GHO Capital buys Velocity Clinical Research for about $500m

GHO Capital is buying NaviMed Capital’s Velocity Clinical Research, which after proving its ability to meet the unprecedented needs fueled by covid-19 is prepared to ramp up further as the landscape evolves. 

Concluding a Harris Williams-run sale process that kicked off in January, the pending deal values the Durham, North Carolina, business at around $500 million, sources familiar with the deal terms told PE Hub. 

Velocity, PE Hub previously wrote, projects $50 million in 2021 EBITDA, however a $30 million EBITDA figure accounting for “one-time benefits” – covid-19 – was also marketed. Bidders in the process underwrote a more normalized figure of about $30 million to $35 million, some of the people said.

While Velocity engaged with both private equity and strategics, GHO was a particularly attractive partner given the London firm’s roots. GHO launched in  2014 by a team who had previously advised, invested-in and held global leadership positions at Quintiles, the clinical research and healthcare IT company now known as IQVIA. 

“They understand our business very well indeed,” CEO Paul Evans told PE Hub. Evans himself worked at Quintiles from 2005 to 2011. “It helps that some of us know each other.”

Velocity’s integrated model – which includes a centralized infrastructure and common technology backbone – will remain a critical ingredient to its continued success. The company to date has added one or two sites at a time – growing from 2 sites to 16 in just over three years – and although it will continue with that strategy, Evans also anticipates multi-site businesses to emerge as acquisition targets. 

That’s in part because other clinical site organizations have difficulty scaling, the CEO said. “Unless you integrate the sites fully into a common operational model when you acquire them, there comes a point where [doing] an acquisition is not viable any longer,” he said. “That probably happens when you get into double-figures of sites.” 

For Velocity, the pandemic has accelerated its business plan by one to two years, the CEO said. 

As the only multi-site company in the US to conduct trials for all pharmaceutical companies included in Operation Warp Speed, plus Pfizer, Velocity has recruited more than 10,000 patients for covid-19. Concurrently, staff has doubled to 500 as has its site space, with Velocity now leasing bigger spaces – doubling the number of exam rooms. Revenue is also expected to double based upon the budget this year. 

But as Velocity sees it, it’s less about a covid-bump in business, and more about the company illustrating that it has the real ability to efficiently ramp up operations, adapting to the needs of CROs and patients through the pandemic. 

Covid has had an interesting impact in ways that are poised to change the landscape in the long-run, Evans went on.  

“For example, the vaccines business was always in many ways the red-headed stepchild in clinical research,” he said. “Well now we’ve seen a very clear sign that that’s begun to turn around.” More private equity dollars are going into vaccine-based research companies, for instance.

As demand for vaccine-related research even beyond covid ought to impact Velocity for the next five years or so, Evans said the breadth of its sites extends much deeper. 

Pre-covid, around 25 percent of Velocity’s business was in the vaccine space. “It was an important part of our business but we weren’t a vaccine business and we still aren’t.” Velocity also had deep experience in general medicine, neurology, dermatology, endocrinology, gastroenterology and women’s health. 

Another pandemic-fueled phenomenon is poised to improve the patient recruitment process, broadly speaking, the CEO went on. 

“Awareness that people now have of the clinical research process will help us to get more people interested in taking part in clinical trials – and certainly that’s the biggest problem we face in clinical trial research,” Evans said.

Other growth levers for Velocity will include exploring expansion into other therapeutic areas, potentially by establishing new partners such as hospitals, Evans said. The company has also begun exploring opportunities to expand beyond the US, although has no definitive plans.

“There are obvious reasons to look at Europe, least of which I’m a European, but there are other areas of the globe that from a clinical research point of view are pretty exciting,” Evans said. 

Worldwide, about 35 percent of clinical sites are in the United States; about 40 percent are in Europe; and 25 percent and climbing are in Asia – the latter which “makes an interesting longer-term prospect,” Evans said. “Whether it’s most attractive short term we’ve yet to establish.”

For NaviMed, a Rosslyn, Virginia-based healthcare PE shop targeting platform businesses with sub $10 million of EBITDA, Velocity looks to be a winning investment. 

Having started out as a concept just over three years ago, the platform was created through the initial purchase of two clinical trial sites in December 2017. Today the business operates 16 fully-owned sites across 11 states – having completed two acquisitions in March amidst Velocity’s own sale process. 

In just three years, Velocity has worked with over 200 biopharma clients, including all of the top 10 pharma sponsors, and its sites have collectively conducted over 5,000 clinical trials, with a focus on phase II and phase III research. 

“Fundamentally, clinical research is pretty inefficient, and the site business is a key part of that,” Evans said. About 80 percent of clinical trials are typically late, and 50 percent of those delays are at the site level, he said. “In essence, the sites are an inefficient part of an inefficient process. What our business does is address that inefficiency.”

GHO and NaviMed declined to comment.

Update: This report has been updated to clarify GHO’s founding team.