ReSearch Pharmaceutical Services (RPS) plans an initial public offering in the U.S. on the Nasdaq exchange. The Fort Washington, Pa.-based contract research organization (CRO ) seeks to raise $100 million from the IPO.
RPS, which prefers to be called a pharmaceutical research organization, had been traded for two years on the London Stock Exchange Alternative Investment Market (AIM) after going public by reverse merger in August of 2007. It delisted in September of 2009.
Michael Martorelli, director with Fairmount Partners and a long-time observer of the CRO industry, said going public in the U.S. could prove more fruitful for the 16-year-old, 2,360-employee CRO.
“This market is definitely more liquid, more visible,” Martorelli said. “RPS didn't trade that much when it was on the AIM, so they're trying it again here.”
RPS's June 18 filing with the U.S. Securities and Exchange Commission did not say how many shares the company planned to sell, nor did it reveal their expected price. RPS could not be queried since it's in a quiet period that's customary when a company goes public.
Martorelli said the move is not a surprise; RPS was among a handful of companies that industry observers thought might go public soon. The others, he said, include Cetero Research and INC Research and Medpace. “They've all been rumored to be lined up and ready to go,” he said.
Martorelli said now is not a bad time for a CRO to go public. “(CRO) stocks are not ridiculously cheap or ridiculously expensive, and the industry seems to be coming back from its down period of late '08 and into '09. It seems like an okay time,” he said.
Though RPS posted a net loss of $73,000 for the first quarter of 2010, down from income of $500,000 for the same quarter a year earlier, Martorelli describes the firm as financially sound. “They've been nicely profitable for a couple years, and growing,” he said.
With the money RPS raises, it may makes more acquisitions, suggested Martorelli. In 2009, RPS bought Chinese CRO Paramax International for $1 million, adding to three European CROs purchased during 2008. Just before that, RPS had expanded rapidly into Latin America. RPS is a CRO that provides functional outsourcing across a client's entire pipeline in a specific region.
Jefferies & Co., William Blair & Co. and Lazard Capital Markets are underwriting the IPO. RPS plans to list its shares on Nasdaq under the symbol "RPSE."
Will this IPO– the first in a long while among CROs—spark a trend, especially those who are rumored to be ready? “This will be a good test,” Martorelli said.