eResearchTechnology, Inc, a leading provider of technology and services to the pharmaceutical, biotechnology and medical device industries, said it agreed to acquire the centralised ECG business of Covance Inc for $35.2 million in cash and an additional sum of up to $14 million.
In addition, Covance and eRT have entered into an exclusive ten-year marketing agreement to supply eRT's centralised cardiac safety services to Covance's clients.
"By acquiring the centralised cardiac services of Covance, eRT is furthering its commitment as a leader in the cardiac safety field. The scale, expertise, and ancillary technology benefits that will be derived from the acquisition will allow us to provide better and more cost-effective services to our valued clients and to the drug development industry. "By engaging in this long-term strategic relationship with the world's largest publicly-traded CRO, eRT is looking to extend its global leadership position in the area of cardiac safety," said Dr. Michael McKelvey, president and CEO, eRT.
"Covance remains fully committed to providing our clients with integrated drug development solutions, including critical cardiac safety data in clinical projects," said Joe Herring, chairman and CEO, Covance. "Under the new marketing arrangement, we believe our clients will benefit from eRT's industry-leading centralized ECG services. The transaction also allows Covance's management team to focus more attention on growing our service offerings in the larger markets we serve."
The companies disclosed that eRT will make a cash payment of $35.2 million and may pay approximately $14 million in additional compensation based upon eRT's potential realization of revenue from the backlog transferred and from new contracts secured through Covance's marketing activities. Under the terms of the marketing agreement Covance will exclusively use eRT as its provider of centralised cardiac safety services for a ten-year period.
eRT will continue to collaborate with all of its other key CRO, phase I, Academic Research Centres, and other strategic partners to promote speed, accuracy, and reliability of data collection and reporting and quality study conduct for their clients.
eRT will adjust its previously issued Q4 2007 revenue guidance of $27 million to $28.5 million, adding approximately $1.5 to $2.0 million additional revenue as a result of the transaction. Additionally, management adjusted its previously issued Q4 2007 guidance for diluted earnings per share of $0.09 to $0.11 downward by $0.02 loss per diluted share to $0.07 to $0.09. The reduction in diluted earnings per share is caused by transition costs associated with the integration of operations of Covance Cardiac Safety Services with that of eRT. For the full year ending December 31, 2007, management reiterated its guidance in which revenues expected to be around the midpoint of the previously issued guidance of $95 million to $103 million. Management adjusted its previously issued guidance of $0.29 to $0.31 to $0.27 to $0.29 of earnings per diluted share.
Management anticipates the additional operations to the Company will add approximately $18 million to $20 million in revenue and add $0.04 to $0.06 of earnings per diluted share for the year ending December 31, 2008. Management will issue full guidance for the year ending December 31, 2008 for its company in February 2008.
Based in Philadelphia, Pennsylvania, eResearchTechnology, Inc. is a market leader in providing centralised core-diagnostic electrocardiographic (ECG) technology and services to evaluate cardiac safety in clinical development. The company is also a leader in providing technology and services to streamline the clinical trials process by enabling its customers to automate the collection, analysis, and distribution of clinical data in all phases of clinical development.