From a 40-foot container to a $135m pharma sell-out
Patsy Carney and Tom Brennan "bootstrapped" their Waterford EirGen biotech firm. Last week they sold it for $135m
Ten years ago, Patsy Carney and Tom Brennan founded EirGen, a Waterford-based company that makes chemotherapy drugs. On Monday they sold it to US-based Opko for $135m (€120m) - netting each of them about €15m.
Part of the deal was that the Irishmen would get to stay on, and they've got lots of plans.
"As would be expected that's an important part of the deal, we're in this for the longer haul. It's about taking EirGen on now to the next level, and that's something we're both motivated to do," Carney told the Sunday Independent.
But it hasn't all been plain-sailing.
"We kind of bootstrapped it in terms of raising cash. Fair enough, we were raising money in what was supposedly the boom in 2005, but the boom was for bricks and mortar and building houses and all sorts of mad stuff like that.
"For two lads from down the South East who wanted to build themselves a pharmaceutical plant, VCs and so on weren't really interested. The idea of putting money into capital expenditure didn't float their boat, so we raised our money from private investors and BES (Business Expansion Scheme) as it was at the time".
At one point some of the company's most important staff were working in a 40-foot container - though Carney quips that at least the container had windows. Others worked in Portakabins, with Carney describing the place as a "shanty town".
Now things are very different, and Carney is excited about EirGen's future.
"What we're looking at is overlaying a layer of products in a similar kind of area to ourselves, these high-potency products, coming through the Opko pipeline.
"The difference being that the majority of products we develop at the moment are actually generic products whereas quite a number of the products coming through the Opko pipeline are actually new chemical entities, new products.
"So that's exciting and quite different from what we've been doing. And the other part is that they already have in their portfolio of companies a company that makes the active raw materials that we use in our products, and there's the potential there for vertical integration, with the raw material coming from their site in Israel, into the Waterford site for manufacture and distribution into the market," Carney says.
And there's no fear of the company leaving Waterford either. EirGen's manufacturing licence to supply products to the market is linked to the facility, and Carney says it will remain at the centre of the company's operations.
The deal was done after EirGen quietly put out the feelers to see what kind of takeover interest there was in the market. Why did they do that?
"Three years ago we took in substantial investment from a pharma company in Saudi Arabia, and we made use of those funds to basically build out our facility, and also invest more in our R&D pipeline.
"We've got it to a stage now where it's a profitable business, and we said, 'Right, what's the next stage for the company?'.
"The pharmaceutical market as it is at the moment in terms of mergers and acquisitions and so on, is actually very buoyant, and certainly in the last couple of years.
"So we began looking at this and saying, 'A lot of our business is actually in to the US, that's the direction our business is going, very clearly that's one of our key markets, so therefore one of the things that would make sense would be to look to the market from the point of view of attracting the right company to bring us on to the next level in terms of access to the market, in terms of R&D portfolio, and in terms of complimenting what we were already doing.'
"We had a number of unsolicited approaches, so we then went and had a look at some of those approaches, and then from that came effectively quite a completable offer, let's say, from Opko."
Mr Carney wouldn't reveal who the other interested companies were, saying only that there was "a range".
"Companies in the same space as us, much larger organisations that are looking to acquire. It's happening every day of the week, there's more news about who's making an offer for who and so on.
"The kind of business that we are, and the niche that we're in, it was quite attractive because it could be bolted on immediately to any organisation. There's a range of products already there, it's a profitable business, it's cash-flow positive and so on."
Carney and Brennan previously worked for an American plc called Ivax, which was built by the founders of Opko. Carney said the "added attraction" of the Opko deal was that they had known the bigwigs at Opko for a long time. Ironically, the idea to start a company of their own came when the two men were sent to do an MBA by Ivax.
"We wouldn't be the poster boys for multinationals to send their staff on MBA programmes, because they could actually just up and leave and start their own company," Carney quips.
"If they do to Opko what they did previously with Ivax there's a very positive future there for the company."
Three years ago, Saudi Pharmaceuticals Industries and Medical Appliances Corporation, one of the biggest pharmaceuticals companies in the Middle East, bought a 48pc stake in EirGen for €19m.
They'll have trousered €58m this week.
Sunday Indo Business