to four months ago we could pull this off, I would have said you were dreaming. Now we are closing six sites and moving to one with state-of-the-art laboratories."
Moving to Nottingham rather than St. Albans will allow ML Labs to retain key research staff who would not have moved farther south.
The acquisition, which is subject to shareholder approval, would be paid for with £19.5 million cash and the issue of 131.9 million new ML Labs shares at 20.625 pence per share. The cash will be raised by placing 91.6 million shares at 19 pence each, bringing in £23.7 million net.
At the same time, ML Labs will pay £1.85 million in cash and shares to take full control of its respiratory technologies subsidiary Innovate Biomed.
Those maneuvers are the culmination of a restructuring process set in motion in March after shareholder pressure prompted the replacement of then-CEO Stuart Sims by Murphy. At the end of April, ML Labs announced its intention to focus on pulmonary drug delivery.
"With the acquisition of Quadrant we now have an array of devices and formulation and stabilization technologies that will enable us to take a much more creative approach to this market," Murphy said.
While it will concentrate initially on asthma and chronic obstructive pulmonary disease treatments that are delivered traditionally by the pulmonary route, Innovata intends also to move into the administration of other small molecules and antibodies and proteins.
"We will spend [£6 million to £8 million] per annum on R&D, some of which will be devoted to collaborations [to deliver drugs for partners] and to deliver drugs coming off patent, and some on riskier projects with longer-term potential," Murphy said.
Quadrant was spun out of Cambridge University in 1996 to commercialize drug stabilization technology discovered by Bruce Roser. It is based on trehalose, a sugar used by desert plants and other organisms to replace water when they go into suspended animation at times of drought. The company floated on the London Stock Exchange, and subsequently was sold to Elan in 2000.
Roser fell out with Quadrant management and after devising new stabilization techniques that circumvent Quadrant's patents, set up a new company, Cambridge Biostability Ltd.
Raj Uppal, the finance director who steered Quadrant through its IPO, the sale to Elan and a subsequent management buyout, will be a nonexecutive director of Innovata.
Quadrant made £1.3 million profit on turnover of £5.7 million in 2004. Its most valuable asset is a royalty stream from Baxter Healthcare Corp. based on a license for Advate, a stabilized version of the blood product Factor VIII, for treating hemophilia A. It also has a license agreement with GlaxoSmithKline plc for vaccines and Bristol-Myers Squibb Co. for an inhaled formulation of insulin.
Murphy said the merged entity will be profitable when the transaction is complete, which is expected in October.