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Ergomed PLC (LON:ERGO) shares were on the up on Monday as the firm said it has purchased US drug safety firm Ashfield Pharmacovigilance from UDG Healthcare PLC (LON:UDG) for US$10mln.

The AIM-listed pharmaceutical services firm will make Ashfield part of its PrimeVigilence division while also establishing a platform for a “broader Ergomed services business in the US”.

WATCH: Ergomed nets significant new acquisition

Ashfield will add over 40 new clients to Ergomed’s roster as well as an order book on contracted revenues worth US$9.8mln. The acquisition is also expected to immediately enhance earnings.

Ergomed added that the acquisition is expected to “drive economies of scale” as prior investments and support functions are leveraged within its existing PrimeVigilence business.

In the year to 30 September, Ashfield reported revenues of US$11.6mln and adjusted earnings (EBITDA) of US$900,000.

The acquisition is to be funded using the company’s existing cash resources and is not expected to affect its ability to make more purchases thanks to the “strong positive cash flow” from its existing order book.

“The acquisition of Ashfield PV is a major step forward for Ergomed in the strategically important US market. It provides a significant US pharmacovigilance presence and access to a genuinely global offering for customers”, said Ergomed executive chairman Miroslav Reljanović.

“It also strengthens the US platform for the Ergomed CRO business as we continue our drive towards becoming a leading mid-tier pharmaceutical services specialist with a global presence”, he said.

In a note to clients, analysts at Peel Hunt said Ashfield was a “long-established and respected provider in the pharmacovigilance service sector” and the acquisition would be “mutually beneficial” for both Ergomed and UDG.

Ergomed’s shares were 6.2% higher at 414p in early afternoon trading.