Private equity continues to become more intrigued by clinical trials. From investing in clinical investigational sites to services providers to disruptive technologies, funds are seeking attractive opportunities. Most recently, buyout firm Leonard Green & Partners joined private equity group Arsenal Capital Partners as co-owners of WCG for $3.1 billion. Interestingly, the investment arm of Danish drugmaker Novo Nordisk also participated in this latest recapitalization.

Who is WCG?

WCG represents a consolidated clinical trial services company offering a suite of comprehensive end-to-end services centering safety, transparency, and trial acceleration services. The core focus areas include: 1) Ethical Review 2) Study Planning & Site Optimization and 3) Patient Engagement 4) Scientific & Regulatory Review and 5) Market Intelligence & Insights. The ultimate goal of rolling up and consolidating services involves the offering to reduce the time and cost of clinical research.

Somewhat of a “Roll-up” strategy, Arsenal Capital triggered the consolidation effort when forming the WIRB-Copernicus Group with the acquisition of Western IRB in February 2012 and the Copernicus Group IRB (CGIRB) in June 2012.

IRB Beginnings

The Institutional Review Board (ethical review) market has been quite fragmented, with many different options form central functions to niche providers, universities, and even committees in health systems. Arsenal smartly saw the opportunity to start to rationalize and consolidate this space. Why not begin combining deep industry experience with a transformational approach to the ethical review process? The benefit: offer industry sponsors and CROs more compelling clinical trial services that, in theory, would accelerate essential functions such as study start-up.

Consolidating & Rationalizing Subject Matter Expertise

WIRB is amassing considerable subject matter expertise in the targeted domains of operation. They often will acquire this expertise–whether it be in the IRB, study planning, regulatory, or other relevant areas. They are also known to purchase technologies that support clinical research processes.

Recapitalization V2.0

In 2016 the financial managers representing institutional investors did a recapitalization to raise more capital to fuel growth

And Back in August 2019, WCG was shopping again for a financial advisor to conduct an auction for financial transactions. Leonard Green and Novo Nordisk’s investment arm Novo Holdings bought in, and the deal is expected to close in the first quarter of 2020.

The parties do not explicitly state why they are recapitalizing. However, we do know that these complicated financial transactions are often motivated by additional fundraising, replacement of ownership, usage of debt, and in some cases, even more, complicated operations from mezzanine financing to other hybrid security transactions.

What we can infer from public information is that Arsenal Capital sold some of the equity to Leonard Green and Novo Holdings.

Operational Realities

The size and scale of the WCG undoubtedly afford an excellent opportunity for new business. However, on the other hand, it doesn’t guarantee the transaction. The vendor space for clinical research is represented by intense competition, lengthy sales cycles, and costly overhead in the form of administrative and regulatory burdens. Emerging business models, from clinical research as a care dynamics to disruptive patient/consumer-driven data paradigms (e.g. 23andMe), make the landscape even more interesting. The laser-like focus for the vendor service or product is an absolute must, but disruptive approaches can catch even the most knowledgeable industry insiders off guard.

Source: Reuters

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