INC Research preps to jump on the IPO bandwagon with SEC filing

By Zachary Brennan

- Last updated on GMT

Related tags Initial public offering

Another top CRO makes the move to go public
Another top CRO makes the move to go public
Following pushes to go public by top peers, CRO INC Research has filed an S-1 with the SEC in preparation for an IPO (initial public offering) on the NASDAQ.

INC says that it expects to use the net proceeds it receives from the offering to refinance its existing long-term debt.

S-1 Filing

According to the filing​, which did not list the number of shares to be offered or the price range, noted that INC for the six months ended June 30, 2014, the company had total net service revenue of $388.2 million and net income of $13.8 million.

The filing comes nearly a month after rival PRA Health Sciences filed a similar S-1​ to go public. That move followed public offerings from Quintiles last year

Unlike some of its more diversified peers such as Parexel, INC says that it derives approximately 99% of its net service revenue from clinical development services, with a primary focus on Phase II-IV trials. The largest and fastest growing therapeutic areas, including CNS, oncology and other complex diseases such as genetic disorders and infectious diseases, collectively constitute over 75% of INC’s backlog as of June 30, 2014.

Market Prospects

One of the benefits of an S-1 filing is that a company reveals what the expected CRO market will look like moving forward.

INC claims that the “total addressable market” for CROs is $56.3bn, with a 3-4% annual growth rate, but after excluding $8.8bn of indirect fees paid to principal investigators and clinical research sites, which are not a part of the CRO market.

In 2013, we estimate biopharmaceutical companies outsourced approximately $20.6 billion of clinical development spend to CROs, representing a 9% increase in such spending compared to 2012 and a penetration rate of 37% of our total addressable market​,” INC writes. “We estimate that this penetration rate will increase to 46% of our total addressable market by 2018.”

INC also says that it has a geographically diverse group of clients that “reduces our exposure to potential US and European biopharmaceutical industry consolidation. For example, 25% of our 2013 net service revenue was associated with biopharmaceutical customers whose parent companies are headquartered in Japan​.”

Goldman, Sachs & Co. and Credit Suisse are serving as joint lead book-running managers for the offering. Baird, William Blair and Wells Fargo are serving as co-managers for the offering.

The company has applied to list its common stock on the NASDAQ under the ticker symbol "INCR​." 

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