PE to veer toward Vitruvian’s CRF after Bracket Global sale

The impressive mid-teen multiple Parthenon Capital Partners commanded in its recent sale of Bracket Global is further validation that financial sponsors continue to see tremendous value in the eClinical space.

Industry sources are confident more consolidation will follow.

Private equity will continue to swoon over eClinical — technology that automates or enhances efficiencies in clinical-trial processes for drug development. These processes are incredibly unsophisticated and largely paper-based, sources said. These inefficiencies set the stage for growth and consolidation in the highly fragmented sector, as the pharmaceutical industry faces significant regulatory and cost pressures.

The eClinical segment is filled with small providers in the sub-$20 million EBITDA range, but one remaining target of scale that dealmakers are keeping tabs on is Vitruvian Partners portfolio company CRF Health, multiple industry sources said.

CRF, like Bracket, provides eCOA, or electronic clinical outcome assessments, through which patients, clinicians and caregivers use electronic devices like smartphones to track and report patient outcomes. These assessments ultimately produce more accurate and more comprehensive data.

The past few years have seen adoption of what are sometimes referred to as electronic patient diaries, which are provided either at research sites or with patients at their homes.

Besides interest from sponsors in eClinical providers, many companies want backers so they have the firepower to make acquisitions, offering more solutions as the life-science industry narrows its vendor relationships, sources said.

The PE community also finds the recurring-revenue model of these technologies and tech services attractive, and a source of funding for the overall pharma industry that is not Medicaid- or Medicare-dependent adds further appeal.

While Vitruvian Founder and Managing Partner Mike Risman declined to comment on plans for CRF, the outcomes of recent high-profile eClinical processes and its scarcity value from a size perspective surely bode well when the time comes.

Major multiples

Parthenon concluded its Jefferies-run sales process for Bracket Global in March, selecting buyout firm Genstar Capital as buyer. Terms weren’t disclosed, but sources told Buyouts its valuation panned out to about 15x EBITDA, or close to $525 million.

Genstar is by no means new to the space, having scored close to an 8x return on the sale of eResearch Technologies, or ERT, to U.K. sponsor Nordic Capital in March 2016. Terms of the deal weren’t disclosed, but sources at the time said the deal fetched roughly $1.8 billion including debt. ERT in December scooped up eCOA provider Exco InTouch.

The third large-scale eClinical company that has traded hands is BioClinica, which Water Street Healthcare Partners and JLL Partners sold to Cinven in August for an enterprise value of $1.4 billion, sources said at the time.

BioClinica and ERT, both of which also turned to Jefferies for banking advice, commanded EBITDA multiples of about 14x and 15x, respectively, according to one source. In comparison, very small assets, in the $2 million to $4 million EBITDA range, are commanding multiples of about 7x to 8x, this person said.

Vitruvian, for its part, purchased its majority stake in CRF in January 2015 from fellow sponsor Verdane Capital. While Verdane helped grow the company’s revenue more than 80 percent during its about two-year hold, according to an announcement at the time, CRF has in the two-plus years since been a “glory story” for Vitruvian, one source said. The source called its “staggering” growth a byproduct of an acceleration eCOA adoption.

Financial terms of the 2015 CRF Health transaction weren’t disclosed, but investment details published by Vitruvian on its website show the Helsinki company generated about 100 million euros ($107 million) in revenue at the time. The company’s EBITDA is likely north of $40 million today, one source speculated.

Besides PE and large PE-backed platforms, the buyer universe for such assets includes both tech-focused and serviced-focused players. On the tech side, sources pointed to IBM, which has made a huge push in healthcare technology through its Watson Health arm, as well as folks like Medidata Solutions and Oracle. Business-service companies with pharma exposure like Accenture and Cognizant have also been talked about, they said.

Outside CRF, another large eClinical provider that the investor community has speculated about is a unit of publicly traded PAREXEL International Corp., the sources noted. The $3.2 billion-market cap CRO’s technology subsidiary, PAREXEL Informatics, provides various eClinical solutions such as treatment randomization and trial supply management, electronic data capture and electronic patient-reported-outcome systems.

Action Item: Reach Vitruvian’s Mike Risman at

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