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INC Research launches its IPO

Monday, November 10, 2014

Global CRO INC Research launched its initial public offering today, raising $150 million by selling just over 8.1 million shares at $18.50 per share—the middle of the expected $17-$20 range. The stock climbed 9% in early trading past $20.75 before settling to $20 by late afternoon.

Founded more than 20 years ago, the Raleigh, N.C.-based company, focused on phase I to phase IV clinical development services, had been working toward today’s IPO launch since early summer.

“Yes, we’re very happy as we’ve reached an important milestone for INC, which will enable us to pay down debt [$592.5 million as of June 30] and still have about $100 million in cash,” said Jamie Macdonald, CEO of INC Research Holdings. “This IPO gives us options to possibly pay down debt further, consider a secondary offering from the original shareholders and make some additional acquisitions.”

In 2010, INC Research was acquired by two large private equity groups—Avista Capital Partners and affiliates of the Ontario Teachers’ Pension Plan—for $600 million. Since 2011, INC has grown with recent profitability. The improved balance sheet played a role in the decision to file for an IPO.

Company officials said they have added more than 650 people in the past 20 months, now employing 5,500 worldwide, including 2,600 in the U.S. and Canada. INC added 40 employees when it acquired MEK Consulting, a CRO based in the Middle East and North Africa, in March, after working with MEK for more than 10 years. In 2011, INC made a major acquisition of Kendle, a publicly traded CRO based in Cincinnati, for $232 million in cash. Macdonald joined INC as chief operating officer from Kendle, and subsequently became CEO.

“We would like to add more companies if they fit the INC model, as we have a good geographic footprint in the clinical development space,” said Macdonald. “The overall market for R&D in the clinical research space is quite good. There’s a lot of industry funding and growth from biotechnology companies, which benefits the CRO industry as outsourcing continues.”

He cited several CROs in recent years that have turned to Wall Street, most notably Quintiles, based in Durham, N.C., which raised $947 million in May 2013. Macdonald acknowledged another Raleigh company, PRA Health Sciences, a substantially larger CRO, seeks to raise as much as $375 million in an upcoming IPO.

CROs are part of a U.S. IPO market that has been booming, as stock prices remain high and market volatility is relatively subdued. Overall, investors are eager for new growth opportunities including CROs, and many that have gone public this year have seen strong demand. Quintiles shares have risen 20% this year.

“For us it’s business as usual as our key areas of focus going forward are process improvements, technology and continuing relationships with investigative sites that support patients and site communities,” said Macdonald.

INC Research is traded on the Nasdaq Global Market under the ticker symbol INCR.

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