Syneos Health

Private Equity Manager (GP)

Case study

About the company

Syneos Health is a leading provider of outsourced clinical research and commercialisation services to pharmaceutical and biotech customers. The company serves the 25 largest pharmaceutical companies and many of the most innovative biotech companies in the world.

Investment rationale

• Large player in a fragmented space: Syneos is currently the fourth largest Contract Research Organisation (CRO) and second largest Clinical Commercialisation Organisation (CCO) in a market worth more than US$40bn, giving the company preferred access to large complex biopharma projects across blue-chip healthcare customers.
• Strong value proposition: Given the significant costs and time associated with producing a new drug and bringing it to market, the cost of failure (or delays) is very high for customers, leading to high switching costs, low price sensitivity, and high barriers to entry.
• Exposure to high-growth therapeutic segments: Strong organic revenue growth profile and backlog coverage due to focus on high-growth subsegments such as Cardiovascular, Cell & Gene Therapy, Neuroscience, Oncology, etc., which are projected to grow at > 10% cumulative annual growth rate over the next five years.
• Syneos Health was formed via the merger of two high-growth pharmaceutical services businesses (INC Research & inVentiv Health). Upon consolidation, Syneos focused primarily on revenue growth, which resulted in strong bookings year-on-year. However, the company lacked effective cost and inventory control measures to deliver its contracted backlog in a timely manner, leaving significant integration and margin improvement opportunity for a new investor.

Our relationship

Founded in New York in 1992, Veritas Capital (“Veritas”) invests in companies providing primarliy critical technology-enabled products and services to government and commercial customers worldwide.

Pantheon has a long-standing relationship with Veritas, and PIP has invested in two of the manager’s funds on a primary basis. PIP is also co-invested alongside Veritas in Perspecta, a provider of services and solutions to US government agencies.

Active management and value creation

The manager sees a number of routes to create value for the business through bolstering the management team, expanding into adjacent markets and deepening the penetration of high-margin services. Veritas also intends to invest in Syneos’ leadership functions (Chief Operating Officer) to help drive effective operational improvements and complement the recent growth experienced by the company.