CARY, N.C. …Â Pharmaceutical services company Inveresk Research Group has become the first North Carolina company to go public this year, raising $156 million through its initial stock offering Friday.
In early trading, shares of Inveresk (Nasdaq: IRGI) hovered around the offering price of $13, ranging between $12.96 and $13.12. It closed at $13.01, with nearly 7 million shares trading hands.
The company now has a market value of about $468 million after issuing 12 million shares, or about a third of the company’s equity. But the offering price was below the target range of $14 to $16 a share the company set in its latest prospectus, which was filed with the Securities and Exchange Commission in early May. The price is a reflection of the continuing tepid market for IPOs.
Inveresk officials were not immediately available for comment.
The company was formed in the mid-1960s near Edinburgh, Scotland, and it moved its headquarters to Cary last year following its $115 million acquisition of ClinTrials Research, which had struggled in recent years. It also has operations in Canada and several European countries.
The purchase and the cost of trying to integrate ClinTrials operations into the company left Inveresk with a large debt load that it plans to reduce with the proceeds from the IPO. The company has $85.1 million in long-term debt, according to its SEC prospectus.
Paying off its debt will cut the level of Inveresk’s interest cost and allow the company to carry much of its operating income to the bottom line. The company lost $5.1 million last year, but had an operating profit of $14.4 million.
In the first quarter of this year, Inveresk lost $414,000 on $53.2 million in revenue in the first quarter, according to the prospectus.
Like other contract research organizations, or CROs, Inveresk helps pharmaceutical and biotechnology companies develop their drugs. But while most CROs focus on clinical trials … designing, monitoring and analyzing drug tests … 61 percent of Inveresk’s revenue comes from its preclinical business involving computer simulations, laboratory tests and testing on animals.
Demand for preclinical services is expanding because pharmaceutical and biotechnology companies have decided it’s better to invest more money upfront to determine a drug’s safety as much as possible before entering costly clinical trials. Also, more biotech companies are moving beyond the discovery phase to early testing of experimental drugs.
Inveresk estimates it is the No. 2 provider of preclinical services in the world, after market leader Covance. The company has more than 2,200 employees, with most based in Scotland and Montreal, Canada. It has about 250 people in Cary.
Bear, Stearns and UBS Warburg acted as co-lead underwriters for the offering. They have an option to acquire up to 1.8 million additional shares from Inveresk for the purpose of covering over-allotments, if any.
MedCath, a Charlotte-based hospital organization, was the only North Carolina company to complete an IPO in 2001. The last company in the Research Triangle area to go public was Pozen, a drug development company in Chapel Hill, in December 2000.
Inveresk Research Group website: www.inveresk.com
