British success stories might be a bit thin on the ground at the moment, but they are out there if you look hard enough. And that’s what private equity has been doing. There are high levels of private equity dry powder looking for a home in the UK mid-market, and that continues to create intense competition for the most attractive assets. This is particularly so in the booming pharma and medtech sectors. What helps is already having a relationship or, better still, an investment, as was the case for Gresham House Ventures and Panthera Biopartners. 

Gresham House first invested in Panthera in September 2020, taking an early stake in the Preston-based company that recruits and manages patients on clinical trials for big pharma companies. In April this year, Panthera secured a further £10m investment from the Business Growth Fund (BGF) and Gresham House (on behalf of the Baronsmead Venture Capital Trusts). 

“[That first investment] was quite an unusual investment for us in terms of going in that early,” says investment director Maya Ward, who led the Gresham House team. “The company was close to inception and typically we look for more commercial traction before we invest, but here we had conviction in the team and proposition.” 

Part of that conviction was inspired by those involved with Panthera. The company was set up by people with a track record of founding or being senior executives in the clinical trials and lab testing space – chiefly Dr Ian Smith, founder of Synexus and John Lyon, one-time global VP of Covance. 

Lyon, now Panthera’s Chairman and CFO, got together with Smith in 2017 to look at founding another clinical trials business, and using their vast experience to go further with it. Synexus had been acquired by that stage and was no longer independent. This had created a gap in the market, as many companies prefer using an independent site management organisation. 

Stuart Young joined from Synexus to become Panthera’s CEO. This was something of a marker, demonstrating that they were recruiting one of the best teams in the clinical testing field. 

Lyon had built a team who’d done it all before. This helped generate a very fast order book of blue-chip clients. A problem with new start-ups can be that nobody will use them because they’ve got no experience – that was not a problem for Panthera. 

Post-pandemic push 

The team’s experience gave Gresham House the confidence to invest, earlier than usual, in an area that Ward thinks “isn’t served particularly well by the main players. From a thematic view, the market is big and there’s a significant opportunity given most research in the UK is still conducted by the NHS alongside staff’s frontline care duties.” 

2021 was, says Ward, “a pretty exceptional year for the company, with COVID-19 vaccinations as well as wider therapeutic contracts driving material overperformance against budget.” This led to Gresham House being keen to put more money to work.  

“We were very impressed with the team and how fast they were able to ramp up operations to service contract wins. This led us to make a pre-emptive offer to provide further capital so they could go faster. We brought BGF on board to support on aspects such as acquisitions, which we’re currently restricted from funding given the nature of our VCT funds, though we’re looking at ways to fund these activities going forward.” 

BGF investor Matt Widdall says: “It was clear from the word go that Panthera represented a compelling opportunity to address the biggest challenge in a clinical trial – patient recruitment and retention.” For Widdall, the primary aim of the growth capital – £10m secured in April 2022 – is to enhance the size of the company’s UK site footprint, develop technology and establish international capability. 

“What is clear is that there are very favourable market dynamics in this billion-dollar sector,” he says. “In the UK, the NHS has to focus on the provision of core services, and with significant pressure on healthcare systems, exacerbated by the backlogs created by COVID-19, there is a need to reduce reliance on the NHS for non-core clinical trial work.” Widdall adds that with the R&D budgets of pharma buoyed by COVID-19 vaccine sales, Panthera can benefit from outsourcing trends and from opportunities in Europe “including M&A, which is accelerating at pace”. 

Next step 

The aim is for Panthera to become pan-European within two to three years, which will allow the business to interact a lot more with the US market. It will also make Panthera attractive for Series C or a potential trade sale in the future. 

With due diligence underway for takeover targets, Panthera expects to increase its site footprint from the current nine to “17 or 18 by the end of 2023”. The company has 80 employees, with that number expected to rise along with site growth. 

The ambition is to become the dominant business in the UK clinical testing market, and also to develop a broad technical capability, extensive geographic coverage and a globally recognised brand. 

Recruiting and running trials for research into a variety of chronic diseases, Panthera is looking to spend some of its investment capital to further digitise its business. Further digitalisation will help the business work in a less centralised manner. 

The 2022 round saw the exit of Series A investors Catapult Ventures, with a 3.3x return over 18 months. There was a lot of interest in Panthera beyond the BGF and Gresham. BGF’s encouragement for overseas acquisitions was one of the key selling points, although the bid was the best. Gresham brought in the BGF to help with the acquisition story, and this became the ideal investment, so the deal went to exclusivity pretty quickly. 

The process 

In terms of valuation, the deal process was smooth, but the transaction took two months longer than was planned because of COVID-19-related due diligence delays. Lyon led the corporate finance oversight in-house, along with non-executive director Chris Steed, a former corporate finance director at Arthur Andersen. The deal involved a secondary cash-out of £4m, with £6m going into the company. 

Gresham’s Maya Ward, previously an observer, became a director, while Rhys Davenport of BGF also joined the board. “We do try to be a supportive investor, not just giving a cheque but thinking about how we can help take a company forward,” Ward says. “I think one of the benefits of being thematically focused on healthcare means I meet lots of interesting companies, and interesting people who might be useful, and I try to make introductions where relevant. There are some opportunities being explored at the moment between portfolios which might lead to some sort of formal collaboration, but a lot of the time it can be quite informal in terms of just sharing learnings and experiences across the sector. 

“I think the biggest thing for us with all the businesses we look at is how compelling the value proposition is. We see patient recruitment and retention in clinical trials as a huge pain point and a major cost point to pharma. So we saw this as a great opportunity to provide better experiences for patients, as well as the industry. Backing a very seasoned team who’ve been there and done it before in an underserved market gave us the conviction to invest early,” she explains. 

The key people 

Matt Widdall and Rhys Davenport co-led BGF’s investment. Based in Manchester, Widdall joined BGF in 2013 from Lloyds Bank, where he worked in acquisition finance. He previously spent 16 years working in corporate finance for Deloitte. Also based in Manchester, Davenport joined BGF from EY, where he worked in corporate restructuring after training as a chartered accountant. 

Maya Ward led the investment at Gresham House. A specialist in the healthcare sector, she joined Gresham in 2019 from Octopus Healthcare. She previously spent seven years with KPMG, where she initially trained as an ACA in audit, before moving into the healthcare M&A advisory team. 

Professor John Lyon is co-founder, chair and CFO of Panthera Biopartners. He is professor of practice in the Entrepreneurship and Innovation Group at Warwick Business School. He was previously global vice-president of Covance, having started his career with PwC, where he trained as an ACA. 

Dr Ian Smith MBE is chief medical officer, director and co-founder of Panthera. He founded clinical research firm, Synexus, in 1998. He was global medical director of Synexus, until he left in 2014, just prior to the Lyceum Capital-backed £83m management buyout of the business. 

Stuart Young joined Panthera as CEO in 2019 from Synexus, where he’d spent 11 years and was UK country manager. 

Shoosmiths and Myersons provided the legal advice on the deal. 

The business model 

Panthera recruits and manages patients on clinical trials for commercial sector pharma. Traditionally, without site management organisations, clinical research was done with doctors who would reach out to consultants. The consultants would say yes or no, and if yes would contact their NHS Trust to work out whether they could resource it.  

Panthera professionalises that service in the independent sector, so that it can find more people to take part in studies, with dedicated staff that aren’t distracted by clinical care. It runs studies through its centres and the value to the customer is that while it is a premium service, there are more guarantees: the level of service, the level of patient access and the level of patient staffing that can be focused on the trial are all far more guaranteed. This means the trial is done faster, and speed is the biggest factor to the customer ahead of cost. 

First published in Coporate Financier, Issue 246, October 2022