Envigo merges with Avista, to be listed on Nasdaq

Nonclinical service-focused CRO Envigo will soon be able to access capital in the public markets as it’s merging with publicly traded Avista Healthcare Public Acquisition Corporation (AHPAC).

The deal will make Envigo a wholly owned subsidiary of AHPAC, and the combined company is valued at about $924 million, representing 10.6 times Envigo’s estimated 2018 pro forma adjusted EBITDA, the companies said in a joint statement.

The transaction is funded through a combination of cash, stock and rollover debt financing. Upon its closing, which is expected before the end of this year, AHPAC will take the name of Envigo International Holdings and the CRO subsidiary will get onto the Nasdaq listing.

AHPAC raised $300 million in its IPO last October and has been evaluating several businesses for acquisition since then, its president and CEO David Burgstahler said in a pre-recorded conference call.

"Envigo represents an ideal target for AHPAC given its financial profile, growth opportunities, leading market position in an attractive industry, diverse blue-chip customer base and strong business fundamentals," Burgstahler said, adding that it "falls squarely in one of our areas of expertise."

Envigo is itself the product of a merger between Huntingdon Life Sciences and Harlan Laboratories back in 2015, but it has a heritage of more than 80 years in the life sciences industry. Two big chunks of services it provides include nonclinical safety assessment and research models, each representing about 60% and 40% of its revenues, respectively.

Headquartered in Huntingdon, U.K., with research models businesses based in New Jersey, the CRO employs more than 3,300 people worldwide. Adrian Hardy, Ph.D., Envigo’s president and CEO since last July, will stay on at his position.

Hardy said during the conference call that his company expects the outsourced nonclinical CRO market to grow by mid to high single digits annually over the next 4 years, from the current size of $4 billion to about $5.8 billion by 2020.

"We see many opportunities to help our biopharmaceutical customers to move their fixed in-house nonclinical costs to a more productive and efficient variable model by leveraging the outsource CRO business model," he said.

To capitalize on that growing trend, Envigo has also been making investments. It announced in March that, besides its existing hERG assay, it will develop and validate five to seven ion channel in vitro tests for measuring cardiac risk ahead of new industry recommendations expected at the end of this year. It also said that it will create between five and 10 new in vitro and in silico tests on average annually beginning in 2018.