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PPD Initial Public Offering OUTSOURCED PHARMACEUTICAL SERVICES SECTOR CASE STUDY PPD Initial Public Offering M&A Advisory | Growth Capital | Recapitalizations | Board Advisory | Strategic Evaluations May 2020 www.delanceystreetpartners.com 300 Barr Harbor Drive | Suite 420 | West Conshohocken | PA | 19428 PPD INITIAL PUBLIC OFFERING Transaction Overview PPD (NASDAQ: PPD) Stock Price Performance $34.00 On February 5, 2020, Pharmaceutical Product $33.00 2/11/20 Closing Price: $32.87 Development (PPD) announced it raised $1.86 billion in its $32.00 initial public offering (IPO) $31.00 The company announced it priced 60 million primary shares of its common stock at the top end of its targeted range or $27.00 per share $30.00 2/6/20 Opening Price: $30.99 ‒ The underwriters simultaneously exercised the greenshoe option, $29.00 offering an additional 9 million primary shares of PPD’s common stock $28.00 at the IPO price, resulting in total IPO shares and gross proceeds of 69 million and $1.86 billion, respectively $27.00 3/6/20 Closing Price: $28.60 ‒ Implied Enterprise Value of $13.1 billion $26.00 ‒ Implied Enterprise Value / LTM Adjusted EBITDA multiple of 16.9x $25.00 PPD used the net proceeds from the offering to redeem a portion of its 5-Mar 1-Mar 2-Mar 3-Mar 4-Mar 6-Mar 7-Feb 8-Feb 9-Feb senior notes that were due to retire in 2022 and will use any remaining 6-Feb 11-Feb 10-Feb 12-Feb 13-Feb 14-Feb 15-Feb 16-Feb 17-Feb 18-Feb 19-Feb 20-Feb 21-Feb 22-Feb 23-Feb 24-Feb 25-Feb 26-Feb 27-Feb 28-Feb 29-Feb proceeds for general corporate purposes On February 6th, shares of PPD’s common stock began trading on the Overview of PPD NASDAQ exchange under the symbol (“PPD”) PPD is a global contract research organization (CRO) that provides clinical trial and ‒ Opening Price of $30.99 (14.8% premium to IPO price); $14.5 billion laboratory services to pharmaceutical, biotechnology, medical device, and government enterprise value, 18.7x EV / LTM Adjusted EBITDA organizations ‒ During the first full week of trading, the stock price rose to $32.87 (21.7% premium to IPO price); $15.2 billion enterprise value,19.5x EV / The company is headquartered in Wilmington, North Carolina and employs approximately LTM Adjusted EBITDA 23,000 people across 100 offices in 46 countries ‒ PPD’s stock traded down in the second half of the month, along with PPD was founded in 1985 by entrepreneur and philanthropist Fred Eshelman who took the global market indices, due to concerns associated with the impact of firm public in 1996 Coronavirus In 2018, the company served all of the top 50 biopharmaceutical companies in the world, and PPD had been owned by The Carlyle Group and Hellman & Friedman was involved in 66 drug approvals (H&F) since 2011 after the two private equity firms took the company private in a $3.9 billion leveraged buyout During the past five years, PPD has conducted more than 2,100 clinical trials, and its The two firms will retain significant ownership in the company, with H&F laboratory scientists have completed more than 57,000 pharmaceutical development projects retaining a 57% ownership stake, and Carlyle owning nearly 24% of all and worked with more than 7,600 compounds outstanding shares (pre-greenshoe) Prior to being taken private, PPD traded on the public markets from 1996- 2011 Source: Company press releases, investor presentations, public filings, and PitchBook 1 PPD INITIAL PUBLIC OFFERING Select Company History (1) 1985 1996 2005 2010 2013 2016 2017 2020 Founded by Fred Initial public stock Revenues exceeds Spins off its Acquires Acurian, a Acquires Evidera, a Carlyle and H&F Completes IPO Eshelman as a one- offering $1 billion compound division full-service provider provider of evidence- recapitalize PPD and person consulting Furiex Pharrma to be of clinical trial patient based solutions, add two new firm an independent enrollment and creating a leader in investors ADIA and company retention solutions real-world research GIC 1995 1997-2002 2007 2011 2015 2016 2019 Expands to EMEA Made a number of Reach 10,000+ Taken private by The Acquires network of Acquires network of Revenues exceeds with acquisition of global acquisitions employees globally Carlyle Group and U.S. based research global research sites $4 billion Gabbay Group, a that rapidly increase H&F sites via Radiant via Synexus CRO in the U.K. service offerings and geographic reach Historical Revenue Growth (2) Historical Adjusted EBITDA Growth (2) ($ in millions) ($ in millions) $4,500.0 $900.0 $4,031 $4,000.0 $3,963 $800.0 $777 $711 $707 $3,500.0 $700.0 $631 $3,001 $3,000.0 $600.0 $2,680 $531 $2,500.0 $2,252 $500.0 $464 $2,086 $2,000.0 $400.0 $344 $1,551 $1,417 $1,471 $1,540 $294 $1,500.0 $300.0 $272 $254 $1,000.0 $200.0 $500.0 $100.0 $0.0 (3) $0.0 (3) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (1) Company press releases, investor presentations, and public filings (2) Public financial information is not available from 2012-2013 (3) LTM as of 10/31/2011 2 PPD INITIAL PUBLIC OFFERING Notable Business Transformation under H&F and The Carlyle Group Ownership (1) PPD delivered substantial revenue and EBITDA growth since it was taken private by The Carlyle Group and H&F in December 2011 ‒ Revenue increased from $1.5 billion to $4.0 billion between 2011 and 2019 (CAGR 12.8%) (2) ‒ Adjusted EBITDA increased from $294.0 million to $776.9 million between 2011 and 2019 (CAGR 12.9%) (2) The company also made a number of meaningful add-on acquisitions that have increased PPD’s service offerings and geographic reach, which included: ‒ Acurian (2013) ‒ Network of U.S. based research sites from Radiant (2015) ‒ Evidera (2016) ‒ Network of global research sites from Synexus (2016) PPD’s value grew almost 236% since H&F and Carlyle purchased the company for $3.9 billion in December 2011, with its IPO assigning an initial enterprise value of approximately $13.1 billion $2.5 Billion Growth in Revenue Significant Revenue and Adjusted Representing an 8-Year CAGR of EBITDA Growth 12.8% $483 Million Growth in Adjusted Proven Ability to Scale Organically EBITDA Representing an 8-Year CAGR and Through Acquisitions of 12.9% Strong Cash Flow Profile 19.3% 2019 Adjusted EBITDA Margin (1) Company press releases, investor presentations, and public filings (2) 2011 financial information reflects LTM as of 10/31/2011 3 PPD INITIAL PUBLIC OFFERING PPD vs. DSP Outsourced Pharma Services Companies (2020 Stock Price Performance) (1) (2) (3) 40% Medpace IQVIA ICON Charles River Labs 30% Syneos Health PRA Health Sciences LabCorp PPD 20% 10% 0% -10% -20% -30% -40% -50% -60% 2-Apr 9-Apr 5-Mar 6-Feb 16-Apr 23-Apr 30-Apr 13-Feb 20-Feb 27-Feb 12-Mar 19-Mar 26-Mar (1) PitchBook (2) Represents YTD stock performance from February 6, 2020 – April 30, 2020 (3) Note: On February 6, 2020, PPD went public and began trading on the NASDAQ exchange 4 PPD INITIAL PUBLIC OFFERING EV / LTM EBITDA Multiple (1) (2) 22.0x Outsourced Pharma Srvcs. (End-to-End Providers)-TEV/EBITDA PPD-TEV/EBITDA 20.0x 18.0x 16.0x 14.0x 12.0x 10.0x 1-Apr 8-Apr 4-Mar 5-Feb 15-Apr 22-Apr 29-Apr 25-Mar 11-Mar 18-Mar 12-Feb 19-Feb 26-Feb 2019 EBITDA Margin % (3) 2019 Revenue Growth Rate % (3) 30.0% 60.0% 23.6% 48.1% 25.0% 50.0% 19.2% 19.3% 19.8% 20.2% 20.0% 17.1% 17.7% 40.0% 13.4% 15.0% 30.0% 22.2% 17.5% 10.0% 20.0% 15.4% 6.1% 7.5% 6.1% 5.0% 10.0% 1.8% 0.0% 0.0% PPD PPD ICON ICON IQVIA IQVIA LabCorp Lab LabCorp Medpace Medpace Sciences Sciences PRA Health PRA Health Charles River Syneos Health Syneos Health CharlesRiver Lab (1) PitchBook (2) Note: On February 6, 2020, PPD went public and began trading on the NASDAQ exchange (3) Company press releases, investor presentations, and public filings 5 PPD INITIAL PUBLIC OFFERING DSP analyzes and groups the public Outsourced Pharmaceutical Services companies into two categories (End-to-End Providers and Commercialization) based on their differentiated service offerings and value characteristics ‒ End-to-End Providers are larger CROs that are focused on both the clinical development and commercialization sides of the house. The average market cap of End-to-End Providers as of year end 2019 was $11.3 billion. These include: • Medpace • IQVIA • ICON • Charles River Laboratories • Syneos Health • PRA Health Sciences • LabCorp • PPD (Added to the group after going public on February 6, 2020) ‒ Commercialization companies are smaller than the End-to-End Providers and offer a suite of specialized services focused on bringing pharmaceutical products to market. The average market cap of Commercialization companies as of year end 2019 was $1.1 billion. These include: • UDG Healthcare plc • Huntsworth plc • Cello Health plc End-to-End Providers typically trade at a premium to Commercialization companies due their size, breadth of service offerings, and additional share of pharmaceutical customers wallet they capture On February 19, 2020, prior to the Coronavirus sell-off, PPD was trading at approximately 19.0x LTM EBITDA, a premium to the median of the rest of the End-to-End Providers who were trading between 12.5x and 21.2x, or a median of 17.5x 6 DELANCEY STREET PARTNERS RECENT HEALTHCARE TRANSACTION EXPERIENCE Outsourced Pharmaceutical Services has merged with has completed a majority has been acquired by Ss recapitalizationSs with Ss a portfolio company of Advisor to Pyxa Advisor to Emmes Advisor to Seller Healthcare Services Life Science Tools Strategic M&A Advisory Growth Capital Recapitalizations Board Advisory Evaluations Senior Leadership Patrick E.
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