There was no obvious reason for us to focus on the $575 million buyout of INC Research, a contract research organization based in Research Triangle Park, NC, that was announced last week.
But the acquisition by Avista Capital Partners, a New York private equity firm, and the Ontario (Canada) Teachers’ Pension Plan’s private capital group, represents a substantial return for San Diego’s Enterprise Partners Venture Capital. Enterprise’s managing director, Drew Senyei, tells me the San Diego VC firm was among the first-round investors in INC Research, which was founded in San Diego in 1996 by Kenneth Selzer, a neurologist and pain specialist.
Selzer, who was a biomedical researcher at UC San Diego at the time, says he raised initial funding of $2 million to $3 million from Enterprise, Crosspoint Venture Partners (which has offices in Irvine, CA, and Woodside, CA), and InterWest Partners of Menlo Park, CA. Selzer says INC expanded its business rapidly, and he estimates the company raised a total of only $20 million in venture funding. Crosspoint and Adams Street Partners (which has offices in Chicago, Menlo Park, CA, London and Singapore) were identified as INC’s lead investors at the time of the sale.
Selzer says he founded INC Research to help pharmaceutical companies expedite their clinical studies of potential drug candidates by tapping the expertise of private physician groups that specialize in neurology, psychiatry, pain, and neurosurgery. Because these medical groups tended to be large and had lots of patients, Selzer says they proved to be an ideal way to help drug companies conduct clinical trials of compounds being developed for pain, depression, and other neurological conditions.
“I was the CEO through 2001,” Selzer says. “Then we moved the company to RTC (Research Triangle Park) and recruited a professional CEO, Jim Ogle.” The company went from a business plan to $400 million in projected (2011) revenue and $60 million in profit, says Selzer, who is now a venture partner with San Diego’s Finistere Partners. Today, INC Research manages mostly late-stage clinical trial programs for drug development companies, and about 60 percent of the work is done outside the United States. It employs 2,000 people in 40 countries.
Enterprise Partners’ Senyei declined to discuss the firm’s return on its investment. But he concedes it was a happy outcome, saying, “If it wasn’t, I don’t know what is.”