Mid-sized M&A madness: Smaller deals dominate CRO space so far in 2015

By Gareth Macdonald contact

- Last updated on GMT

Mid-sized deals, consolidation and demand for niche capabilities driving M&A activity in 2015
Mid-sized deals, consolidation and demand for niche capabilities driving M&A activity in 2015

Related tags: Clinical trial, Ceo

Chiltern’s takeover of Theorem Clinical will be the latest acquisition in a busy eight months of deals impacting the mid-sized CRO space.

The proposed acquisition – announced this month​ – is designed to add Theorem’s medical device and diagnostics trial capabilities to Chiltern’s clinical research offering and follows less than a year after the UK contractor’s takeover of Ockham​ and Pacific Clinical Research​.  

The deal underlines Chiltern’s ambition and is a response to sponsor demand for device and diagnostics knowhow according to CEO, Jim Esinhart.

In broader terms it also illustrates the trend for consolidation that has dominated the first eight months of 2015.

Major players, mid-sized moves

The M&A news-flow began in January with the expiry of the waiting period for LabCorp’s $6.1bn​ (€5.3bn) takeover of Covance expired. While clearly not a mid-sized deal, the progress of the agreement - including LabCorp’s decision to call on on Deloitte​ to help with integration - had a significant knock on impact on the mid-sized services sector.

In response, Covance’s labs rival Quintiles partnered with mid-sized firm Quest​ to try and capture market share during the period of “customer uncertainty” that CEO Tom Pike​ predicted would accompany the Lab-Covance integration process. The Quintiles-Quest JV launched in July​.

Real world data in demand

Shortly after Lab-Covance deal – which eventually completed in February​ after some tough questions from shareholders​ – Icon announced it was going to buy market access and communications contractor MediMedia Pharma​ for $120m in cash.

At the time Icon CEO Steve Cutler told Outsourcing-pharma.com that sponsors under pressure to prove new drugs are cost effective are driving demand for the type of real world data with which MediMedia works.

Also in February Charles River Laboratories (CRL) announced it was close to buying an unnamed ‘early-stage drug discovery services’ company with CEO James Foster​ telling investors at a financial conference the firm would be “disappointed if we don’t get some meaningful M&A done in 2015.”

As yet no deal in the drug discovery space has been announced – despite Foster reiterating CRL’s desire for such a takeover in March​.  The CRO’s most recent acquisition has been drug and consumer product testing firm Celsis, which it bought in July for $212m​.

Whether CRL’s recent announcement​ of plans to re-open its early-stage research site in Shrewsbury, Massachusetts indicates it has abandoned plans to buy in the space remains to be seen.

Geographic reach

Quintiles has also been looking for acquisitions in 2015.

In March​ “Q” – as the firm is known by analysts – signalled it was on the lookout for mid-sized CROs to buy outside the US, reasoning that its acquisition of Novella in 2013 showed it has the knowhow to grow such firms’ businesses.

At the time​ Tom Pike said smaller CROs “benefit greatly from coming to us​” reiterating his earlier argument​ that alone such companies lack the reach to compete in the increasingly globalised market.

In May​ Quintiles purchased Japanese CRO Clio Science, a 70-strong full service contract which it said would give it access to customers in Asia-Pacific.

Parexel was the next major CRO player to make a move. In March the firm bought Quantum Solutions India,​ a provider of pharmacovigilance services, to bulk out its post-approval offering.

We caught up with CEO Josef von Rickenbach at DIA in June​ who told us that acquiring such expertise in niche areas was driving industry M&A activity. He also hinted at more deals.

What we have done recently is reviewed our financial situation and balance sheet and felt that acquisitions would be a more important part of our strategic plan going forward​” Rikenbach said.

Customer driven

Clinipace made the next notable acquisition in 2015. In April, the North Carolina, US CRO bought Germany’s Accovion​ to expand its presence in Europe.

The deal, financial terms of which were not disclosed, bolstered Clinipace’s capabilities in oncology and cardiovascular trials and extended its reach into Eastern Europe according to CEO Jeff Williams.

Williams also hinted that Clinipace would look at other acquisitions this year, but stressed that any deals would be motivated by a desire to bring in new clients rather than geographic expansion.

More recently it was BioClinica that got involved by buying patient recruitment and retention firm MediciGroup.

The clinical trial technology firm said Medici’s 40-strong team would relocate to its facility in Audobon, Pennsylvania next January.

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