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Inotiv Makes $545 Million Bid for Envigo RMS Holdings to Fortify Research and Drug Discovery Platforms

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Shares of Inotiv Inc. traded 27% higher to a new 52-week high after the company reported it entered into agreement to acquire Envigo RMS Holding Corp. in a cash and stock deal valued at $545 million which will serve to create a one-stop-shop, discovery-to-approval solution for drug developers.

Before U.S. markets opened for trading today, contract research organization Inotiv Inc. (NOTV:NASDAQ), which specializes in providing nonclinical and analytical drug discovery and development services, announced that it entered into an agreement to purchase global research models and services provider Envigo RMS Holding Corp. in a combination cash and stock deal.

Inotiv advised that when the transaction is finalized, the new combined company will "enable drug developers to access products and services for the entirety of discovery and nonclinical development within one organization."

The acquisition terms place an enterprise value for Envigo of approximately $545 million. Under the terms of the agreement total consideration paid to Envigo will include $200 million in cash and 9,365,173 shares of Inotiv's common stock. When joined together, Inotiv is expected to have a total enterprise value of around $1.2 billion.

The transaction is expected to close in the fourth quarter of calendar year 2021, subject to approvals from both Inotiv's and by Envigo's shareholders, other customary closing conditions and required regulatory approvals. When the purchase is completed, on a fully diluted basis, existing Inotiv shareholders will own about 64% of the combined company and Envigo shareholders will own the remaining 36%.

Inotiv's President and CEO Robert Leasure Jr. commented, "Evolving complexity in the disease research space is creating additional demand for research models and continued innovation in biopharma is increasing demand for specialty and disease-specific models…The complementary nature of Inotiv and Envigo is expected to accelerate the movement of innovative drugs and medical devices through the discovery and preclinical phases of development. Supported by deep, in-house expertise and scientific capabilities, we're building a comprehensive contract pharmaceutical research solutions provider with a full spectrum of discovery and nonclinical services and research models into a unique, one-stop-shop, discovery-to-approval solution for drug developers."

Envigo's CEO Adrian Hardy remarked, "Envigo has a long history and broad expertise supplying critical research models and services to the scientific community…Our diverse client base of CROs, pharmaceutical, government and academic institutions and Inotiv's biopharma clients will be able to utilize leading research models and services from Envigo, including genetically engineered models and services (GEMS), contract breeding services, Teklad laboratory animal diets, surgical services, custom antibody services, and large and small research models."

The merger of the two firms is expected to create a full-spectrum drug discovery and non-clinical development services provider with the added capabilities of a leading research model products platform. The merger will give Inotiv access to an expanded base of approximately 3,000 customers in biotech, pharma and academic organizations.

The report indicated that during the nine months ended June 30, 2021, the firms had combined revenue of around $286 million. The acquisition will serve to boost Inotiv's operational presence in North America and will increase exposure via several new locations in Western Europe that should enhance its global offerings.

Each of the two companies individually have demonstrated strong revenue growth. The report noted that during the same 9-month period mentioned above, Inotiv grew revenues by 33% to $60 million, compared to $45 million in the prior year's corresponding period. For the 6 months ended June 30, 2021, Envigo increased revenue by 22% to $141 million, versus $115 million in H2/20.

Plans are for Inotiv's current President and CEO Robert Leasure Jr. to maintain his role and lead the company after the transaction is completed.

Inotiv is a contract research organization (CRO) centered around providing nonclinical and analytical drug discovery and development services. The company helps it customers strategize to meet their own discovery and development objectives and to accelerate in achievement of their goals. Inotiv's products are instrumental in driving efficiency, improving data and decreasing costs of bringing new medicines to market.

Envigo is a provider of standard research models for the biotech and pharma industries and other life science organizations as well as for academic institutions and governments. The firm employs more than 1,200 people in over 20 locations in Europe and North America. The report noted that the firm is "the largest organization that is solely dedicated to providing research models and related products and services."

Inotiv started the day with a market cap of around $585.8 million with approximately 15.92 million shares outstanding and a short interest of about 2.1%. NOTV shares opened almost 9% higher today at $40.05 (+$3.24, +8.80%) over yesterday's $36.81 closing price and reached a new 52-week high price this morning of $48.35. The stock traded today between $40.05 to $49.93 per share and closed at $49.93 (+$13.12, +35.64%).


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