Bear Growth Capital Partners (BGCP) was formed by Bear Stearns & Co. in August to make investments in small-market companies valued at between $10 million and $100 million. Last week, it announced its first purchase, Clintrak Pharmaceutical Services LLC, a provider of clinical trial labeling, packaging and logistical services to the pharmaceutical and biopharmaceutical industries.
“We attempt to find segments where nine out of 10 businesses will make money, and then we focus on the best of that group,” said Paul Lattanzio, senior managing director with BGCP. “The overall [clinical trial] market is growing at 10 percent-plus annually, and it’s basically recession proof. If you start a trial in 2002, and the drug does not come to market until 2010 or 2012, you don’t shut down because the economy is bad in 2004.”
Clintrak is particularly important to this process, because faulty labeling or packaging can cause severe bottom-line damage to clinical trials that already may cost hundreds of millions of dollars. The issue is so sensitive among pharmaceutical companies that price is no longer the driving factor when they pick a labeling or packaging vendor. Instead, it’s about picking a company that can do the job competently and on time.
Lattanzio feels that Clintrak is that company, and existing customers like Merck & Co., Novartis AG and Pfizer Inc. agree. It features two business segments-Clintrak Clinical Labeling Services Inc. and AccuLogix Inc.- and has over 80 employees in its Ronkonkoma, N.Y., and Bristol, Pa. Facilities.
Clintrak had initially garnered some interest by strategic investors and private equity firms prior to the BGCP-led recapitalization, but there were no formal talks until Lattanzio and his team arrived after an introduction through Clintrak advisor Murdoch Capital.
“Murdoch had a prior relationship with John Howard [head of Bear Stearns Merchant Banking], but John recognized that the deal was too small for the larger fund, called me into a meeting and the rest is history,” Lattanzio said. “There’s an opportunity to add to the customer base and to expand geographically, most likely in Europe. We don’t see this as a roll up platform, but we would make certain acquisitions if it made sense.”
Lattanzio was tapped by Howard to lead the BGCP unit, after having previously served as a managing director with TD Capital. Before that, he co-founded NMS Capital and spent 13 years with Bankers Trust Co.
“Prior to Bear raising its current $1.5 billion fund in May 2001, a large part of the firm’s investment history included smaller deals,” said Lattanzio. “But with the size of the new fund, they couldn’t continue to allocate sufficient time and resources to those deals, which left a hole in the small and middle market. The Clintrak deal is the perfect example of why we did this.”