Clinical Outsourcing
Table 2: Select private equity deals
Target Country Private equity f_i rm Reported deal size Date of announcement
Premier Research Group UK Pegasus Bidco (ECI, Indigo) €73.6 million March 2008
Quintiles US Bain Capital, 3i, TPG, Tamasek $3.0 billion January 2008
Synexus Clinical Reseach UK Lyceum Capital £18.1 million November 2007
Shangpharma China Texas Pacifi c Group $30 million November 2007
GVK Biosciences India Sequoia Capital $25 million November 2007
PRA International US Genstar Capital $797 million July 2007
Source: Ernst & Young
in a high intensity care setting and expertise would be possible in biotech pre-credit Ref_l ecting the growing importance India
in systemic drug phototoxicity studies. crunch. In addition, the service model also and China are playing as locations for R&D
As trials have become more global and allows the CROs to take a portfolio approach outsourcing, private equity has also begun to
complex, enabling technologies have become to those companies it serves, allowing it to make investments in these geographies. Texas
more important for running trials more manage and mitigate any risk by avoiding Pacif_i c’s $30 million investment in China’s
effectively and eff_i ciently, improving quality customer concentration – it is quite typical Shangpharma and Sequoia Capital’s $25 million
of data, providing visibility across studies, and
for CROs to ensure that no more than investment in India’s GVK Biosciences highlight
speeding up decision-making. ClinPhone, the
10-15% of total revenue is derived from a growing interest in Asian assets and the
UK-listed clinical technology company recently
single customer.
potential they present for growth.
caught the attention of rival suitors Parexel
CROs often operate business models
Businesses like the New York Stock
International and Quintiles Transnational,
capable of scalability which, with private
Exchange-listed Wuxi PharmaTech highlight to
which both expressed interest in bidding for
equity investment, have the potential for
investors the huge potential for Chinese-based
the business. In June 2008, Parexel eventually
rapid growth. It is these qualities that were
CROs. Wuxi, which provides outsourced drug
succeeded in reaching an agreement to buy
cited as attractive when Lyceum Capital
discovery and manufacturing services, has been
ClinPhone for $182 million after Quintiles
announced it was to take the AIM-listed
one of China’s fastest growing companies,
withdrew from bidding. ClinPhone’s offering
Synexus private in November 2007. On the
achieving high double-digit quarter-on-quarter
combines data capture and supply chain
other side of the table, the management of
revenue growth and triple-digit net income
management technologies, which are widely
Synexus (which specialises in the recruitment
growth since it announced the closing of its
employed by CROs across the sector.
and management of patients for late-stage
IPO in August 2007. In July 2008 the private
Looking forward, the market can expect
primary care clinical trials) saw the deal as an
equity player Warburg Pincus acquired 5.4% of
further consolidation among small to
opportunity for the company to complete
outstanding ordinary shares in the company.
medium-sized CROs. In addition, it seems
international expansion plans as well as
As private equity becomes more familiar
likely that consolidation and organic market
benef_i t from an investor experienced in
with the CRO space, and the pharmaceutical
growth in emerging economies, particularly
supporting rapid growth businesses.
sector in general, the marketplace is likely
China and India, will give rise to CROs that
Private equity investors are also attracted
to see greater appetite for new types of
can compete locally as well as with major
by opportunities to capitalise on the shifts
partnerships and funding models. Perhaps
players on the global stage.
occurring in the CRO marketplace described
most interesting on this front was the August
2008 deal announced between Lilly, TPG-Axon
enter private equity
previously (globalisation, customer demand
Attracted by strong growth fundamentals,
for full-service offerings, opportunities for
Capital and Novaquest, the venture arm of
private equity has been a particularly active
technological and service differentiation) by
Quintiles. TPG-Axon Capital will invest up to
investor in the CRO sector. As service-based
following buy-and-build strategies to achieve
$325 million to fund the development costs
businesses, CROs present an opportunity
critical mass and scale as well as leverage
for two Lilly Alzheimer’s programmes, with
to gain investment exposure to the health
the synergies of complementary businesses.
Novaquest covering 10% of the costs and
sciences industry with a different risk prof_i le
Indeed, the ability to follow a global buy-and-
conducting the clinical trials. Both will receive
than that typically offered by biotech
build strategy was cited as a key objective for
development milestone payments and royalties
and pharma.
the ECI Partners-backed management buy-out
on successful commercialisation.
This type of deal is becoming increasingly
Thanks to the services-based model, CROs
of Premier Research Group, completed in
common between pharma companies and
are largely insulated against the pipeline risks
June 2008.
CROs; note that Lilly had already partnered
faced by their customers. They operate a
Importantly for private equity, the CRO
with Novaquest on the development of Lilly’s
business model with which private equity
sector is relatively mature in so much as there
antidepressant Cymbalta (duloxetine). Such
players are traditionally more familiar and
is already a signif_i cant publicly-traded CRO
arrangements have raised interest among
comfortable, and have shown to be able to
segment, presenting exit routes at the end of
private equity houses in funding development
achieve prof_i tability early in their corporate
the investment lifecycle through IPO or sale
programmes and, depending on success, they
history. While CROs are still exposed to the
to trade. Indeed, initially brought to the public
could indicate the shape of things to come.
risk of sponsors pulling or halting a trial, the markets in November 2004 by San Francisco-
contracted nature of the revenue stream based mid-market PE house Genstar Capital,
provides good security for any debt provider and raising $100 million, PRA International Andrew Jones is Ernst & Young’s senior
and ensures that even in the current diff_i cult was taken full-circle when it was taken private pharmaceutical analyst and Leo Gribben is a
debt markets, the banking of a private equity again by Genstar in a $797 million transaction director in the f_i rm’s pharmaceutical team.
deal should be more easily achieved than announced in July 2007.
www.scripnews.com/supplements Scrip 100
111
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128