Venture Capital Finance - Kendle

FINAL CASE

Kendle International Inc

November 29 , 2006

Megan Ebadat

Angel Nguyen

Jay Shah

Background

Give a brief overview of the situation faced by Kendle in your own words

Kendle is looking at expanding internationally . If Kendle is going to become a serious player in the CRO business , they have to acquire an international presence . As a small privately-held company , they do not have the financial resources to make the acquisitions that would provide that presence . Before Kendle expands , it needs capital . This capital can be

acquired by an IPO beforehand or loans to purchase acquisitions and then IPO to repay those loans . IPOing beforehand might take too long and Kendle will miss out on the acquisition opportunities . At the same time changes in the CRO industry have lowered the value of company stock for CRO firms , making Kendle potentially less attractive to investors . For the most optimal solution , Kendle needs to execute their acquisition program and launch an IPO at the same time , something that is virtually unheard of

CROs

How does the CRO business work ? Think about the following : How did the CRO business evolve ? How do they get business ? How are they paid ? How is the business changing

Contract Research Organizations (CRO ) were created for pharmaceutical companies to outsource their research activities . CROs perform clinical research for pharmaceutical companies that are trying to obtain FDA approval for new medications and treatments . Pharmaceutical companies spend millions of dollars every year to run trials for the FDA approval process . The pharmaceutical companies had conducted their own clinical trials . The pharmcos selected the research sites (usually a university medical school , and recruited investigators to conduct the research This process was labor intensive and expensive . The FDA process and phases are intense . For example several reports have to be d and three phases of human clinical trials have to be performed . CROs soon sprouted allowing the pharmaceutical companies to outsource the tasks of the process for a cheaper price than in house . CROs were developed as a way of outsourcing the research needs of the pharmcos so they could expedite the FDA approval process (How they get their clients ) CRO 's generally obtain pharmaceutical clients by providing outsourced clinical testing options that reduce R D overhead and budgets for the clients . CRO 's specifically obtain business by marketing contracts to pharmaceutical companies to manage the entire clinical research of a particular drug . CRO 's further maintain competitive positions among other CRO 's by specializing in complex drug trials that are capable of involving data and trials from around the world . CRO 's that are able to meet the demand for global trials are uniquely valuable to pharmaceutical companies because these global trials make it easier to get the drug approved world-wide . Due to the increasing complexity of government laws and the complicated process of compiling data and preparing reports , CRO 's are able to gain clients by marketing specialized services that reduce clinical research time-lines , therefore helping pharmaceutical companies maximize new...