Quintiles to Merge with IMS Health in $9 Billion Deal

Investors can say hello to the newest information technology and data powerhouse for the life sciences sector. In a joint release on May 3, one of the largest contract medical research providers, Quintiles Transnational Holdings (NYSE:Q) and health care information company, IMS Health (NYSE:IMS), announced a merger of equals deal valued at $9 billion.
 
The merger will create an industry-leading information and technology-enabled healthcare service provider, that will offer drug and medical device companies services ranging from assisting with running clinical trials to tracking sales once a product has reached the market.

What does this mean for the life science sector?

For the market, this deal highlights the growing importance of information technology and data analytics in the healthcare sector. What’s more, is that the merger comes at a time when we are seeing pharmaceutical companies cut their costs and increasingly outsource their drug development.
In a note to clients, William Blair analyst John Kreger noted that investors could be wary of the deal due to the fact that neither side is getting a merger-related premium from the deal and integration risks are higher in a merger of equals.

But for the sector, the new company can prove to be an asset, helping both biotech and pharmaceutical companies that are faced with a harder road in getting treatments approved.
As Quintiles CEO Tom Pike commented, “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. We are bringing together two best-in-class leaders. I’m confident that together we will make our clients even more successful.”
Echoing Pike’s statement, IMS Health Chief Executive Officer Ari Bousbib, maintained that the companies “will improve clinical trial design, accelerate recruitment, and drive efficiencies in clinical trial execution.”
The analyst also sees the deal as having “an interesting strategic case to be made for putting Quintiles and IMS together, particularly for late-stage, post-approval work,” William Blair analysts wrote in a note.

The details

Per the terms of the deal, IMS Health shareholders will receive a fixed exchange ratio of 0.384 shares of Quintiles common stock for each share of IMS Health common stock. This values each share of IMS Health at $26.53 based on Monday’s close.  Once completed, IMS shareholders will own roughly 51.4 percent of the combined entity on a fully diluted basis and Quintiles shareholders will own roughly 48.6 percent of the combined company on a fully diluted basis.
The offer values the all-stock deal at $9 billion and will mean the combined company will have a market value of nearly $18 billion.
The new company – Quintiles IMS will be headed by Ari Bousbib while Quintiles CEO Tom Pike will be the vice-chairman. Quintiles IMS will maintain a dual headquarters in Danbury Connecticut and Research Triangle Park, North Carolina.
The deal is expected to close in the second half of 2016, and expectations are that it is expected to add to the combined company’s 2017 earnings.
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Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned in this article.