Ethan Leder and Mark Clein believe that lightening can strike twice, and they now have $153 million with which to test their theory.
The 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 more than $100 million. Less than eight months later, U.S. Bioservices was acquired by publicly traded AmerisourceBergen Corp. (NYSE: ABC) for approximately $160 million.
For Leder and Clein to attain deja vu, however, they must repeat their success with United BioSource Corp., which was formed just weeks after the buyout checks had been 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 while at U.S. Bioservices are very applicable to what they’re doing with United BioSource, especially in terms of the knowledge they gained about how pharmaceuticals are currently being marketed,” said 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, in the sense that it had been exclusively a specialty [pharmaceutical] distribution business, whereas this 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.
Perhaps in order to avoid the appearance of impropriety, United BioSource has been created with a broadly nebulous acquisition strategy. The company’s official mission is to 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, 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 very fragmented,” explained 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, 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, 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. But the big money came through late last month, as Whitney & Co., Oak Investment Partners and Grotech Capital Group 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 in order 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 said.
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 Ethan Leder co-founded Healthcare Financial Partners (later acquired by Heller Financial) and Clein once served as a venture capitalist with firms like Sprout Group, Merrill Lynch Venture Partners and Jeffries & Co.