Syneos Health eyes sale of company as contract backlog shrinks-sources

Syneos Health

27/02/2023 16:50

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    By David  Carnevali and Anirban Sen
       Feb 27 (Reuters) - Syneos Health Inc  SYNH.O  is making
a new effort to sell itself after a reduced backlog of contracts
for providing clinical research to drug developers led to a 52%
plunge in its shares over the past year, according to people
familiar with the matter.
    Reuters reported in March 2020 that Syneos was working with
investment bank Centerview Partners LLC to explore a sale. The
market disruption triggered by the onset of the COVID-19
pandemic prompted Syneos to abandon those sale deliberations,
according to four sources familiar with the discussions.
    Now, Syneos has hired Bank of America Corp  BAC.N  in
addition to Centerview for financial advice as it embarks on a
new round of talks with potential acquirers that may include
industry peers and private equity firms, the sources said.
    The sources cautioned that the prospects of a deal remain
uncertain and asked not to be identified because the matter is
confidential.
    Syneos, which has a market capitalization of about $4.3
billion and carries a $2.9 billion debt pile, was not
immediately available for comment. Centerview also did not
respond to a request for comment, while Bank of America declined
to comment.
    Syneos shares rose 13% on the news in morning trade to
$43.35 a share.
    Based in Morrisville, North Carolina, Syneos helps
pharmaceutical companies with clinical trials and to market
their drugs. It was created in 2017 by INC Research Holdings
Inc's acquisition of inVentiv Health Inc for $7.4 billion,
including debt.
     That deal buoyed INC Research - which changed its name to
Syneos in 2018 -- by giving it scale and broadening its
offerings for the outsourcing of the development and
commercialization of drugs. The push to develop COVID-19
vaccines and medicines in 2020 and 2021 also boosted its
fortunes.
    But last year's stock market downturn led to a drop in the
valuations of many small and medium-sized biotechnology firms,
which limited their ability to raise capital and forced them to
slash spending on contract research organizations such as
Syneos.
    Syneos Chief Executive Michelle Keefe said on the company's
fourth-quarter earnings call earlier this month that Syneos had 
"work to do" to improve its win rates among small drug companies
for which it relies on for a big chunk of its business. 
    She added that the company was "underweight" when it came to
contracts with large pharmaceutical companies and that it was
making progress in winning more customers.
    Syneos reported a total backlog for contracts of $6.8
billion as of the end of 2022, down from $7.5 billion as of the
end of 2021.
    There has been a wave of consolidation among contract
research organizations in a bid to lower costs, amass more
clinical trial data and win customers. 
    Most recently, Thermo Fisher Scientific Inc  TMO.N  acquired
PPD Inc for $17.4 billion and Icon Plc  ICLR.O  took over PRA
Health Sciences Inc for $12 billion. 
    Some companies are concluding that it is better to run
clinical trial outsourcing as a separate business. Labcorp
 LH.N , for example, said earlier this month that it will
complete the spinoff of its contract research organization,
called Fortrea, by the middle of this year. Labcorp will retain
its laboratory business that provides healthcare testing.   

 (Reporting by David Carnevali and Anirban Sen in New York,
editing by Deepa Babington)
 ((David.Carnevali@thomsonreuters.com;))