BX Blackstone Inc

Pharmaceutical Product Development LLC is exploring a sale that could value the drug-research company at about $5 billion amid a rush of takeover activity among healthcare-services providers.

PPD, of Wilmington, N.C., hired Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Centerview Partners to help it find a buyer, people familiar with the matter said. The banks plan to start sounding out suitors this month. A deal could be reached in the first quarter, assuming there is one, the people said.

The company's owners, private-equity firms Carlyle Group LP and Hellman & Friedman LLC, may opt to take it public instead, but they aren't actively preparing for an IPO, the people said. A $5 billion deal would deliver a return of more than three times the firms' investment, when accounting for four dividends PPD has paid them.

PPD conducts drug research for pharmaceutical and biotechnology companies. These contract-research organizations, as they're known, have benefited from increased spending to develop treatments for cancer and other ailments. Meanwhile, drug companies have embraced the outsourcing of clinical trials, which proponents say is less costly and more efficient.

Carlyle and Hellman & Friedman purchased PPD in 2011 for nearly $4 billion and later recruited longtime Pfizer Inc. executive David Simmons to run it. Under his leadership, the company added expertise in areas like cancer and central-nervous-system diseases. Mr. Simmons also championed a more proactive approach to securing contracts.

PPD has acquired a handful of businesses aimed at speeding and improving its research efforts, including the 2013 purchase of Acurian, which recruits participants for drug trials. Through hiring and acquisitions, it added about 8,000 employees since it was bought, bringing total head count to about 19,000.

The company, which could be worth more than $9 billion including debt, expects to post about $700 million in earnings before interest, taxes, depreciation and amortization on $2.8 billion in revenue in 2017, according to people familiar with its finances.

Healthcare mergers and acquisitions have slowed from a record pace in 2015, with $168 billion worth of such deals in the U.S. year-to-date versus $400 billion in the same period last year, according to Dealogic.

Nonetheless, several large healthcare-services companies have changed hands, including in deals involving private-equity firms. They will be among likely bidders for PPD, according to people familiar with the matter. Should a private-equity firm buy PPD, it would be one of the largest leveraged-buyouts in recent years after such activity slowed since the financial crisis.

Software-and-data company IMS Health Holdings Inc. in October merged with outsourcer Quintiles Transnational Holdings Inc. in a deal worth nearly $9 billion.

In May, Hellman & Friedman agreed to buy healthcare-service provider MultiPlan Inc. for $7.5 billion. Blackstone Group LP in November agreed to lead an acquisition of healthcare-staffing provider Team Health Holdings Inc. for more than $3 billion.

Dana Mattioli contributed to this article.

Write to Matt Jarzemsky at matthew.jarzemsky@wsj.com

(END) Dow Jones Newswires

December 09, 2016 14:35 ET (19:35 GMT)

Blackstone (NYSE:BX)
Historical Stock Chart
From Mar 2024 to Apr 2024

Blackstone (NYSE:BX)
Historical Stock Chart
From Apr 2023 to Apr 2024