Clinical research group comes to NASDAQ in £113m listing

The Irish clinical research group Icon will be valued at almost $160 million (£113 million) when it floats on the NASDAQ market in New York next month. The NASDAQ flotation, which will make Icon founders Dr Ronan Lambe and Dr John Climax multi-millionaires, will be followed by a listing on the Irish stock market within a year.

Shares in Icon are being floated at between $14 and $16, and at the mid-point of that range the company will raise $39.4 million - $37.6 million after expenses - while existing shareholders are selling 875,000 into the flotation, raising $13.1 million at the $15 mid-point price. "A smaller offering of shares would be of limited interest to the market," said the chief financial officer, Mr Peter Gray.

Mr Gray said that the funds will be used for various purposes, including acquisitions, although he cautioned that no acquisitions are in the pipeline.

Following the flotation, the directors of Icon will have 52.1 per cent of the company, although this will fall to 47.7 per cent if underwriters Goldman Sachs, William Blair and Merrill Lynch exercise their over-allotment option in respect of 222,600 shares. After the flotation, around one-third of the company will be in public hands.

Founded in 1990 by Dr Lambe and Dr Climax, Icon is a contract research organisation which provides research and development services to pharmaceutical and bio-technology companies. Dr Lambe said that Icon's focus is on Phase 2 and Phase 3 clinical trials.

`We manage clinical trials for pharmaceutical companies. They come to is, we identify hospitals to perform the studies, we obtain all the necessary regulatory and ethics approvals, but we are not involved directly with patients involved in trials. Our role is to manage the collection of the data, ensure it is accurate, bring it back for statistical analysis and then prepare a report."

With a headquarters in Dublin, Icon has grown substantially since its formation and now employs 450 people in Dublin, four offices in the United States, the UK, Germany, Japan and Australia. Around 320 people are employed directly in clinical research and management, a further 90 in data processing, with the remainder in administration.

Currently, Icon is working in 1,200 centres in 31 countries involving 20,000 patients in the clinical trials. Dr Lambe said Icon is around tenth in the rankings of 700 companies involved worldwide in clinical research management. The biggest publicly-quoted competitors are Quintiles, Covance and Parexel.

He said that around $18 billion a year is spent by pharmaceutical companies on the development end of R&D, with about $3.5 billion of this outsourced to contract companies like Icon.

In 1997, Icon had pre-tax profits of $1.5 million on sales of $38.6 million, compared to profits of $4.1 million on sales of $28.4 million the previous year. But comparing the nine months to the end of February to the same ninemonth period ending February 1997 shows that Icon has grown strongly in the period.

Sales in the nine months to the end of February jumped from $24.4 million to $44.3 million, with pre-tax profits up from $561,000 to $4.2 million. The nine-month earnings per share, based on the number of shares in issue after the flotation, is $0.34.

Annualising this earnings figure, and assuming a flotation price of $15, produces a price/ earnings multiple of 33, a substantial discount to the 55/56 p/e's on which Quintiles and Parexel are trading. This discount probably reflects the relative size of Icon in relation to its bigger competitors and flotation discount.