Test taking for hire: PRA Health Sciences sets terms for $400 million IPO

PRA Health Sciences, one of the largest global contract research organization, announced terms for its IPO on Monday. The Raleigh, NC-based company plans to raise $400 million by offering 18.6 million shares (9% insider) at a price range of $20 to $23. At the midpoint of the proposed range, PRA Health Sciences would command a fully diluted market value of $1.3 billion.

Business
CROs perform outsourced clinical trials for biotechnology firms. With over 60 biotech IPOs this year, some of PRA Health's clients are newly flush with cash for clinical trials. It estimates the global CRO market was $22 billion in 2013 and is expected to grow at an 8% CAGR for the next 5 years to $32 billion. About 31% of Phase 1 through Phase 4 trials were outsourced in 2013, which could rise to 43% by 2018. The company generates revenue from large biotechs, small- to mid-sized pharmaceutical companies and emerging biotechs. PRA highlights its expansion into emerging markets through joint ventures with WuXi AppTec (Shanghai) in Asia and ClinStar in Eastern Europe.

KKR (NYSE: KKR) purchased PRA Health in September 2013 from Genstar for an estimated $1.3 billion. Genstar originally bought the company from Carlyle in 2001 for $95 million, took it public in 2004, and paid $800 million to take it private again in 2007. KKR also bought ReSearch Pharmaceutical Services (RPS) in September 2013 from Warburg Pincus for $289 million and combined it with PRA Health. The IPO candidate claims that its merger with large pharma-focused RPS is a complementary fit to its historical focus on biotech and smaller pharmaceutical companies.

Related IPOs
Close peer INC Research (INCR), also an LBO, is expected to price a $770 million IPO this week. Catalent (CTLT), a Blackstone LBO (Genstar had a minority interest) that provides drug delivery technologies, has returned +25% from its July IPO.

PRA Health Sciences, which was founded in 1982 and booked $1.2 billion in sales for the 12 months ended September 30, 2014, plans to list on the NASDAQ under the symbol PRAH. Jefferies, Citi, KKR, UBS Investment Bank, Credit Suisse and Wells Fargo Securities are the joint bookrunners on the deal. It is expected to price during the week of November 10, 2014.