Fundamental Analysis

Wall Street is making huge bets on healthcare companies you’ve never heard of

Wall Street has been piling in to an area in healthcare you’ve likely never heard of.

Contract research organizations, or CROs for short, work with drugmakers to take on some of the science companies have to do to get drugs approved.

That means everything from discovering potential drug targets to running clinical trials on behalf of pharmaceutical companies.

For example, say you need to run a clinical trial for a drug you’re working on, but you don’t want to invest in hiring all the folks to run the clinical trial yourself. So you work with a CRO, which can set that up for you and recruit patients for a certain price. As drug companies continue to look for ways to trim R&D costs, these companies have become more popular.

That activity has made a lot of room for mergers and acquisitions, even at a time when drugmakers themselves are in a bit of a deal making lull . According to Bloomberg that M&A spending in the CRO industry was $24 billion in 2016. So far in 2017, the spending on deals is $13 billion.

Many of these CROs are getting picked up by private equity, signaling that investors expect the companies to grow over the next decade. Pamplona Capital Management, Carlyle Group and GTCR have all struck big deals in the space recently.

Stocks of the companies that are public are up more than 25% over the past year meanwhile, signaling public market investors are betting on the companies too, potentially in anticipation of activity to come

“We are at the beginning of this process,” KPMG principal Paul Saias told Bloomberg .

Almost every major CRO has been involved with an acquisition, starting back in 2015.

  • Pamplona Capital Management acquired Parexel International in a $5 billion deal to take the CRO private in June.
  • In June, Albany Molecular Research Inc. was acquired and taken private by Carlyle Group and GTCR for $922 billion.
  • Chiltern picked up a Japanese CRO Integrated Development Associates in May.
  • In May, two of the largest CROs – INC Research Holdings andInVentiv Health – merged in a $4.6 billion deal .
  • In 2016, Charles River Laboratories went on an acquisition spree,snapping up other CROs .
  • In 2016, Quintiles Transitional merged with IMS Health in a $8.75 deal . Together, the company provides clinical research and health information technologies, which goes beyond what’s traditionally considered a CRO.
  • Back in 2015, LabCorp acquired Covance in a $6.2 billion deal .

Only two of the top 10 CROs appear to not be part of the dealmaking frenzy : Pharmaceutical Product Development, which is majority owned by the Carlyle Group, which was also behind taking Albany Molecular private. The other is Icon, which might be more open to deals now, according to Jefferies analyst David Windley.

 

Source – Business Insider

Advertisement

Click To Join Our Community Telegram Group

Vladimir Ribakov

Following 11+ years of trading experience, trading my own accounts as well as for hedge funds and brokerages, I have decided to fulfill my destiny and to personally mentor Forex and Commodities traders. When I released the “Broker Nightmare” (software that hides trades from brokers) 8 years ago, I found an overwhelming number of frustrated people who genuinely wanted to learn how to trade the Forex market, but instead found themselves scammed and misled. Over the years I have also release other trading systems based on my trading strategies, and met a lot of people on my worldwide Forex seminars. We’ve formed a close Forex community and we meet once or twice a year in various locations in Europe.

View Comments

Recent Posts

Weekly Summary And Review 20th December 2024

Hi Traders! Arvinth here from the Home Trader Club team. The weekly summary and, review of December…

3 days ago

US Stocks Face Headwind From Rising Yields After Fed Signals Fewer Rate Cuts

The rally in U.S. stocks is encountering a fresh hurdle -- a potentially problematic rise…

4 days ago

EURAUD Short Term Forecast And Technical Analysis

Hi Traders! EURAUD short term forecast and technical analysis post is here. We do our…

4 days ago

GBPCHF Short Term Forecast Follow Up and Update

Hi Traders! GBPCHF short term forecast follow-up and update is here. On October 3th, 2024…

5 days ago

AUDJPY Short Term Forecast And Technical Analysis

Hi Traders! AUDJPY short term forecast and technical analysis post is here. We do our…

5 days ago

GBPCAD Short Term Forecast Update And Follow Up

Hi Traders! GBPCAD short term forecast update and follow up is here. On November 26th,…

6 days ago