In my latest Outsourcing Industry Monitor, I noted that half of the publicly held companies covered in the eight years of the Monitor’s circulation are no longer traded. This realization caused me to take a closer look at the combined size of the firms acquired by strategic partners or private equity groups during the past eight years.

Various analysts regularly describe the size of separate markets for preclinical research, clinical research, contract laboratory and manufacturing services, or post-approval studies. In constructing those estimates, I wonder how they account for the absence of published revenue numbers by firms that have ceased disclosing their financial performance.

In 2010, strategic buyers or private equity firms acquired three public companies with combined revenue of more than $3.4 billion. Phase Forward, IMS Health, and inVentiv Health operate in different segments of outsourcing; it is unclear to me how analysts will adjust future estimates of segment size to reflect the lack of transparency caused by the withdrawal of those firms from the public spotlight. Yet another large and visible company will stop reporting revenue results once Warburg Pincus completes its pending acquisition of ReSearch Pharmaceutical Services; that firm has annual revenue of approximately $260 million. Private equity firms also acquired INC Research and United BioSource, two privately owned firms with estimated combined annual revenue in excess of $500 million.

In 2009, buyers took control of more than half a dozen publicly held outsourcing firms with combined revenue of more than $1.8 billion. Averion, Celsis, Entelos, eTrials Worldwide, Life Sciences Research, MDS Inc., and PharmaNet generated revenue across at least that many sectors, depending on how precisely one defines the industry silos in which those firms participated. Further, in a late December filing with the SEC, Quintiles Transnational reminded analysts that it was generating annualized revenue of about $3.7 billion across its various business segments.

Identifying the recent annual revenue of the firms acquired in the 2003-2008 period is a challenging task. However, only a relative handful of acquisitions that occurred during those years involved companies with then-current combinedannual revenue figures in excess of $2.9 billion. (Remember Cardinal Health’s Pharmaceutical Technologies and Services Group? And firms such as Dendrite International and PRA International?)

By the way, in the numbers above I have not included the recent acquisitions of some very large providers of laboratory equipment and instruments used across the life sciences industry. For those with a strong interest in that arena, it’s worth noting that Millipore is part of Merck KGaA, Applied Biosystems is a component of Life Technologies, Fisher Scientific is part of the larger Thermo Fisher Scientific, and Varian Inc. is part of Agilent Technologies. The combined annual revenue of those four firms at acquisition was more than $10 billion.Dionex Corp. (revenue of $450 million) may soon become another component of Thermo Fisher Scientific.

During the period in question, only three outsourcing firms have gone public and stayed public. Medidata Solutions, ShangPharma and WuXi PharmaTech recently disclosed combined annual revenue of almost $600 million. A couple of years ago, we joined other observers in speculating that firms such as Aptuit, Cetero Research, INC Research, Medpace, United BioSource, and even Quintiles were candidates for an Initial Public Offering (IPO). While the equity market in the U.S. has been relatively healthy during the past few quarters, it’s clear that investors do not have the same appetite for IPOs they’ve had at other times during the past decade.

What Should We Make of All This Activity?

The number of publicly held outsourcing companies providing audited revenue figures is declining. Consider that fact the next time you’re tempted to lend 100% credence to someone’s “guesstimate” of the size of any segment of the highly fragmented, incredibly diversified, and increasingly opaque pharmaceutical outsourcing industry.

Michael A. Martorelli is a Director at the investmentbanking firm Fairmount Partners. For additional commentaryon the topics covered in this column, please contact him at michael.martorelli@fairmountpartners.com, or atTel: (610) 260-6232; Fax (610) 260-6285.