INC stock launches up almost 10% as CEO says business as usual

By Zachary Brennan contact

- Last updated on GMT

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INC stock launches up almost 10% as CEO says business as usual
The IPO boom for CROs is kicking off with INC Research’s stock offering, which as of Friday afternoon saw a nearly 10% rise, meaning the company raised more than $150m.

INC CEO Jamie Macdonald told Outsourcing-Pharma.com in an interview that it’s “business as usual on the operating side​,” with the successful completion of clinical trials continuing.

He added that the timing of the IPO is “good and allows us to make a significant improvement to our capital structure​,” noting that the increased transparency “helps our customers have confidence in our liquidity and longevity​.”

With about $100m in cash and a $100m line of credit, the company is also poised for additional acquisitions though Macdonald didn’t elaborate on where those might take place. In March, INC bought CRO MEK Consulting​ to expand its presence into the Middle East.

We’re one of the larger clinical CROs​,” and in terms of “size and scale we think we’re pretty competitive, and we expect we’ll grow bigger​,” Macdonald told us. The company derives about 99% of its net service revenue from clinical development services.

The proceeds from the IPO will be used to refinance INC’s long-term debt. Macdonald also said the company is looking into offering an employee stock program, though that will be “farther down the road​.”

Outlook

As far as expectations for the CRO industry, INC says it believes the penetration rate of the total $56bn addressable market will increase from about 37% to 46% by 2018.

A geographically diverse set of clients will also help INC stay ahead of the consolidation among its EU and US partners.

CFO Greg Rush also told us that from a profitability perspective, INC has been profitable for the last two years.

Strategic Partnerships

INC peer and competitor Parexel recently discussed some troubles​ in an earnings call that the company was experiencing with its strategic partnerships and requests for proposals. Macdonald, however, said that he’s “pleased with the volume of business right now for INC​.”

Some companies have specific performance issues or fluctuations… and there’s a misperception that all CROs compete for same business​,” but there are differences by therapeutic areas, and INC hasn’t “seen any change in opportunities​,” Macdonald added.

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