Contract research organization INC Research sets terms for $150 million IPO

INC Research Holdings, a global contract research organization LBO'd by Avista and the Ontario Teachers' Pension Plan, announced terms for its IPO on Monday. The Raleigh, NC-based company plans to raise $150 million by offering about 8.1 million shares at a price range of $17 to $20. At the midpoint of the proposed range, INC Research Holdings would command a fully diluted market value of $1.1 billion.

Business
Avista and the OTPP acquired INC Research from Crosspoint Venture Partners and Adams Street Partners in 2010 for about $600 million. INC Research provides Phase 1 to Phase 4 clinical development services for biopharmaceutical and medical device companies, and claims it is particularly strong in central nervous system, oncology and other complex diseases. It estimates the addressable global clinical development market to be $56 billion, of which nearly $21 billion is outsourced, representing a 37% penetration rate which it expects to grow to 46% by 2018.

Recent financials
During the nine months ended September 30, 2014, net service revenue increased 25% to $596 million, driven by strong awards during the period and growth in the CNS and Oncology therapeutic areas. Adjusted EBITDA rose 51% to $114 million as direct labor costs fell as a percent of revenue. At quarter-end, INC Research had a backlog worth $1.5 billion, up 10% from $1.4 billion at the end of the 3Q13. As of September 30, the company had $592 million of debt (4.1x LTM adjusted EBITDA), and will use IPO proceeds to pay it down.

Competitors
Close peer PRA Health Sciences, a contract research organization LBO'd by KKR, filed for a $375 million IPO in early September. The world's largest CRO, Quintiles Transnational (Q; backed by TPG and Bain), has gained about 40% since its $950 million IPO in May 2013. INC Research's CEO, Jamie Macdonald, worked at Quintiles for 15 years until 2011, most recently as Head of Global Project Management.

INC Research Holdings, which was founded in 2010 and booked $770 million in sales for the 12 months ended September 30, 2014, plans to list on the NASDAQ under the symbol INCR. Goldman Sachs and Credit Suisse are the joint bookrunners on the deal. It is expected to price during the week of November 3, 2014.