Garrett Black April 15, 2014
Pharmaceuticals & biotechnology companies are tempting investment opportunities; who wouldn’t want to back a company that can tap into the swelling demand for more and better drugs, particularly as antibiotics become outdated and populations age?
The recent flood of pharma & biotech IPOs indicates the industry still generates a fair amount of attention. However, the road from the lab to pharmacy shelves is fraught with regulatory hurdles, time-consuming trials and patent issues. Such hindrances make private equity investors wary, and the numbers imply investor caution; a cursory search of thePitchBook Platform uncovers a decline in capital invested even as deal count has risen in recent years, intimating that although the field is still attractive, firms are risking less money. But what isn’t as risky is the support ecosystem surrounding the drug trial process, because no matter who wins or loses in the game of drug development, the process constantly requires a wide variety of service providers to assist in research, regulatory compliance and more.
Enter companies like Synchrogenix, which was just acquired by Arsenal Capital Partners and merged into Certara. A regulatory writing firm, Synchrogenix works with pharmaceuticals companies to generate regulatory documentation associated with clinical and non-clinical trials, CMC (Chemistry, Manufacturing and Controls), drug safety and more.Increasingly stringent FDA regulations render these services invaluable to pharma companies, consequently making them a more stable investment opportunity. Certara serves as another example: bought by Arsenal in December 2013 for $190 million, Certara provides modeling, analysis and simulation methods through its software to assist drug discovery and development.
Both companies are similar to the thriving contract research organization (CRO) industry, inasmuch as they provide outsourced services to pharma and biotech companies, but they aren’t quite the same. They do benefit, though, from the same trend in the pharma industry of contracting outside firms to handle not only research but also regulatory services and analysis. How much will they benefit? Well, with the CRO industry only set to grow, related services companies will most likely reap rich rewards as well.