Quintiles exec ‘very pleased’ with IPO reception

May. 10, 2013 @ 02:27 PM

Durham-based Quintiles Transnational Holdings Inc.’s stock was trading up about 5 percent at the market’s close on Thursday in the first day of trading on the New York Stock Exchange for the biopharmaceutical services company.

This was the second public debut for Quintiles, which first went public in 1994. The company was taken private again in a buy-back of stock led by company founder Dennis Gillings, a former biostatistics professor at the University of North Carolina at Chapel Hill, and other investors. Founded in 1982, the company’s major business is in the management of clinical trials for drug development firms.

Through the sale of 23.7 million shares of stock for $40 each to its underwriter, the company and its shareholders raised $947 million in the most recent IPO. The shares were then offered up to the public on Thursday on the exchange.

Before noon Thursday, Quintiles’ shares were up 9.67 percent to $44. At the market’s close, the company’s stock was trading at $42.11, up about 5 percent.

John Ratliff, Quintiles’ president and chief operating officer, said in an interview before noon that he was “very pleased” with the reception to the offering.

 “We’ve got a special company, obviously the reception’s been great so far,” he said.

The company offered up 13.125 million shares of common stock, and shareholders offered another approximately 10.6 million. The underwriters also have an option to buy additional shares.

The company had proposed a price range for its shares of between $36 and $40 per share. The $40 initial offering price was on the upper end of the range.

Ratliff said was because institutional investors showed “a lot of interest.”

“(It) just really comes from our results as a company, the talent that we demonstrated that the company has,” he said.

Of the $947 million, about $496.1 million is expected to go to the company, and about $399 million of the total is going to the shareholders. About $52 million was slated to pay underwriting commissions and other costs.

The company plans to use $306 million of the its net proceeds to pay outstanding debt from a $300 million loan, about $50 million to pay down other debt, $25 million to end a management agreement with founder Dennis Gillings and others, and to pursue growth opportunities.

The company had secured the $300 million loan to pay a cash dividend to its shareholders. The $25 million fee was to end an agreement that related to the company’s shareholder reorganization in 2008.

Under that agreement, management fees of $5 million were paid annually to managers working with the firms that invested in Quintiles in 2008, including Gillings, Bain Capital, TPG, and others.

David Menlow, president of the independent initial public offering research firm IPOfinancial.com, said he was “pleased” that Quintiles’ stock was doing well in trading on Thursday morning, but also said he thought the company was breaking the mold compared with offerings of other private equity-backed companies that are “very leveraged up with debt as this company is.”

“Private equity-sponsored IPOs have basically been less in-demand than many of the other(s) that have come to the marketplace because of the private equity sponsorship,” he said.

He said the deterrent for those IPOs is company debt.

“These companies come in; they make everybody think they have altruistic intentions,” he said. “It’s just a financial transaction for them to give them solid returns for their investors…a company may end up benefiting from the actions of these private equity concerns,  but they are almost, without exception, a very debt-laden operation that puts them at risk.”

Lauren Migliore, a senior equity analyst with the investment research firm Morningstar Inc., said Quintiles’ public opening was very strong. That mirrored Morningstar’s own strong view of the company, she said. In a report this week, she said the firm believes the company is worth $46 per share.

“For the most part, it’s providing evidence for our optimistic take on the firm,” she said.

Quintiles is a biopharmaceutical services company that offers clinical trial management, drug sales and commercialization services, among other services.

Last year, the company’s revenues were up about 12 percent to $4.87 billion. Its net income was $177.5 million, down about 27 percent.

The company has about 27,000 employees globally, with about 2,000 employees in the Triangle area, Ratliff said. He underlined the company’s commitment to Durham going forward.

“It is where our headquarters is, it’s a star in terms of North Carolina, and we love being there,” he said. “(There’s) no change at all to Durham; we appreciate the community and have taken advantage of it obviously in terms of the work that we’re doing, and the talent that we attract.”