February 2021 M&A activity highlighted continued momentum on several compelling themes:
- Evolution of Outsourced Pharmaceutical Services: In the wake of COVID-19, virtual clinical trials and eClinical solutions have gained attention as mechanisms to expand patient reach and engagement in the drug commercialization process. The desire for swift speed to market, accelerated adoption of telemedicine and digitalization, and the growing use of decentralized trials has driven investment into the outsourcing pharmaceutical services landscape. As of 2019, 53% of clinical development spending was outsourced, up from 39% in 2012. Flexible delivery approaches and expanding access to real world data will drive informed decision making as the paradigm for bringing clinical research to patients continues to evolve. TripleTree remains intrigued by the innovative approaches to remote data collection, clinical trial design, and hub services, all of which continue to re-define the healthcare ecosystem.
- Triangulating Around Governance, Risk, and Compliance: Healthcare organizations continue to seek out ways to combine investigative workflows with process optimization to delivering safer and more efficient care. Stakeholders within these organizations need access to a single source of truth for safety, compliance, and provider data. Integrated, cloud-based software solutions allow for more proactive management of patient safety, risk, and quality. In a highly regulated industry such as healthcare, simplifying complex datasets can lead to the reduction in costly bottlenecks and operational inefficiencies. Companies that offer a holistic view into data management have the greatest flexibility to react and adapt to new use cases.
- Continued Consolidation in the Autism Services Market: Private equity activity in the autism services market remains robust with scaled platforms continuing to garner premium valuations. Interest in the space is driven by the growing awareness around autism incidence rates, a highly fragmented landscape of applied behavior analysis (ABA) therapy providers, and favorable reimbursement tailwinds. Well-established platforms with scaled back-office infrastructure, sophisticated clinical programs, and strong management teams are aggressively sought after. Providers that can showcase strong clinical evidence of effective treatment are best positioned to cultivate entrenched payer relationships.
Several transactions announced in February align with the above themes:
- ICON, a Dublin-based contract research organization (CRO), entered into a definitive agreement to acquire PRA Health Sciences in a cash and stock transaction valued at ~$12B. Through a combination of mobile and connected health platforms, a global site network, home health services and wearables expertise, the combined company will deliver differentiated decentralized and hybrid trial solutions.
- Quotient Sciences (Quotient), the drug development and manufacturing accelerator, announced that it acquired Arcinova, the U.K.-based multiservice contract development and manufacturing organization (CDMO). The acquisition expands Quotient’s service portfolio and will enable the integration of drug substance, drug product, and clinical testing capabilities all under one organization. As a part of the deal, Arcinova’s minority equity partner, BGF, will exit the business.
- Charles River Laboratories announced plans to acquire Cognate BioServices (Cognate), a cell and gene therapy contract development and manufacturing organization, in a $875M cash deal that will significantly expand the company’s capabilities in the high-growth cell and gene therapy sector. The addition of Cognate is also expected to provide a significant financial boost to Charles River. Cognate is expected to generate annual revenue of ~$140M in 2021 and is expected to grow at least 25% annually over the next five years.
- RLDatix, the leading global provider of intelligent patient safety solutions and a portfolio company of TA Associates, acquired Ecteon. Ecteon's Contraxx™ solution helps organizations manage complex contracting processes across multiple legal entities, jurisdictions, and contract types. The acquisition of Ecteon is the most recent acquisition to deepen the Governance, Risk, and Compliance offerings from RLDatix, following the acquisitions of Verge Health and oneSource in 2020, and Quantros and iContracts in 2019.
- ProviderTrust, the leading provider of healthcare compliance screening, monitoring, and verification tools, announced a significant minority investment from Susquehanna Growth Equity. ProviderTrust works with acute and post-acute providers, payers, and their vendors across all 50 states.
- Proud Moments ABA (Proud Moments), a national organization serving children diagnosed with Autism Spectrum Disorder and a portfolio company of Audax Private Equity, acquired Bridges: Educational Services for Children with Autism (Bridges). Acquiring Bridges further propels Proud Moments’ growth in the Southwest and accelerates Bridges’ mission to expand access to quality care in a historically underserved community.
- ACES, a provider of ABA and ancillary services to individuals impacted with autism and a portfolio company of General Atlantic, announced the acquisition of the Center for Language and Autism Support Services (CLASS). Prior to the acquisition of CLASS, ACES had grown 100% organically since its founding. The acquisition will enable ACES to continue scaling its evidence-based clinical model in Oklahoma.
TripleTree and TT Capital Partners continuously monitor the market to identify the forces and themes impacting the healthcare industry. Thanks for reading and, as always, let us know what you think!