Sep 8, 2021

Share If Nucleus Network bidders want more than a trial run, they’d better put their best foot forward. It is understood auctioneer Morgan Stanley is calling for indicative bids for the clinical research business this week, on behalf of owner Crescent Capital. As usual, the auction seems to be a bit of a tussle between strategic buyers and private equity types, although recent history tips the result in the strategics’ favour. Contract Research Organisations are all the rage right now. iStock One of the strategics is understood to be Chinese contract research organisation (CRO) WuXi AppTec, which has been sniffing around for an Australian acquisition to bolt into its existing network. WuXi AppTec is one of the Asia-based testing groups whose shares have had a massive run. The stock’s trading at nearly 100-times FY22 forecast earnings, to value the business at close to $90 billion. Advertisement WuXi, which is listed in Hong Kong and Shanghai, is worth close to $90 billion. Clearly, if it wanted to have a swing, it would have the capacity to go hard. The big question over its interest could be FIRB approval. Bids out of Shanghai and Hong Kong for Australian companies have all but dried up in recent years, as there could be some sensitivity around Nucleus and its patient data. Its presence in both Australia and the US is a selling point for the company. It specialises in phase one clinical trials and was involved in testing COVID-19 vaccines. Interestingly, one of the strategics that would normally be sniffing around Nucleus Network is TPG Capital’s Novotech, which missed out to Crescent Capital a few years back. Novotech’s now trying to list in Hong Kong, and you would have to think it would be too much to try to secure a chunky bolt-on deal while running an IPO campaign. Advertisement White-hot sector WuXi was named as a comparable stock for Novotech in pre-deal reports blasted to investors in Asia, which highlighted the 98 times price earnings multiple it fetches. Locally, the Burnet Institute’s sale of 360biolabs, which went for about $400 million or a 20 times price earnings, also showed momentum is with strategic bidders. Other big CROs internationally include US-based multinational companies Laboratory Corporation of America, Parexel, IQVIA and Syneos Health. In July Parexel proved that you can’t count PE buyer out, when it was announced the firm would be acquired by EGT and Goldman Sachs Asset Management from Pamplona Capital Management. In four years, Pamplona turned its $US4.5 billion purchase into a $US8.5 billion asset. For Crescent, the sale of Nucleus comes only a few months after it listed one of its other healthcare assets - pathology business Australian Clinical Labs.