Nordic Capital and Astorg have teamed up to buy New Mountain Capital’s Cytel, which uses statistical analysis in the planning and optimization of clinical trials, according to sources with knowledge of the pending deal.
Nordic and Astorg, partnering for the second time on the pharma services front in a little over a year, are investing through a 50-50 joint ownership structure, the sources said.
The agreement values Cytel at approximately $1 billion, the people said, implying a 7x increase in the company’s enterprise value under New Mountain’s hold.
The deal will provide an exit for New Mountain just over three years into its November 2017 investment. New York-headquartered New Mountain is poised to produce a multiple of invested capital of more than 5x and 70 percent internal rate of return, according to one of the sources.
Cytel’s 2020 EBITDA and revenue are just shy of $40 million and $200 million, respectively, the sources said, implying an about 25x EBITDA multiple. Accounting for M&A adjustments, the company has been growing at a 30 percent clip from a revenue standpoint over the past five years, they said.
New Mountain did not run a formal sale process. Rather, Rothschild and Barclays were engaged for sell-side financial advice in recent weeks after the buyout group approached the sellers in September with an unsolicited offer, sources said.
The deal follows the successful public debut of Cytel peer Certara, a biosimulation software company that predicts how patients will react to drugs. The EQT- and Arsenal Capital Partners-backed company raised approximately $668 million in its IPO earlier this month.
Benefiting from existing trends that are accelerating through the global health crisis, Cytel (and similarly, Certara) is riding the tailwinds of pharma R&D growth and the push to make R&D spend more efficient.
While the typical cost of a clinical trial sits between $3 billion and $4 billion, success rates are down from the 90s, one of the sources noted. In turn, the construction of adaptive trials through the software and services offered by Cytel helps drugmakers maximize their probability of success.
Cytel was founded in 1987 by Cyrus Mehta and Nitin Patel, research scientists at Harvard University and MIT, respectively, and collaborators at the Dana Farber Cancer Institute. Their early mission was to create software that could expedite oncology trials.
Today, Cytel has grown to become the largest provider of statistical software and advanced analytics for clinical trial design and execution. Cytel’s software and outsourced services are used by more than 400 life sciences customers, including all of the world’s 30 largest pharmaceutical companies, as well as regulatory bodies such as the FDA, NMC states on its website.
The company is led by CEO Joshua Schultz, a former senior member of global clinical research organization Parexel.
Cytel has also been active on the M&A front, most recently buying Purple Squirrel Economics in a move to expand its reach in the health economics outcomes research arena. Other recent acquisitions include Laiya Consulting, MTEK Sciences, Ingress Health and Axio Research.
Nordic and Astorg appear to be natural buyers of Cytel, as the pair of European firms are also investment partners behind another clinical trial technology player, ERT.
ERT, which focuses in clinical end-point data collection, recently agreed to merge with Cinven’s Bioclinica in a transaction assigning the combination an enterprise value of approximately $5.9 billion, sources familiar with the deal terms told PE Hub. The deal is poised to leave Nordic and Astorg with roughly 40 percent stakes each, alongside Novo Holdings and Cinven with around 10 percent stakes each.
For Nordic, Cytel represents its continued focus on businesses that operate at the intersection of pharma services and technology – marking its third such investment over the past 18 months or so. Although the firm has backed ERT since 2016, Nordic last year exited its original Fund 8 investment and reinvested through Fund 9, when Astrog joined as an investor, PE Hub previously wrote.
Besides Cytel and ERT, Nordic last year won a competitive sale process for ArisGlobal, a drug-safety software-as-a-service company for the life sciences industry. The June 2019 deal was valued just south of $800 million, sources said at that time.
Nordic and New Mountain declined to comment. Astorg didn’t return PE Hub’s request for comment.