ICAEW.com works better with JavaScript enabled.

Results matter


Published: 25 Nov 2022

Exclusive content
Access to our exclusive resources is for specific groups of students, users and subscribers.
With an £18m investment from LDC, the future is looking healthy for innovative drug development company TMC. David Prosser learns of plans for international expansion

The bucolic setting of TMC Pharma Services’ head office in rural Hampshire rather belies the advanced science and innovation that the business supports. With a global client base of leading healthcare companies, TMC plays a key role in ensuring millions of people will have access to better treatments and outcomes. And following an investment from private equity firm LDC, which has taken an £18m minority stake in the company, it is hoping to step up its growth plans. 

TMC specialises in drug development, working with biotechnology, pharmaceutical and life sciences clients. The development of new drugs involves wide-ranging activities from early-stage innovation and experimentation to large-scale clinical trials, as well as work with regulators and the medical profession to explain the treatment and secure approval. TMC is unusual in offering services in all these areas and has a particular focus on rare conditions and orphan (extremely rare) diseases, a growing area of focus for the healthcare industry. 

“We are a one-stop shop for drug development,” explains Julie Matthews, co-founder and CEO of TMC. “There are very few businesses in the sector with the expertise to provide comprehensive support from the earliest stage of development right through to taking the drug on to the market.” 

To deliver that breadth of service, TMC has built a network of around 900 ‘contracted associates’ in 75 countries, who work with the company’s 30-strong in-house team. These freelancers are hand-picked for their experience and expertise, enabling TMC to meet a very broad range of client needs on a local basis globally. 

The key is the calibre of the employed staff base and this broad network of associates, Matthews explains. “We’ll only work with mature people who have a depth of experience in their field, which is what gives us our high quality,” she says. “We work with medics, scientists, data analysts, medical writers and more, but we aim to hire the best international field-based experts, whose skillsets match our client’s requirements.” 

This approach has proved increasingly appealing to clients, with TMC more than doubling revenues over the past five years – sales reached £11.8m over 2021. However, Matthews admits TMC has done “almost no business development work” during its first two decades. Instead, growth has come largely through reputation and word of mouth. 

Hence the company’s search for external investment. “We reached a point where we wanted to make more of the business – to actively grow it, rather than benefiting from ‘accidental’ growth, and also to bring the wider management team into the equity,” Matthews says. That prompted it to appoint corporate finance adviser Torreya to help it pursue a transaction. 

LDC was excited by the potential for the business from the start, says Dewi Hughes, partner and head of South West and Wales at the private equity firm, which had already made several other investments in the sector. “We saw a high-quality specialist with a full capability offering in an area of the market – orphan drugs and oncology – that is set to grow at a double-digit annual rate over the next five years,” Hughes explains. “There is a real opportunity to develop this business and build on the strong foundations and brand – our ambition now is to double revenues and headcount over the next five years.” 

There are several routes to those objectives, Hughes believes, particularly as LDC helps TMC to build out its sales and marketing capabilities in order to focus on business development for the first time. Only a fifth of clients currently buy more than one service from TMC, so the potential to build business from the existing client base is significant. And its strong reputation in the sector will help it secure new clients. 

LDC is looking primarily at organic growth, but isn’t ruling out acquisitions in order to boost TMC’s capabilities. While the company already has a full-service offering, it delivers some of that proposition through partner businesses; they would be one possible M&A hunting ground. 

World of opportunities 

International expansion is another possibility for TMC, adds Stefan Gunn, LDC’s investment director. “The majority of clients are already from beyond the UK and TMC has hubs in Ireland, Japan and the US as well as in the UK, so this is a business with a significant international footprint,” he says. “But the growth of the biotech sector in Asia, particularly in China, offers real opportunities as those companies look to tap into the European market; we can also develop a stronger presence in the US, where a significant number of TMC’s customers raise funding.” 

The company’s business model will further help support international growth, believes Gurpal Ahluwalia, a partner at BDO, which conducted commercial due diligence work on behalf of LDC ahead of the deal. 

“The associates model gives TMC real operational flexibility and a unique offering because it has freelancers with the right expertise to work locally with clients,” Ahluwalia says. “The key for the business is to manage the model effectively, so it can be confident about quality and consistency; that’s the role of the highly experienced and technical in-house staff at the business.” 

More broadly, Ahluwalia describes TMC’s business plan as, if anything, on the conservative side because the strength and resilience of the orphan disease market offers such a valuable opportunity, particularly when coupled with TMC’s broad service offering. “When you break this market down, there are huge areas of potential growth,” he adds. The challenge will be to scale the business effectively in order to take advantage of that opportunity. 

LDC will be an excellent partner for TMC, believes Sylvester Oppong, partner and head of healthcare and life sciences corporate finance at EY, which served as the private equity investor’s corporate finance adviser during the transaction. 

“This was a competitive process and LDC secured exclusivity after establishing a great rapport with TMC’s management,” he says. “TMC has grown quickly and successfully under Julie’s ownership, building a fantastic market position and reputation. I believe the sky is the limit as the business continues its growth trajectory in partnership with LDC.” 

The deal process evolved smoothly, says Oppong, although LDC and its advisers were conscious that TMC was taking on external investment for the first time. “LDC spent time with the management explaining their role and approach and getting them comfortable with having a new investor in the business and another voice in the boardroom,” he says. “They needed to understand the practicalities of that.” 

Certainly, TMC is keen to maintain its independence – a trade sale or offering a majority stake were ruled out early on, says Matthews. “Taking on a partner with a flexible and patient funding model and experience in the sector works better for both sides,” she argues. 

Healthy rivalry 

Growth isn’t assured. The macro picture is important, with recession or economic slowdown potentially jeopardising funding for TMC’s clients and therefore its business, although BDO’s due diligence work suggests the new business pipeline is resilient. Competition is a threat, too; while relatively few businesses in the sector offer a full set of capabilities, TMC does have rivals in each of the service areas where it operates. 

Nevertheless, LDC is convinced that it’s picked a winner. “Julie and the management team have built a global reputation and they’re passionate about the business,” says Gunn. “We’re proud to be investing in a business doing such important work for people who will benefit so greatly from the treatments TMC is helping to develop.”  

How the deal was done 

LDC paid £18m for a minority stake in TMC Pharma Services in a deal completed in late August. The business will continue to be run by co-founder and CEO Julie Matthews and COO Carol Woodward. 

Dewi Hughes, LDC partner and head of the South West and Wales team at the firm, and LDC investment director Stefan Gunn, led the transaction. The private equity firm was advised by EY, which provided corporate finance and tax advisory services; Blake Morgan, serving as legal adviser; and PwC and BDO, respectively conducting financial and tax due diligence, and commercial due diligence. 

Both Hughes and Gunn will serve on TMC’s board, with pharmaceutical sector veteran Thomas Engelen also joining as non-executive chairman. 

TMC worked with corporate finance adviser Torreya – this was the eighth pharma services sector deal the company has advised on over the past year. Shepherd and Wedderburn provided TMC with legal advice on the transaction. 

Management team 

Julie Matthews and her husband Mike Matthews founded what would become TMC Pharma Services as The Matthews Consultancy (TMC) in 2000. Both had extensive experience of the sector, having served in senior roles at a number of pharma and life sciences businesses. 

More than two decades later, Julie Matthews is staying on as CEO of the business following LDC’s investment. Her husband has stepped down as chairman, following the arrival of independent non-executive chairman Thomas Engelen. Engelen’s career has included stints at pharma giants such as Akzo Nobel and Novartis. Recently, he has pursued a portfolio career working as a director and adviser at businesses across the life sciences sector. 

Engelen will work closely with Matthews, as well as COO Carol Woodward. The TMC team is keen to expand the business significantly with the help of their private equity backers – hence Matthews’ determination to retain independence. “We could have pursued a trade sale with a larger business in the sector, but we would have just been gobbled up and have lost what makes TMC special,” she observes. 

TMC will hope to leverage LDC’s expertise in the healthcare sector, where it has invested more than £100m over the past three years. The firm has worked with the clinical trials operator Synexus and contract development and manufacturing organisation Penn Pharma, and recently invested in mobile clinical solutions specialist EMS Group Solutions. 

First published in Corporate Financier, Issue 247, November 2022