Bionomics pays $2m for French CRO

South Australian biotech Bionomics (ASX:BNO) is to pay more than AUD$2 million in cash and kind for Neurofit, a small contract research company that specialises in testing candidate drugs for central nervous system (CNS) disorders in cellular and animals models.

Rather than buy the service, Bionomics bought the company -- "a tremendous little business," that is already operating profitably, according to Bionomics CEO Dr Deborah Rathjen.

"Neurofit is exactly what we wanted. They have some interesting assets -- a mouse model of Parkinson's disease that seems to be more reflective of human Parkinson's disease, which should be more predictive for any compounds we develop.

"They have the intellectual property rights to transgenic models [for CNS disorders] generated by the Institut Pasteur, which is where the Parkinson's disease mouse came from. We'll continue to evaluate them to see which ones we take up."

Apart from sharing Bionomics' interest in neurodegenerative disorders like Alzheimer's disease and motor neuron disease, including psychiatric disorders, Neurofit works on psychiatric disorders like depression and schizophrenia -- overlapping Bionomics' interest in developing drugs for anxiety and pain.

"They also do diabetic neuropathy -- they have an incredible breadth and depth of talent for a small company," Rathjen said.

But a key factor in Bionomics''s decision to acquire Neurofit was its list of contract research clients, which includes Novartis, Boehringer-Ingelheim, Guilford Pharmaceuticals and Biogen-Idec. The acquisition gives Bionomics a potential "bridge to market" in Europe for promising new CNS drugs emerging from its research.

Bionomics said the French company had also been looking for ways to grow, and saw the takeover as a way of joining forces with a larger company to grow their business.

"Adding Neurofit's capability to our CNS ionX discovery platform will give us the ability to take our CNS drug discoveries right through comprehensive preclinical testing," Rathjen said.

The deal involves a cash payment of Euro 1 million (AUD$1.75 million), and Bionomics shares to the value of Euro 250,000. The number of shares depends on the volume-weighted average closing price in the seven trading days before the acquisition is completed early in the new year.

Neurofit will operate under the aegis of Bionomics' new, wholly owned French subsidiary, Bionomics France SAS, but its experienced management team will continue to run the company.

Neurofit is based in the innovation park at the University Louis Pasteur in Strasbourg. It has eight permanent employees, including three PhDs, and will have 10 by the time the takeover is completed, Rathjen said.

Rathjen said the company currently had annual revenues around Euro 1 million, and had been moderately profitable for several years -- its operation would be cash-flow and profit-and-loss neutral, but Bionomics aimed to increase Neurofit's revenues and profitability.

The companies will maintain close contact from opposite sides of the globe via a broadband interlink. The extra travel costs for Bionomics are expected to be around $50,000 a year -- a modest cost for the advantage of having a forward base in the lucrative EU market, Rathjen said.