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Quick Impact - PRA Acquires Symphony Health

Yesterday, PRA Health Sciences announced the acquisition of Symphony Health, a privately-held best-in-class provider of data, analytics and consulting solutions to the life sciences market. Symphony Health will be acquired for an upfront payment of $530 million in cash payable at closing, subject to customary purchase price adjustments, plus potential contingent payments that are based on Symphony Health exceeding financial targets for the twelve month periods ending December 2017 and December 2018. PRA expects to close the transaction in the third quarter of 2017.

Why Does This Transaction Make Sense for PRA?

PRA's acquisition is a great example of a strategic transaction within the CRO industry (as opposed to acquisitions for scale and financial synergies). The amount of traditional clinical research and development spend is expected to plateau (some analysts estimate that over 60% of clinical work is already being outsourced to CROs today), which could make it difficult for large public CROs to maintain growth rates necessary to satisfy shareholder expectations. PRA's acquisition of Symphony could help them in several ways:

1) Revenue Diversification - PRA's current annual revenue run rate is roughly $1.8 billion dollars (Q1/Q2 '17 revenue was $884 million dollars), Symphony's 2017 revenue is projected to be $200 million dollars. Going forward Symphony would make up 10% of PRA's total revenue base. PRA has been growing nicely (should see annual growth in 2017 close to 15%) while I think its safe to assume that Symphony is likely growing at a double digit clip as well. Having a new revenue stream growing faster than the broader market should help PRA maintain a growth rate above the industry average.

2) Service Diversification - PRA has just added several new services offering that they can offer to their existing client base (and Symphony can provide PRA's services to their 400+ strong customer base). PRA acquired the following capabilities (per Symphony's website):

  • Market Data - Symphony sources data from major supply channels that include retail pharmacies, wholesalers, specialty pharmacies, hospitals, clinical registries, electronic medical records, health plan claims, and government program claims. To objective is to holistically understand the role and changing influence of patients, payers, and providers in the prescribing decision.

  • Apps & Technologies - Tools specifically designed to turn Symphony's data into information that can be used to help support critical customer business decisions.

  • Consulting & Services - Symphony Health's Consulting Group provides information, solutions and industry expertise to help today’s sales and marketing professionals transform market data into successful marketing strategies.

3) Patient Centricity - PRA plans to use Symphony's data to that will allow them to customize their clinical studies to be designed around patients. I think we are in the early days of understanding what that means from a practical standpoint. QuintilesIMS commented on their Q2 2017 earnings call that since the merger between Quntiles & IMS, more than $600M of new awards can be directly attributed to utilizing IMS data to more efficiently and effectively deliver clinical research solutions. I imagine that PRA is looking for a similar impact to their core business.

4) Improved Profitability - As you can see below PRA's YTD Adjusted EBITDA% (i.e. profitability) significantly lags the other large CRO's excluding Parexel. I would assume the reason for PRA's lower profitability is its large staffing business brought on via the RPS acquisition. Staffing business margins are normally much lower than margins earned from running full service clinical trials. If Symphony comes with a robust EBITDA % (20%+) and enables PRA to win more full service work, PRA could enjoy profitability closer to 20% in future quarters.

CRO 2017 YTD Adjusted EBITDA's

Wrapping Up

I've mentioned in previous blogs how the CRO landscape has changed with all the recent transactions. I also think we are witnessing the traditional CROs franchises morphing into CRO 2.0. CRO 2.0 will be more than a clinical development partner to sponsors, they will leverage their existing core competencies with healthcare analytics and technology to provide a wide array of services to their sophisticated customer base.

Jason Monteleone is President at Pivotal Financial Consulting, LLC. Pivotal provides Divestiture Assistance, Acquisition Advisory Services and Strategic Planning to the Pharmaceutical Outsourcing Industry. Jason can be reached at Follow me on Twitter @JMPivotal. Sign up for Jason's latest blogs and updates at my

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