IMS Health and Quintiles to merge

DANBURY, Conn. & RESEARCH TRIANGLE PARK, N.C.—May 3 saw IMS Health and Quintiles (or, more specifically and formally, IMS Health Holdings Inc. and Quintiles Transnational Holdings Inc.) announce that their respective boards of directors have approved a definitive merger deal that will create Quintiles IMS Holdings Inc.—an all-stock merger of equals transaction that will mean an equity market capitalization for the joined companies of more than $17.6 billion and an enterprise value that will exceed $23 billion.

IMS Health provides information, services and technology for the healthcare industry; Quintiles is a global provider of biopharmaceutical development and commercial outsourcing services, known in particular as a contract research organization (CRO), and provider of clinical trial services and pharmaceutical consulting.

Upon completion of the merger, IMS Health shareholders will own approximately 51.4 percent of the shares of the combined company on a fully diluted basis, and Quintiles shareholders will own approximately 48.6 percent of the combined company on a fully diluted basis.

“This combination addresses life-science companies’ most pressing needs: to transform the clinical development of innovative medicines, demonstrate the value of these medicines in the real world and drive commercial success,” said Tom Pike, CEO of Quintiles. “We are bringing together two best-in-class leaders. I’m confident that together we will make our clients even more successful.”

On the IMS side, CEO and Chairman Ari Bousbib added, “Together our solutions will enable differentiation in the CRO market, advance real-world evidence capabilities and deliver comprehensive commercial solutions for our clients. This powerful combination brings together leading technology and analytics with deep scientific expertise delivered on a global scale by our 50,000 immensely talented professionals in more than 100 markets. Our combined business will accelerate growth, yield greater operating efficiencies and provide more flexibility for future expansion.”

Among the strategic rationales provided by the two companies for the merger was that the combination will improve clinical trial design, recruitment and execution in the $100-billion biopharma product development market “by combining IMS Health’s rich, global information solutions with Quintiles’ industry-leading product development skills,” as well as “create a distinctive global real-world evidence solutions platform by combining a leading portfolio of anonymous patient records, technology-enabled data collection and observational research experts to address critical healthcare issues of cost, value and patient outcomes.” The companies also believe their merger will “further differentiate commercial analytics and outsourcing services to support the efficiency of life sciences’ commercial organizations.”

On May 3, shortly after the announcement, Steven Wardell and Matt Dellelo of Leerink Partners wrote that they liked the new capabilities that will form around real-world evidence (RWE), noting, “For IMS, RWE products represent a high-potential line of business that we estimate to be 8 percent of revenue in 2016 growing at 14 percent (as compared to overall IMS growth of 8 percent). Management cited the growing importance of RWE to both companies and the ability to combine IMS retrospective RWE data and Quintiles prospective primary RWE data collection as combining a high-potential new capability for the merged company.”

On May 20, the Leerink pair went into more detail about the deal, writing, “We like the controversial strategy proposed by Quintiles and IMS managements and look forward to a larger addressable market, higher growth, synergies and accretion ... We like the ‘smarter CRO’ product strategy enabled by IMS data,” which positions the combined company “as the leader in the fragmented and evolving pharma contract service market with more to offer pharma, and the near-term synergies-driven accretion, which we estimate at 9 percent in 2017.”

The two analysts noted that in their continued analysis they had “encountered some investor skepticism and specialist disagreement on this controversial topic” but they found validation for the idea to build a differentiated, smarter CRO “by wrapping IMS commercial data around Quintiles’ CRO offerings.” Specifically, they see IMS providing Quintiles with the ability to identify better trial sites and investigators internationally than Quintiles and its competitors have been able to do so far.

Analyst Ross Muken with Evercore ISI called the deal a “bold move” for Quintiles and indicated that his firm viewed the merger as “an intriguing combination, combining a market-leading CRO with a dominant data service/technology company.” Analysts at William Blair suggested there was “an interesting strategic case” to be made for combining Quintiles and IMS, “particularly for late-stage, post-approval work.”

The combined company expects to maintain dual headquarters in Danbury and Research Triangle Park. Bousbib will become chairman and CEO of the merged organization, while Pike will become vice chairman. The company’s board of directors will be composed of six directors appointed by the Quintiles board and six directors appointed by the IMS Health board.

The transaction is subject to customary closing conditions, including regulatory approvals and approval by both IMS Health and Quintiles shareholders, but is expected to close in the second half of this year.