Following the science: dealmakers step up chase for CROs in Australia, New Zealand

Data InsightDealspeak 28 February

Following the science: dealmakers step up chase for CROs in Australia, New Zealand

There are few winners in a global pandemic, but the advent of coronavirus (COVID‑19) shone a spotlight on scientific guidance, pharmaceutical companies, biotech firms, and contract research organisations (CROs) in particular, not least in Australia, but also New Zealand.

  • Clinical trials, a key feature of CRO services, contributed AUD 1.4bn to Australia’s economy in 2019, up 6.5% from AUD 1.1bn in 2015, and accounted for 25% of total domestic health research spend, according to a 2021 report by MTPConnect (Medtech and Pharma Growth Center). The report says COVID-19 provided a platform for the country to further strengthen its reputation, and indeed the lifting of lockdowns has seen activity balloon.
  • In both 2021 and 2022, in the aftermath of the pandemic, Australia ranked as the third-largest country in the Asia-Pacific region in terms of CRO deal value behind China, according to Dealogic data. Japan held second place (generating USD 1bn across 17 deals) but was overtaken in 2022 by South Korea (USD 352m from seven deals).

There were seven deals Down Under in both 2021 and 2022, six in Australia, worth USD 285m and USD 255m, respectively, and one in New Zealand each year.

PE in rude health

Having salted away its dry powder at the height of the pandemic, private-equity (PE) players sprang to life in 2021 as restrictions were lifted. Blackstone PE [NYSE:BX] moved for Melbourne-based Nucleus Network for an undisclosed sum, while Massachusetts-headquartered Parexel was also reportedly vying for the company until it fell to Goldman Sachs and EQT-owned Newton for an eye-watering USD 8.5bn.

  • New Zealand’s sole 2021 deal came in the guise of Pencarrow PE financing a merger between Lakeland Clinical Trials and Southern Clinical Trials to create Pacific Channel Trial Network, with the PE firm holding 52% of the new entity. In October, Melbourne-based 360biolabs ceded a 75% stake to BioAgilitx, which itself saw UK-headquartered PE firm Cinven shelling out an undisclosed sum in December for a majority stake.

Quadrant PE continued the momentum into January 2022, when it acquired a share of Sydney-based Southern Star Research for an undisclosed sum.

At the year-end, Singapore’s Hillhouse Capital added another Sydney firm, George Clinical, also for an undisclosed sum following an auction that reportedly included Partners Group, Affinity Equity Partners, and Canadian pension fund OMERS’ PE unit. Indeed, George Clinical was no stranger to M&A, having taken over Memphis, Tennessee-based Vector Oncology Solutions’ CRO division in 2017.

Lastly, in December, Sydney PE firm Genesis Capital took a majority stake in New Zealand’s P3 Research, accounting for the Kiwi’s only deal last year, and coming hot on the heels of Genesis’ August investment in Australian bioanalytical laboratory, Crux Biolabs. The PE firm says it plans to continue focusing on high-potential clinical trials services businesses in Australia and New Zealand.

Analyse this

This year looks set to continue the buzz in Australian CRO activity. While CROs approached by this news service held their cards close to their chests, some at least are understood to be preparing for capital events in 2023.

Players range from old hands such as Datapharm, founded in 1987, to newer entrants like Victoria-based cannabis specialist iNGENu, which launched in 2018. Victoria is also home to Australian Healthcare Solutions, while Paratus Clinical, Pacific Clinical Research Group (PCRG) and CROW Clinical are possible targets in New South Wales, and Linear Clinical Research and Clinical Research Australia in Western Australia.

South Australia-based Agilex Biolabs, which was acquired by Healius [ASX:HLS] in December 2021 for AUD 301m, could find itself under close scrutiny given its current owner is under pressure to merge with Australian Clinical Labs, according to a report in the mainstream media this January.

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