IDT buys clinical trials research unit

Contract research group Institute of Drug Technology Australia (ASX: IDT) has purchased a clinical trials research unit in a deal the company said will bolster its annual revenue by 20 per cent.

The Melbourne-based company, which conducts development, scale-up and production of active drug ingredients, has bought the Adelaide facility, CMAX, from Mayne for an undisclosed sum.

Under the deal, IDT will take over the facility, its staff and its existing projects, which comprise a range of Phase I studies for local and international clients.

IDT chairman and managing director Dr Graeme Blackman said the purchase would help the company strengthen its local client base and build its international exposure.

"We anticipate that the CMAX business will add in excess of $4 million to IDT's annual revenue," Blackman said.

"The acquisition is also expected to make an immediate positive contribution to earnings and will contribute significantly in the future."

Blackman said the agreement with Mayne forbids IDT from disclosing the sale price, but said it would be paid for through the company's cash reserves, which at November last year sat just below $4.3 million.

"This fits into our business model and is currently owned by a pharma, which creates a potential conflict of interest," he said.

"With us owning it, that conflict with our clients disappears and we will be marketing it strongly on that basis."

The CMAX facilities, located at the Royal Adelaide Hospital, include a dedicated hospital ward, specialised analytical chemistry facilities and more than 20 staff.

The unit has also been inspected by the US Food and Drug Administration and found to comply with international Good Clinical Practice and Good Laboratory Practice.

Blackman said finalisation of the deal was a mere formality, with IDT expecting to take over the facility within weeks.

"Since IDT already provides a range of consulting services and is not in direct competition with potential clients, there is considerable scope to expand this business," he said.

"The need to provide early phase clinical development capabilities is internationally recognised and the CMAX business is ideally placed to capture this opportunity."

He said the synergies created from the merging of CMAX with IDT's existing early stage development businesses would create a world-class unit that was expected to attract new clients.

CMAX was originally established in 1993 by FH Faulding to provide early clinical phase support for Faulding's generic drug development programs.