Chad Moore, Robert W. Baird & Co. Inc.11.30.-1
The CRO sector is like Motown in the 60s—the hits just keep coming. Deal activity over the last few years has been in nearly every conceivable form, including take privates of public companies, tuck-in acquisitions by strategics, platform acquisitions by private equity sponsors, initial public offerings, follow-on offerings, large transformative mergers, and most recently a joint venture. What’s next is difficult to predict, but the sector will continue to be active and attract the attention of a diverse group of players.
Given the ongoing, robust activity in the sector, it’s worth taking a closer look at a couple of the recent transactions: the Quintiles-Quest joint venture (JV); the acquisition of Synexus by UK-based private equity firm LDC; and Clinipace’s acquisition of Accovion. Much of the rationale behind these transactions connects back to broader sector dynamics that are driving deal flow.
Quintiles, Quest Joint Venture
The JV between Quintiles and Quest will become the second largest provider of clinical trial lab services. Some market observers viewed the JV as a defensive move following Labcorp’s acquisition of Covance. Others viewed the JV as a unique way to ensure that both Quintiles and Quest have vested interests in the JV’s success.
Whatever your view, it’s clear that the combination positions the JV to more effectively compete in the increasingly complex clinical trial lab sector. The growth of targeted or personalized medicine and the need for biomarker discovery and asset development will continue to increase the demands on clinical lab services providers. These capabilities are increasingly vital due to the growth of companion diagnostics/devices and combination clinical trials.
Lastly, the JV enables other possible tangential benefits including combining large data sets and technology assets, patient recruiting, companion diagnostic development and commercialization, development of tools and analytics for population/disease management, and the ability to provide support for Quintiles’ late phase/real-world studies.
With regard to near-term EPS impact, Quintiles guided that the JV will be slightly dilutive in 2015, primarily related to costs needed to stand up the new venture. Quest expects no impact on 2015 EPS. Accretion is expected in 2016 at both Quintiles and Quest.
Synexus Acquired by LDC and Company Management
Earlier this year, Lyceum Capital sold Synexus to LDC, the private equity arm of Lloyds Banking Group. Manchester, UK-based Synexus operates a global network of 25 dedicated research centers in eight countries. In its press release, LDC described Synexus as providing “a key bridge in the outsourced clinical research value chain, enrolling and managing patients for clinical trials on behalf of leading pharmaceutical, biotechnology and CROs.” The company has particular expertise in cardiovascular, musculoskeletal, respiratory, endocrinology/metabolic and CNS. With operations in the UK, Germany, Poland, Hungary, Romania, Bulgaria, Ukraine and South Africa, Synexus has access to over 68 million potential clinical trial participants. The company employs over 600 people including 100 physicians/investigators solely dedicated to carrying out clinical trials.
Clinipace Worldwide Acquired Accovion
On April 13, Clinipace announced the closing of its acquisition of Accovion. Headquartered in Frankfurt, Germany, Accovion provides outsourced clinical research services to pharmaceutical, biotech and medical device sponsors. The company has offices in ten European countries and has on-going projects in more than 20 countries. Clinipace is based in the Research Triangle Park in North Carolina and positions itself as a digital contract research organization or dCRO. Its dCRO model is based on a unified technology platform—TEMPO eClinical—that enables integration and collaboration among functions across the spectrum of clinical trials operations (e.g., Site Management, Patient Enrollment, Project Management, Monitoring, Data Management, Biostatistics).
Clinipace’s CEO, Jeff Williams, commented: “To be competitive in today’s market, it is important to have, among other things, a strong multi-national scale, broad therapeutic expertise and a better service delivery model.” With the acquisition, Clinipace will have nearly 1,000 global staff located in 39 countries who have managed over 3,000 clinical research studies and more than 300 regulatory and strategic development engagements.
Given the favorable market conditions for the CRO sector and its sponsor customers, the expectations for the remainder of the year include more “hits” in the form of M&A and equity transactions.
Chad Moore
Robert W. Baird & Co. Inc.
Chad Moore, CFA, is a Director in the Global Investment Banking business at Robert W. Baird & Co. Inc. He leads the firm’s Pharmaceutical Services & IT Investment Banking effort. He can be reached at cmoore@rwbaird.com or +1.312.609.5475.
Given the ongoing, robust activity in the sector, it’s worth taking a closer look at a couple of the recent transactions: the Quintiles-Quest joint venture (JV); the acquisition of Synexus by UK-based private equity firm LDC; and Clinipace’s acquisition of Accovion. Much of the rationale behind these transactions connects back to broader sector dynamics that are driving deal flow.
Quintiles, Quest Joint Venture
The JV between Quintiles and Quest will become the second largest provider of clinical trial lab services. Some market observers viewed the JV as a defensive move following Labcorp’s acquisition of Covance. Others viewed the JV as a unique way to ensure that both Quintiles and Quest have vested interests in the JV’s success.
Whatever your view, it’s clear that the combination positions the JV to more effectively compete in the increasingly complex clinical trial lab sector. The growth of targeted or personalized medicine and the need for biomarker discovery and asset development will continue to increase the demands on clinical lab services providers. These capabilities are increasingly vital due to the growth of companion diagnostics/devices and combination clinical trials.
Lastly, the JV enables other possible tangential benefits including combining large data sets and technology assets, patient recruiting, companion diagnostic development and commercialization, development of tools and analytics for population/disease management, and the ability to provide support for Quintiles’ late phase/real-world studies.
With regard to near-term EPS impact, Quintiles guided that the JV will be slightly dilutive in 2015, primarily related to costs needed to stand up the new venture. Quest expects no impact on 2015 EPS. Accretion is expected in 2016 at both Quintiles and Quest.
Synexus Acquired by LDC and Company Management
Earlier this year, Lyceum Capital sold Synexus to LDC, the private equity arm of Lloyds Banking Group. Manchester, UK-based Synexus operates a global network of 25 dedicated research centers in eight countries. In its press release, LDC described Synexus as providing “a key bridge in the outsourced clinical research value chain, enrolling and managing patients for clinical trials on behalf of leading pharmaceutical, biotechnology and CROs.” The company has particular expertise in cardiovascular, musculoskeletal, respiratory, endocrinology/metabolic and CNS. With operations in the UK, Germany, Poland, Hungary, Romania, Bulgaria, Ukraine and South Africa, Synexus has access to over 68 million potential clinical trial participants. The company employs over 600 people including 100 physicians/investigators solely dedicated to carrying out clinical trials.
Clinipace Worldwide Acquired Accovion
On April 13, Clinipace announced the closing of its acquisition of Accovion. Headquartered in Frankfurt, Germany, Accovion provides outsourced clinical research services to pharmaceutical, biotech and medical device sponsors. The company has offices in ten European countries and has on-going projects in more than 20 countries. Clinipace is based in the Research Triangle Park in North Carolina and positions itself as a digital contract research organization or dCRO. Its dCRO model is based on a unified technology platform—TEMPO eClinical—that enables integration and collaboration among functions across the spectrum of clinical trials operations (e.g., Site Management, Patient Enrollment, Project Management, Monitoring, Data Management, Biostatistics).
Clinipace’s CEO, Jeff Williams, commented: “To be competitive in today’s market, it is important to have, among other things, a strong multi-national scale, broad therapeutic expertise and a better service delivery model.” With the acquisition, Clinipace will have nearly 1,000 global staff located in 39 countries who have managed over 3,000 clinical research studies and more than 300 regulatory and strategic development engagements.
Given the favorable market conditions for the CRO sector and its sponsor customers, the expectations for the remainder of the year include more “hits” in the form of M&A and equity transactions.
Chad Moore
Robert W. Baird & Co. Inc.
Chad Moore, CFA, is a Director in the Global Investment Banking business at Robert W. Baird & Co. Inc. He leads the firm’s Pharmaceutical Services & IT Investment Banking effort. He can be reached at cmoore@rwbaird.com or +1.312.609.5475.