Hyderabad-based GVK Biosciences (GVK Bio), a leading contract research organization (CRO) announced on Wednesday that it was acquiring Aragen Bioscience, Inc. Aragen is a privately held US-based, pre-clinical CRO specializing in high-value biologics services. As per the deal, GVK Bio will acquire the capital stock of Aragen Bioscience. Manni Kantipudi, CEO of GVK Biosciences, told Business Today: "For the last 13 years, we have been focused on small molecules (Synthetic chemicals / drugs) in our drug discovery projects for our customers. Now Aragen brings a complementary strength to the company as it is focused on large molecules (biotech drugs like proteins, monoclonal antibodies, and vaccines to some extent)."
Both GVK and Aragen are service providers - they do not own intellectual property but work for their customers. GVK has about 350 customers, according to Kantipudi and Aragen about 120. Aragen is a 50 employee company located in the San Francisco Bay Area in the US. Since both are privately held, Kantipudi did not reveal the cost of the acquisition but said the complete acquisition would take place over a three year period in a uniquely structured deal.
"It is based on an earn-out model. As of now, we have 65 per cent stake and the balance 35 per cent is linked to certain revenue targets and as they reach them the valuation will change and we could end up paying more or paying less, depending on their ability to hit (or miss) the revenue targets." He added the deal would lead to customer synergy as out of GVK Bio's 350 plus customers, 120 are also involved with big molecules and these could become Aragen's potential customers. And of Aragen's 120 customers, 70 deal with small molecules as well, and these could become GVK's potential customers. That apart, there would also be cost and technology synergies.
A release issued by the company earlier said: "The acquisition of Aragen Bioscience provides GVK Bio with world-class expertise in large molecule R&D services and a unique and extensive set of high-content biological services. Combined with GVK BIO's established small molecule discovery and development capabilities, this expansion uniquely position GVK BIO as a leading provider of integrated R&D services across both large and small molecule platforms and provides a base for further expansion."