European private equity firm Cinven has taken a majority stake in US-based contract research organisation (CRO) Medpace for around US$915 million.

Cinven is acquiring Medpace from another private-equity player, CCMP, which took an 80% stake in the CRO in May 2011.

According to some reports, CCMP decided to put Medpace up for auction late last year and is making three times its original investment in the CRO through its deal with Cinven.

The latter is paying a total consideration of US$915 million for Medpace plus “certain cash inflows” from CCMP’s period of ownership.

Investment opportunity

Cinven said its healthcare team had been looking for some time at the contract research market as an attractive investment opportunity.

The firm was reported to be in the bidding last year for PRA-International – also US-based – which eventually went to investment firm KKR.

Cinven cited increased spending on research and development by the pharmaceutical and biotechnology industries, due to the growing number and complexity of clinical trials required to bring new molecules to market.

This was expected to fuel dynamic growth in the CRO sector, especially for operators such as Medpace that focused on smaller pharmaceutical and biotechnology customers, “where the outlook for R&D spend is most positive”, Cinven commented.

European presence

It also noted that Medpace had been rapidly expanding its European presence. The company acquired MediTech Strategic Consultants, a specialist medical-device CRO with headquarters in the Netherlands, in November 2012.

Medpace has “the opportunity to achieve greater penetration across Europe and Asia, where Cinven has a strong track record of portfolio company growth”, the latter commented.

The Medpace management team will continue to be led by Dr August Troendle, the CRO’s founder, president and chief executive officer. Dr Troendle and his team will also remain significant minority investors in Medpace alongside Cinven.

Set up in 1992, Medpace is based in Cincinnati, Ohio and has global operations in over 45 countries. Out of a total staff of more than 1,500, around 40% of Medpace’s clinical operations employees are in Europe.

Medpace generated adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) of US$94 million in 2013, Cinven said.

Phase I-IV services

The acquired CRO provides Phase I-IV core-development services for drug, biologic and medical-device programmes.

It has expertise across a range of therapeutic areas including oncology, cardiovascular disease, metabolic disease/diabetes, neuroscience, infectious disease, regenerative medicine and gastrointestinal conditions.

Alex Leslie, principal at Cinven, highlighted the depth of experience in Medpace’s management team (Troendle has worked at Sandoz (Novartis) and the US Food and Drug Administration) as well as its strong market positioning, “with growth in Europe and Asia presenting a real opportunity for the business”.

The Cinven team is well placed to accelerate this growth, “given our considerable European presence and also the strength of our Asia portfolio team – which has been instrumental in the success of international businesses in the region”, Leslie added.