Biotech Vets Start New Rollup

Ethan Leder and Mark Clein believe that lightning can strike twice. And now they have $153 million with which to test their theory.

Their initial strike involved U.S. Bioservices Corp., which Leder and Clein launched in early 2002 as a holding company focused on the distribution of specialty pharmaceuticals.

By May, the startup had raised $60 million from Whitney & Co. at a post-money valuation of just over $100 million. Less than eight months later, publicly traded AmerisourceBergen Corp. acquired U.S. Bioservices for about $160 million.

For Leder and Clein to attain deja vu, however, they must repeat their success with their next venture, United BioSource Corp., which was formed just weeks after the buyout checks were cashed.

The new company shares many similarities with its predecessor, including a Washington, D.C. headquarters, a holding company structure, private equity backing and a focus on the life sciences industry.

“Many of the skills that Ethan and Mark acquired before are applicable to what they’re doing now with United BioSource, especially in terms of the knowledge they gained about how pharmaceuticals are currently marketed,” says Terry Hymen, a general partner with Grotech Capital Group and a United BioSource director.

“But this really is a different business model than U.S. Bioservices,” says Hymen, who explains that what they had done before was exclusively a specialty pharmaceutical distribution business, whereas their current company is looking in other areas.

An AmerisourceBergen spokesman declined to comment on Leder and Clein, except to say that it’s typical for executives in their position to have signed multi-year non-compete contacts as part of an acquisition agreement. Clein acknowledged the agreement and said that United BioSource will not acquire any drug distribution company – specialty or otherwise – while either he or Leder are still with the company.

What United BioSource will acquire, however, is still a bit nebulous. The company’s official mission states it will acquire companies that provide science and evidence-based services and information to the pharmaceutical and life sciences industries.

Most of the focus seems to be on drug commercialization services, although other potential acquisitions could include advertising firms that focus on life sciences or a company that provides outsourced medical device sales forces.

“It’s difficult to say what our ideal acquisition would be, because this industry is fragmented,” explains Clein, who had worked as a venture capitalist before becoming an operating executive.

“We understand that most of the companies we’ll look at are small in size with between $10 million and $30 million in revenue,” he adds. “Although, we’d also love to find a company with $50 million to $100 million in revenue that is a premier provider of a specific type of service that’s very important in commercializing or marketing pharmaceuticals or life sciences products.”

Clein adds that United BioSource aims to acquire profitable companies with the expectation that existing company management will remain in place.

Moreover, United BioSource will maintain a pool of investment capital for acquired companies (at least $15 million), and also plans to build an in-house consultancy to provide acquired companies with value-added counsel.

United BioSource was seeded through an investment vehicle named LCI Capital, which is operated by Leder and Clein.

The big money came through late last month as Whitney & Co. and additional investors Oak Investment Partners and Grotech Capital Group together ponied up $153 million in what is expected to be a first and final round of fund-raising. The capital is fully committed, but will be called down in multiple tranches.

“We raised what we did to send a clear message that we have a strong capital base, that we’re in a position to get leverage and that we can execute rapidly,” Clein says.

As part of the funding, the United BioSource board added Terry Hymen of Grotech, Peter Castleman of Whitney & Co. and Ann Lamont of Oak Investment Partners.

That gives the board five members with private equity experience, as Leder once co-founded Healthcare Financial Partners (later acquired by Heller Financial) and Clein had served as a venture capitalist with firms like Sprout Group, Merrill Lynch Venture Partners and Jeffries & Co.

Email Dan Primack