Quintiles exec ‘very pleased’ with IPO reception

May. 09, 2013 @ 02:48 PM

Durham-based Quintiles Transnational Holdings Inc.’s stock was trading up more than 9 percent on the New York Stock Exchange close to midday Thursday in the second public debut for the company, which manages clinical trials for drug development firms.
The company and its shareholders raised $947 million through the sale of 23.7 million shares of stock for $40 each to the underwriting financial services firm. Its stock was then offered up for sale to the public on the exchange Thursday.
John Ratliff, Quintiles’ president and chief operating officer, said in an interview before noon Thursday that he was “very pleased” with the reception so far. Shares were trading up 9.67 percent to $44.
“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 company shareholders offered another approximately 10.6 million. The underwriters also have an option to buy additional shares.
The company had proposed 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 the institutional investors showed “a lot of interest.”
“(It) just really comes four our results as a company, the talent that we demonstrated that the company has,” he said.
At the price of $40, the offering raised more than $947 million, with about $496.1 million of that going to the company, and about $399 million of the total 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 company’s net proceeds to pay outstanding debt from a $300 million loan, about $50 million to pay down other debt, for a $25 million fee to end a management agreement with founder Dennis Gillings and other managers, and for growth opportunities.
The company had secured the $300 million loan in order 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 the 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” Thursday morning that the stock was doing well, but also said he thought it was breaking the mold compared with the public offerings 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 opening was very strong. That reflected the company’s own strong view, she said. In a report this week, she said the firm believes the company’s 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 whose major business is in the contract management of clinical trials. It also offers third-party sales, commercialization and other services.
Its revenues were up about 12 percent to $4.87 billion last year. 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 the area going forward.
“There’s no change in our commitment to Durham,” he said. “It is where our headquarters is, it’s a star in terms of North Carolina, and we love being there. (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.”