Exclusive-Syneos Health eyes sale of company as contract backlog shrinks-sources
By David Carnevali and Anirban Sen
(Reuters) -Syneos Health Inc is making a new effort to sell itself after a reduced backlog of contracts for providing clinical research to drug developers led to a 52% plunge in its shares over the past year, according to people familiar with the matter.
Reuters reported in March 2020 that Syneos was working with investment bank Centerview Partners LLC to explore a sale. The market disruption triggered by the onset of the COVID-19 pandemic prompted Syneos to abandon those sale deliberations, according to four sources familiar with the discussions.
Now, Syneos has hired Bank of America Corp in addition to Centerview for financial advice as it embarks on a new round of talks with potential acquirers that may include industry peers and private equity firms, the sources said.
The sources cautioned that the prospects of a deal remain uncertain and asked not to be identified because the matter is confidential.
Syneos, which has a market capitalization of about $4.3 billion and carries a $2.9 billion debt pile, was not immediately available for comment. Centerview also did not respond to a request for comment, while Bank of America declined to comment.
Syneos shares rose 13% on the news in morning trade to $43.35 a share.
Based in Morrisville, North Carolina, Syneos helps pharmaceutical companies with clinical trials and to market their drugs. It was created in 2017 by INC Research Holdings Inc's acquisition of inVentiv Health Inc for $7.4 billion, including debt.
That deal buoyed INC Research - which changed its name to Syneos in 2018 -- by giving it scale and broadening its offerings for the outsourcing of the development and commercialization of drugs. The push to develop COVID-19 vaccines and medicines in 2020 and 2021 also boosted its fortunes.
But last year's stock market downturn led to a drop in the valuations of many small and medium-sized biotechnology firms, which limited their ability to raise capital and forced them to slash spending on contract research organizations such as Syneos.
Syneos Chief Executive Michelle Keefe said on the company's fourth-quarter earnings call earlier this month that Syneos had "work to do" to improve its win rates among small drug companies for which it relies on for a big chunk of its business.
She added that the company was "underweight" when it came to contracts with large pharmaceutical companies and that it was making progress in winning more customers.
Syneos reported a total backlog for contracts of $6.8 billion as of the end of 2022, down from $7.5 billion as of the end of 2021.
There has been a wave of consolidation among contract research organizations in a bid to lower costs, amass more clinical trial data and win customers.
Most recently, Thermo Fisher Scientific Inc acquired PPD Inc for $17.4 billion and Icon Plc took over PRA Health Sciences Inc for $12 billion.
Some companies are concluding that it is better to run clinical trial outsourcing as a separate business. Labcorp, for example, said earlier this month that it will complete the spinoff of its contract research organization, called Fortrea, by the middle of this year. Labcorp will retain its laboratory business that provides healthcare testing.
(Reporting by David Carnevali and Anirban Sen in New York, editing by Deepa Babington)
