Raleigh-based INC Research became the Triangle’s latest publicly traded company Friday with a market value surpassing $1 billion.
INC’s stock was initially priced at $18.50 a share but closed at $20.49. The company had estimated the value of its shares between $17 and $20 and offered the stock at a safe midpoint, then investors pushed it up 11 percent.
The company is among the Triangle’s stable of contract research organizations – including global giant Quintiles – that test the safety and effectiveness of newly developed drugs for pharmaceutical companies.
INC is one of the larger CROs in the country and one of two in the Triangle with intentions to go public this month. PRA Health Sciences, also based in Raleigh, is expected to price its shares on Wednesday and begin trading the following day.
Investor interest in INC exceeded the company’s offer of 8.1 million shares. During a two-week road show before mutual funds and private equity funds, INC officials debuted their company before about 100 investors before selecting suitable investors, said chief financial officer Greg Rush.
“We had to be very selective,” Rush said. “We had excessive demand.”
INC could have achieved its ends by targeting select institutional investors but instead cast a wide net, said John Fitzgibbon, who tracks new stock offerings for IPOScoop.com in New Jersey.
Fitzgibbon noted that the stock was not under-priced at $18.50, even though investors thought it was worth more.
“You want to leave a little on the table for people to have a happy launch,” he said.
INC expects to generate net proceeds of $135 million and pay down some of its $588 million in debt, about half of it borrowed at 11.5 percent interest. Using a combination of cash and loans, INC plans to restructure its debt down to $425 million, all of it at 4.5 percent interest, resulting in a $30 million annual savings in lowered interest payments, Rush said.
INC has about 5,500 employees worldwide, including about 800 in Raleigh, and has added about 650 positions in the past 20 months. INC’s second largest location, outside Raleigh, is Camberley in the United Kingdom.
The company traces its origins to 1985 in the University of Virginia’s brain injury research program. It moved to Raleigh in 2000 and was acquired in 2010 by Avista Capital Partners, a private equity firm with more than $5 billion in assets under management, and by the Ontario Teachers Pension Plan, a Canadian public pension fund.
Before INC’s public stock offering, 68 percent of INC was owned by Avista and 29 percent was owned by the Ontario Teachers Pension Plan. They still own a controlling stake in the business – with Avista alone owning 50.8 percent, assuming that the underwriters exercise their option to acquire additional shares after the IPO.
INC occupies one of three areas of focus in the CRO sector: human drug trials. The company does not conduct “early phase” testing on animals, nor does it operate its own labs to analyze blood and urine of the human volunteers who take experimental drugs.
Through the first nine months of this year, INC generated $26.3 million in net income, reversing a loss of $28.6 million for the same period a year ago. Revenue over the first nine months totaled $596 million, up 25 percent from a year earlier.