December 14, 2015
By Mark Terry, BioSpace.com Breaking News Staff
Rumors have surfaced that Wilmington, NC-based Pharmaceutical Product Development LLC , a contract research organization (CRO), is planning a sale or, if that doesn’t happen, an initial public offering (IPO).
Inside sources told Reuters that PPD’s private equity owners, Carlyle Group LP and Hellman & Friedman LLC, have contacted investment banks regarding appointing financial advisers for a potential sale. It is expected to offer an auction early in 2016, but if the offers don’t meet valuation expectations, they will go after an IPO.
There has been a lot of activity in the CRO market this year. In January, there were rumors that Pfizer Inc. was spreading out its CRO work to a third CRO partner, with Quintiles, Inc. as the front runner. In April, Pfizer announced it had chosen PPD as its third preferred CRO, but indicated it wouldn’t have a negative effect on its relationships with Parexel International and Icon.
Parexel in June announced that it was laying off 850 people as part of restructuring efforts to improve productivity and efficiency. In January, it announced it planned to hire 450 GlaxoSmithKline employees with the idea of buildings its own dedicated business unit for GSK.
Other deals have included Laboratory Corporation of American Holdings, the largest clinical diagnostic laboratory in the U.S., acquiring Covance for $6.1 billion. WuXi PharmaTech was turned private for $3.3 billion this year as well. In December, WuXi PharmaTech, which has operations in China and the U.S., completed the merger with WuXi Merger Limited, a wholly-owned subsidiary of New WuXi Life Science Limited.
There has also been discussions among analysts about the effect the Pfizer -Allergan merger will have on CROs. Pfizer has said that it plans to make about $2 billion in cuts as a result of the merger, with about a third of that related to slashing research costs.
In the short-term, there will probably be an effect. “Pfizer’s use of CROs has been very successful,” said Tim Evans, an analyst with Wells Fargo in late November. “It’s become a bit of a role model in some ways for how to drive efficiency into your research-and-development process by using outsourcing. Don’t be surprised if you see a quarter or two of depressed bookings. In the longer run, it’s a positive.”
Reuters cites a PPD IPO would probably value the company between $7 billion and $8 billion. Quintiles, Inc. , based in Durham, NC, has a market value of $8.3 billion. Parexel is valued at about $3.4 billion.
From 1996 to 2011, PPD operated as a publicly traded company. In 2011, when it was acquired by The Carlyle Group and Hellman & Friedman, it went private. That deal was for $3.9 billion.
Wilmington Mayor Bill Saffo told StarNews Online on Friday that a sale of PPD wouldn’t surprise him, given the international nature of their business operations. “We would hope that if it is for sale or is sold … that the company would continue to be in Wilmington and continue to operate here.”
The New Hanover County Board of Commissioners Chairman Jonathan Barfield agreed. “I do understand the economics behind these corporate sales,” he said. “I just want Wilmington to remain their headquarters.”
