💥CR-oh no!💥
Indiana-based Inotiv Inc. looks as troubled as its lab animals. Plus: Carbon Health Technologies, Inc. files chapter 11 in Texas to effectuate a prearranged debt-for-equity swap.
Indiana-based Inotiv, Inc. ($NOTV)(“Inotiv” or the “company”) is a contract research organization (“CRO”) that provides nonclinical and analytical (i.e., before the human clinical trial stage) drug discovery and development services to biopharma companies, academia, and government institutions. The company operates two segments:
📍Discovery and Safety Assessment (“DSA”) (38% of LTM Revenue), in which the company researches and tests new drugs in animals to evaluate efficacy and determine if they are safe enough to test on humans.
📍Research Models and Services (“RMS”) (62% of LTM Revenue), through which the company produces and sells lab animals – mainly mice, rabbits, and primates, some of which are specially-bred or genetically modified to research certain diseases — and provide related goods (e.g., food, bedding, enrichment) and services (e.g., health monitoring, transportation).
We’re gonna stop there for a second to shake off the Severance vibes.
Anyway … Purdue University chem professor Peter Kissinger founded the company back in the ‘70s, but Inotiv became the company it is today through numerous acquisitions, the most significant of which was the $545mm acquisition of Envigo RMS Holding Corp (“Envigo”) in November ’21. To fund the Envigo acquisition, Inotiv issued $380mm of debt, split across a 1L term loan and a series of convertible notes.
For Inotiv, the Envigo acquisition was like a snake swallowing an elephant — the deal more than quintupled revenue and 10x-ed EBITDA, and spurned a host of problems for Inotiv (more on those below). With the Envigo acquisition, Inotiv transformed from a small but growing DSA business into a significantly larger enterprise with a new RMS business that had higher margin potential but much greater volatility.
See the numbers for yourself: