This is what stands out in $150M IPO filing for CRO Medpace

Medpace has carved a niche for itself serving small and mid-sized pharma and biotech companies seeking clinical trial services.

17086570218_70271813b1_zMedpace is moving forward with an initial public stock offering, a filing that comes two years after a private equity firm acquired the contract research organization. Cincinnati-based Medpace aims to raise as much as $150 million, according to the filing, though that preliminary figure could change as the company works out how many shares it will sell and at what price.

Medpace has applied to have its stock listed on the Nasdaq under the stock symbol “MEDP.” The company said in its filing that it plans to use proceeds from the offering to pay down debt.

As a CRO, Medpace provides an array of services to biotechnology and pharmaceutical companies testing drugs in all phases of clinical trials. Medpace has provided these services since its founding in in 1992 by CEO August Troendle, who continues as its top executive today. The company bills itself as a full-service CRO that provides a comprehensive suite of services throughout a clinical trial, in contrast to some CROs that focus on particular aspects of the process.

Medpace has 2,200 employees spanning 35 countries, though the United States accounts for 98 percent of its net service revenue, according to the filing. The CRO’s areas of therapeutic focus include oncology, cardiology, metabolic disease, endocrinology, central nervous system, and medical devices.

Medpace competes against other full-service CROs, including the industry’s largest players, such as Quintiles, Covance, and Parexel. But unlike these large CROs, which aim to land extensive “preferred provider” deals with big pharma companies that funnel a lot of business their way, Medpace generates most of its revenue from small and mid-sized companies seeking clinical trial services. In 2015, the company reported drawing 55.7 percent of its revenue from small and mid-sized biotechnology companies and 29.3 percent from mid-sized pharmas.

Large pharma accounts for just 15 percent of its business.

In 2015, Medpace reported $320.1 million in revenue, up from 2014, when the company’s revenue was $290 million. That 2014 total represents both the period before and after the company was acquired by private equity firm Cinven Capital Management for $921.3 million. Following that transaction, the company took out a $530 million term loan. As of March 31, the company’s debt was $378.5 million, according to the filing.

Like other CROs, Medpace pegs its growth to the ongoing trend that has pharma companies outsourcing more of their clinical trial work. Using industry sources, Medpace estimated that global biopharma spending on clinical development was approximately $100 billion in 2014, according to the filing. The portion of that spending attributed to clinical development services was $44 billion, of which $23 billion was outsourced, Medpace said. The company projects that spending on outsourcing will grow to $31 billion in 2019. But despite that growth in outsourcing, Medpace cautioned that recent pharma industry consolidation could also crimp future revenue.

Medpace’s backlog, the CRO industry’s description of anticipated revenue from business that has not yet started or is currently in progress but not complete, was $448.1 million on March 31, up 10.3 percent over the year ago period. Medpace expects to convert more than half of that backlog into service revenue this year. Despite the fact that Medpace’s revenue has been growing, the company is not profitable.

The CRO reported an $8.6 million loss in 2015; Medpace’s 2014 net loss was $15.5 million.

Photo: Flickr user Sam Valadi