This pre-clinical Contract Research Organization (CRO) is providing routine and custom radiotracer-based services for pharma, biotech, and academic organizations. In addition to be able to provide conventional pharmacology, toxicology, and efficacy studies with small animals in the mid- to late stage of drug development, their core expertise supports ADME (absorption, distribution, metabolism excretion) studies. It also includes early-stage studies, including target screening and validation, based on radioligand binding assays, receptor occupancy assays, and autoradiography imaging in systems ranging from human cell cultures to live animals (rodents) to tissues (rodents, primates, humans). They also provide custom radiolabeling and radiosynthesis, as well as a variety of related behavioral, cellular, and molecular services featuring proteomic profiling.
One of the oldest and most sensitive methodologies for evaluating drug candidates is using radiotracers for radiometric analysis. This generally involves quantitation of beta-emitting radioactive isotopes such as 14C, 3H, or 32P or gamma-emitting radioactive isotopes such as 125I. Radiometric analysis is one of the most precise, sensitive, and efficient detection methods – the “Gold Standard” – and is why there will always be a demand for the kind of services that this Lab provides.
Small Lab – Outsize Capabilities
Although this is a relatively small CRO, there are only a handful of CROs that have the capabilities that this Lab offers.
- Only three CROs account for most of the worldwide Quantitative Whole Body Autoradiography (QWBA) market. New Drugs needing approval must have QWBA done for accurate biodistribution and micro-dosimetry information before a radiolabeled drug can be given to human patients at the Clinical Phase I stage for ADME studies done, each of which can easily cost between $40,000-$100,000. This lab recently started offering this service and with good marketing, just four to five QWBA studies would double the revenue of the lab. These studies have large profit margins (~65%).
- Only three companies in the USA have a capability to make (and sell) custom or standard radio-labeled compounds. The Lab does in-house the 125I labeling of antibodies, proteins or peptides; the 32P labeling of DNA/RNA; and 35S metabolic labeling of proteins in live cells. Also provides 14C and 3H labeling done in partnership with another company. With so few companies manufacturing / selling radiochemicals, an ambitious buyer can significantly expand this business.
The Lab has its own small animal facility and an independent IACUC (Institutional Animal Care and Use Committee). The animal facility consists of cage and procedure rooms. It can handle up to 1,800 mice and 420 rats. The procedure room supports small animal surgical procedures such as implantation of tumor cells to create animal tumor models, implantation of catheters, survival surgery, and so on. With an independent Institutional Animal Care and Use Committee, the Lab can do studies without undue administrative burden and limitations while being complaint with State and Federal regulations.
Reason for Sale
For three of the four partners, this is a side business to which they are not able to devote sufficient time to grow. They would rather focus on their main business and divest this business.
Financials, Assets, Asking Price
The Company’s average revenues over past 6 years have been $321K. In 2018, its revenues were $307K and discretionary earnings were $76K. Although the current year financials are not completed, the projected current year revenue is $330K with discretionary earnings projected similarly around 80-90K. The Lab has always been profitable but with modest revenues, largely because (a.) the owners had other businesses and did not focus as much on growing this business, (b.) they continually redirected profits into acquiring specialized instrumentation and facilities, and (c.) they have not done any marketing. All of their over 300 customers have come from organic Google search results and from referrals. But for the right buyer which can bring in the business, this is an ideal opportunity with a great infrastructure.
The has hard assets and inventory worth $676K, but even more valuable for a buyer would be are its various licenses that are a significant barrier to entry for any company attempting to set up a facility with this Lab’s capabilities. These include, (a.) State’s Radioactive Materials License (b.) State Permit for the Use of Living Animals (c.) An active IACUC for animal work, and (d.) State Controlled Substance License.
To set up such a laboratory from scratch with new equipment and getting all of these licenses, it could easily take 12-18 months and exceed $2M. The lab also has several important web domains that are useful for marketing purposes.
The Lab’s value is based on its hard assets, inventory value, and value of its licenses – it is offered at $450K for a quick sale.