A researcher prepares medicine at a laboratory in Nanjing University in Nanjing, Jiangsu province, April 29, 2011.

Contract research organizations, to which pharmaceutical companies outsource research and development, are the subject of a lot of acquisition activity.

Lab-testing giant LabCorp just picked up contract research organization Chiltern for $1.2 billion.

Chiltern, a CRO, works with drugmakers to take on some of the science that companies have to carry out to get drugs approved, like discovering potential drug targets and 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 don’t want to invest in hiring all the folks to run the clinical trial. You could 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 research-and-development 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 dealmaking lull. According to Bloomberg, M&A spending in the CRO industry was $24 billion in 2016. So far this year, spending on deals has totaled $14.2 billion, including the LabCorp acquisition.

LabCorp itself is no stranger to CROs. In 2015, it acquired Covance in a $6.2 billion deal. And in May, Chiltern picked up Japanese CRO Integrated Development Associates.

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 by more than 25% over the past year, signaling Wall Street 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.

Here are some of the other notable CRO deals from the past few years.

Only two of the top 10 CROs haven’t been part of the dealmaking frenzy. One is Pharmaceutical Product Development, whose majority is owned by 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: Pulse nigeria

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