- InVentiv Health and INC Research are combining to form one of the world's largest businesses for outsourced research services.
- The all-stock merger creates a company worth $7.4 billion, according to a Wednesday statement. That valuation stems from the price of INC shares at close-of-market Tuesday, which clocked in at $43.65 apiece. INC shareholders will control 53% of the new company while InVentiv investors hold onto the rest.
- INC anticipates the deal will be accretive to earnings per share within 12 months after its closing — slated for the second half of this year. The newly-formed company will be a top three contract research organization (CRO), with net revenues pegged at $3.2 billion.
Pharmaceutical developers, unable to conduct in-house all the clinical work necessary to keep up with increasing pressure to flesh out pipelines and stay competitive, have increasingly turned to outsourcing studies to CROs over the last decade or so.
CROs, meanwhile, have had a hard time providing the manpower necessary to handle such an influx of work. A report from BioPharm Insight released late last year found many research providers are understaffed, in no small part due to lower revenue margins.
InVentiv, which offers both clinical and commercial services, was one CRO in need of cash. The company even considered a $100 million initial public offering in 2016 as a way to pay down its debts. Those money woes loomed over an already busy business, with InVentiv claiming it provided services to 80% of all new-to-market drugs in the U.S. over the past half-decade.
Much like the merger between Quintiles and IMS Health, the InVentiv-INC deal stands to save the new entity $100 million each year in cost synergies. Also to InVentiv's benefit is access to a metrics-based project management system called Trusted Process, which INC says allows it to start clinical trials four weeks earlier, on average, compared to competitors.
"The combination also provides the opportunity to leverage INC Research’s Trusted Process — a proven methodology to accelerate success — which can improve the overall cost of development and time to market for our customers," InVentiv Health CEO Michael Bell said in the statement.
Meanwhile, INC becomes part of a company worth more than twice its current market cap, outfitted with more equipment, staff and general bandwidth.
"Customers are increasingly seeking simultaneous approvals and product launches in multiple markets worldwide," INC's chief Alistair Macdonald said in the statement. "The combination of INC Research and InVentiv will expand our global scale and add capabilities to grow our addressable market."
The combined business will have more than 22,000 employees and operate in more than 110 countries. In addition to owning slightly more stock, INC benefits from Macdonald staying on as CEO. Bell will shift gears and serve as executive chairman, while the two companies will each contribute five representatives to a new 10-person board of directors.
InVentiv, however, gets to pick only one director by itself. Private equity firms Advent International and Thomas H. Lee Partners own equal, and presumably sizable, amounts of the CRO, and as such will each select two directors for the board.