PRA joins the CRO in-crowd with a $306M IPO

CRO conglomerate PRA Health Sciences ($PRAH) pulled off a $306 million IPO, joining the growing list of Big Pharma contractors cashing in on Wall Street after years under private equity stewardship.

The Raleigh, NC, company priced nearly 17 million shares at $18 apiece, coming in below its expected range of $20 to $23 a share. PRA expects to pull in net proceeds of $286.5 million, money it plans to spend on the payment of debts and redemption of senior notes. The CRO specializes in handling all manners of clinical trials for its partners in pharma and biotech, employing more than 10,000 people around the world.

PRA's market debut follows an en-vogue model among the companies that handle Big Pharma's heavy lifting, in which private equity heavyweights buy out the industry's largest contractors, execute bolt-on acquisitions to boost their value and then cash out with IPOs. Quintiles ($Q), the world's largest CRO, set the template with its $947 million offering last year, followed by Catalent ($CTLT), which raised nearly $1 billion in July, and INC Research ($INCR), which picked up $150 million in an IPO earlier this month.

Today's PRA came to be thanks to KKR, which won a bidding war and picked up the CRO for $1.3 billion last year. A few months later, KKR paid an undisclosed sum for ReSearch Pharmaceutical Services and merged its two acquisitions. By year's end, the company had acquired CRI Lifetree to bolster its piecemeal CRO's early-stage capabilities, completing a buy-and-merge plan that created what it said is the world's fourth-largest pharma contractor.

Investor interest in the world's biggest CROs is driven by drugmakers' increasing reliance on outside researchers. The outsourcing industry is on pace to grow about 8% a year, according to Industry Standard Research, reaching $32 billion by 2018. ISR estimates that about 31% of all clinical development spending is outsourced to CROs, a number the firm expects to reach 43% in the next 5 years.

And PRA believes it will play a lead role in that growth. Through all its acquisitions, the company has carved out a niche as a big CRO with an affinity for mid-sized drugmakers. In the first 6 months of 2014, PRA got 20% of its revenue from small- to mid-sized pharma companies, 26% from Big Biotech and 14% from emerging drug developers, the company said. In that same period, the company boosted its revenue by about 80% over 2013, bringing in $622.8 million.

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