CRO Consolidation Continues as ICON Splashes $12B for PRA Health Sciences

Researching vaccine to novel coronavirus 2019-nCoV. Close-up shot of a scientist preparing glass slide.

ICON has agreed to acquire PRA Health Sciences for approximately $12 billion in cash and stock, the companies said, as ICON seeks to broaden its abillity to provide decentralized and hybrid trial solutions incorporating data from mobile and connected health platforms, as well as from a global network of trial sites, home health services, and wearables.

That need for virtual clinical trials has intensified, the companies said, as a result of the global pandemic, which has seen a move toward scale among competing contract research organizations (CROs) and driven consolidation.

“COVID-19 created a platform for change that we cannot ignore,” PRA chairman and CEO Colin Shannon declared in a statement. “The pandemic accelerated the adoption of mobile health technologies and healthcare intelligence tools—tools that PRA helped develop—at an unprecedented rate.”

Responding to COVID-19, PRA launched a COVID-19 Clinical Study Support Mobile Application designed to virtually connect patients worldwide with clinical trial sites and health professionals from any location via their mobile device. PRA also mobilized its Center for Vaccine Research, which applies data to improve the design, site selection, and enrollment forecasting of clinical trials. The company participated in Phase I–IV clinical studies that assessed a combined 72,000+ COVID-19 patients at more than 700 sites globally.

Last year, ICON provided clinical trial services toward BNT162b2, the mRNA-based COVID-19 vaccine that Pfizer and BioNTech have shepherded to emergency use authorization in the United States, as well as in Europe. ICON announced on January 4 that it worked with 153 sites in the United States, Europe, South Africa, and Latin America to ensure the recruitment of more than 44,000 trial participants over four months. ICON provided site training, document management, and operational support for patient Informed Consent Form review, coordinated eConsent in most countries, and assisted with clinical supply management services.

Pfizer is one of ICON’s most enduring pharma customers, with the CRO providing clinical trial services to the pharma giant for 30 years. The companies formed a strategic relationship in 2011, enabling ICON to provide Pfizer with global expertise in planning, executing, managing, and conducting clinical trials.

Shrinking revenues 

While COVID-19 cemented ICON’s relationship with Pfizer, the global pandemic slowed down enough clinical trial activity in other therapeutic areas, with 65% of ICON’s global sites impacted. ICON withdrew its 2020 investor guidance in April, and saw its revenues shrink 10.8% year over year to $620 million during Q2.

Business bounced back in the second half of last year for ICON to end the fourth quarter with a 1.4% year-over-year gain in net income, to $101.234 million from $99.861 million. Revenue rose nearly 5%, to $760.229 million from $725.409 million.

Yet ICON still ended 2020 with a 7.2% drop in net income from 2019, to $348.792 million from $375.856 million. Revenue last year dipped 0.3%, to $2.797 billion from $2.806 billion.

Like ICON, PRA withdrew its 2020 guidance as COVID-19 wreaked havoc on global clinical trials. Also like ICON, PRA saw its net income and revenues shrink in the fourth quarter and last year. PRA finished 2020 with Q4 net income of $51.257 million, down 31.5% from $74.801 million a year earlier. For all of last year, PRA reported net income of $197.043 million, down 19% from $243.119 million in 2019.

PRA was able, however, to keep revenue climbing. During Q4, the company generated $873.458 million, up 9% from $800.24 million—while for all of 2020, PRA revenues rose nearly 4%, to $3.183 billion from $3.066 billion in 2019.

U.S.-based PRA provides outsourced clinical development and data solution services to biopharma. PRA’s global clinical development operations include more than 75 offices across North America, Europe, Asia, Latin America, Africa, Australia, and the Middle East, and approximately 19,000 employees worldwide. PRA said it has participated in approximately 4,000 clinical trials worldwide since 2000.

Ireland-based ICON is a global provider of outsourced drug and device development and commercialization services to pharmaceutical, biotechnology, medical device, government agencies, and public health organizations. ICON also specializes in the strategic development, management, and analysis of programs that support clinical development—from compound selection to Phase I–IV clinical studies.

As of December 31, ICON employed approximately 16,000 employees in 93 locations in 41 countries.

Platform for growth 

ICON and PRA vowed that their combined company will build a platform for growth and innovation by being the leader or number-two in key clinical market segments, and will draw upon strategic partnerships formed with most of the top 20 biopharma companies.

“We will be the leading provider of decentralized and hybrid trial solutions through the integration of our data capabilities, health platforms, and Accellacare site network,” ICON CEO Steve Cutler, PhD, vowed. “With broader and deeper operational scale combined with innovative technology and real-world data solutions, we will enable all customers to reduce their development time and cost.”

Customers of the combined company, according to ICON and PRA, would benefit from increased functional, geographic, and therapeutic scale as well as expansive healthcare technology innovation.

Investors in PRA signaled approval of the deal, with shares of the company climbing nearly 19% yesterday, to $151.66, before declining 2% to $148.50 a share in after-hours trading as of 5:32 p.m.

However, shares of Icon slid 7.77%, to $192.41 from Tuesday’s close of $208.62—a price that stayed unchanged in after-hours trading.

In a research note reported by Reuters, Elizabeth Anderson, healthcare technology and distribution analyst with Evercore ISI, noted that ICON and PRA have attracted mostly different customers in biopharma: “Despite their relative sizes, the small amount of customer overlap between the two should help lower the integration risk.”

ICON said it expected its acquisition of PRA to deliver double-digit growth the first full year after the companies combine, to be followed by 20%+ growth each after. That forecast reflects in part a lowering of the combined companies’ effective tax rate to 14% since ICON is headquartered in Dublin at the Leopardstown campus, while PRA has been based in Raleigh, NC.

Another factor in ICON’s rosy growth forecast: The combined company expects to achieve cost cuts and other synergies totaling $150 million annually.

The combined company will remain headquartered in Dublin, and will be led by CEO Cutler and CFO Brendan Brennan, who now hold identical positions with ICON.

Ciaran Murray, the non-executive chairman of ICON’s board, will serve as chairman for the combined company.

Shannon will join the board upon closing of the transaction, as will one additional board member from PRA.

“People, data, and technology” 

“The union of PRA and ICON will create an organization that has the people, data, and technology to bring those cures to patients faster and more efficiently than ever before,” Shannon stated.

ICON agreed to acquire PRA for $80 per share in cash—an approximately 30% premium above PRA’s closing price Tuesday of $127.73—and 0.4125 shares of ICON stock. ICON said it intends to fund the cash portion of the transaction through a combination of cash on hand and fully committed debt financing from Citi.

ICON finished 2020 with $842.034 million in cash and short-term investments, and a net cash position after subtracting debt of $493.557 million—the company’s highest-ever cash position, and more than double the $220.297 million net cash position reported as of December 31, 2019.

The transaction is not subject to a financing condition.

Upon completion of the acquisition, PRA shareholders will own approximately 34% of the shares of the combined company, with ICON shareholders holding an approximately 66% majority stake.

The boards of both companies have approved the deal, which is set to close in the third quarter, subject to regulatory and shareholder approvals and customary closing conditions.

“The combined company will create a new paradigm for accelerating clinical research and bringing new medicines and devices to market,” Cutler added. “Both ICON and PRA have track records of robust growth and performance and we are ready to build on this unrivaled position of strength, utilizing the outstanding talent in both organizations.”

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