Water Street Healthcare Partners

Comprised of two businesses that specialize in outsourced clinical services, CCBR-SYNARC expands Water Street’s global presence in the pharmaceutical services sector.  It also marks the health care firm’s first investment from its new fund, Water Street Healthcare Partners III, L.P., which it closed last year after receiving $750 million of investor commitments in less than eight weeks.

CCBR-SYNARC is a highly specialized provider of clinical services to the world’s largest pharmaceutical and biotechnology companies.  The company’s SYNARC business, based in Newark, Calif., specializes in imaging services, consultation and analysis to track progress throughout a clinical trial’s life cycle.  Its CCBR business, headquartered in Copenhagen, Denmark, recruits patients from all over the world, and conducts and manages clinical trials in its dedicated clinical centers. Together, the businesses employ more than 500 doctors, nurses and technicians who are located in 29 research centers across Asia, Europe and The Americas.  They currently focus their expertise in the musculoskeletal, cardiovascular and neurological therapies.

“Water Street’s team has consistently demonstrated to us a deep understanding of our businesses since it first approached us about potential ways to work together several years ago,” said Dr. Claus Christiansen, founder and chairman, CCBR-SYNARC. “When we reached a point in our development in which we were ready to expand our capabilities and services, we knew Water Street was our ideal partner.  Its experience in the pharmaceutical sector, business development expertise and extensive industry relationships will provide our businesses with the intellectual capital and resources to achieve long-term growth and success.

The outsourced clinical development market is projected to grow as much as 5 to 10 percent per year over the next five years.  With new regulations and global protocols leading to more complex drug development processes, pharmaceutical companies are increasingly turning to specialized providers such as CCBR-SYNARC to support them with particular aspects of their clinical trials. CCBR’s ability to recruit large patient populations from diverse markets and SYNARC’s high quality imaging capabilities have fueled the company’s growth since its founding in 1998.

“Recruiting patients to participate in clinical trials can be a significant pain point for pharmaceutical companies and can cause costly delays in their drug development processes,” said Al Heller, an operating partner with Water Street who has more than 30 years of pharmaceutical experience.  “CCBR-SYNARC stands out for its proven ability to both quickly recruit patients from targeted geographies and efficiently analyze images to support customers while increasing their clinical trial success rates.”

CCBR-SYNARC expands Water Street’s group of companies specializing in health care products and services to 12.  The firm is also an investor in AAIPharma Services Corp., a provider of pharmaceutical product development services.  It sold its oral health pharmaceutical company, OraPharma, to Valeant Pharmaceuticals International, Inc. last year.   Since its founding in 2005, Water Street has completed 39 transactions to create and grow a diverse group of market-leading health care companies.

“We are pleased to build Water Street’s presence in the pharmaceutical sector with our investment in CCBR-SYNARC.  The company is highly regarded as a partner that delivers results through its unique combination of scientific acumen, local market knowledge and proprietary technology,” said Peter Strothman, partner, Water Street.  “We look forward to working closely with Dr. Christiansen to strategically expand both businesses’ unique capabilities.”

Water Street has activated its newest fund, Fund III, with its investment in CCBR-SYNARC.  The firm is seeking new opportunities to partner with corporations interested in divesting non-core health care businesses, and middle-market companies wanting to accelerate growth.  Water Street targets investments ranging from $50 to $500 million in four health care sectors: distribution, medical products, health care services, and pharmaceutical products and services.

Headquartered in Vista, Calif., PMI distributes new and refurbished EMS equipment and supplies.  It is the sixth acquisition Sarnova has completed since Water Street Healthcare Partners, a strategic private equity firm focused exclusively on health care, invested in the company in 2008.

With PMI, Sarnova expands its portfolio of EMS supplies and advances its position in the refurbished medical equipment market.  The company added refurbishment and recertification of medical equipment to its menu of services earlier this year when it acquired DXE Medical, Inc. (“DXE”).  Sarnova will integrate PMI’s capabilities into its DXE business to support customers with repairing and upgrading their medical equipment to factory-certification levels.  It will distribute PMI’s medical supplies through its Bound Tree Medical business, which serves emergency caregivers.

“PMI is another step in our continual process of expanding our portfolio to offer our customers a greater array of clinically differentiated medical products, expertise and services.  It is highly complementary to our businesses, and furthers our ability to support customers with maximizing the life of their medical equipment,” said Dan Connors, chairman and CEO, Sarnova.  “Our focus continues to be identifying new ways to grow our products and services to provide greater value to our customers who are on the front lines of saving patients’ lives.”

Sarnova has grown to become a leading specialty health care distributor through a combination of organic initiatives and strategic acquisitions.  Since partnering with Water Street four years ago, it has expanded its products and services to serve thousands of emergency medical services providers, hospitals and acute care centers across the country.

“When we invested in Sarnova, we saw an opportunity build on its extensive clinical expertise and products.  Together with management, we have executed a strategic growth plan that has broadened the company’s products and supplies,” said Chris Sweeney, partner, Water Street.  “With PMI and DXE, Sarnova has extended its position as one of the industry’s only distributors that can offer health care providers a comprehensive offering of products supported by refurbishment and repair services.”

PMI was a privately negotiated transaction.  Financial terms are not being disclosed.

Sarnova is a leading specialty provider of health care products across the emergency medical services (EMS) and acute care continuum. It is comprised of four major business units: Bound Tree Medical, DXE Medical, Inc. (DXE), Emergency Medical Products, Inc. (EMP) and Tri-anim Health Services, Inc.  Bound Tree and EMP are focused on EMS and pre-hospital medical supplies and equipment. Tri-anim specializes in acute care and respiratory products. DXE refurbishes and repairs medical equipment.  Sarnova offers more than 100,000 health care products and services to thousands of emergency care providers, hospitals and advanced patient-care facilities nationwide. Sarnova is a company of Water Street Healthcare Partners, a strategic private equity firm focused exclusively on health care. For more information, visit www.sarnova.com.

“As a market leader, we have been looking at new ways to support health care providers who are operating under increasingly constrained budgets.  Adding repair and recertification capabilities to our menu of services enables us to become a long-term partner to our customers in helping them care for and maximize the life of their medical equipment.  In addition, we can offer them the option of buying ‘like new’ equipment that is fully certified and warranted,” said Dan Connors, chairman and chief executive officer, Sarnova.  “By aligning with DXE, Sarnova also deepens its offering of resuscitation equipment to health care providers, and expands its group of customers to businesses, not-for-profit groups and government agencies.”

DXE, headquartered in Brentwood, Tenn., specializes in distributing new and recertified emergency products, and providing refurbishment services.  It employs manufacturer-certified biomedical technicians and rigorous testing procedures to repair and upgrade medical equipment to factory-certification levels.  With the addition of DXE, Sarnova will form a new services business, which will be led by Matt Spencer, founder and CEO of DXE.  Sarnova will distribute DXE’s new and “like-new” equipment and supplies through its family of companies: Bound Tree Medical, Emergency Medical Products, Inc. (EMP) and Tri-anim Health Services, Inc.

“I am very excited about the opportunity for DXE to become part of Sarnova,” said Matt Spencer, CEO of DXE.  “Together, we will offer health care providers the best products, prices, advice and services to support them with providing their patients with the highest level of care.” 

DXE is the fifth acquisition Sarnova has completed since Water Street Healthcare Partners, a strategic private equity firm focused exclusively on health care, invested in the company in 2008. In the four years since Sarnova partnered with Water Street, the company has expanded its products and services to become the nation’s leading specialty health care distributor to thousands of emergency medical providers, hospitals and acute care centers across the country. 

“With this newest acquisition, Sarnova is uniquely positioned as a provider that can offer health care providers a comprehensive portfolio of clinically differentiated medical products and expertise supported by refurbishment, maintenance and repair services,” said Chris Sweeney, a partner with Water Street and board member of Sarnova.  “We will continue to pursue new opportunities that will expand the company’s capabilities to support customers with maximizing their spending on products and services that provide them with the highest quality and value.”

DXE was a privately negotiated transaction.  Financial terms are not being disclosed.

Sarnova is a leading specialty provider of health care products across the emergency medical services (EMS) and acute care continuum. It is comprised of three major business units: Bound Tree Medical, Emergency Medical Products, Inc. (EMP) and Tri-anim Health Services, Inc. Both Bound Tree and EMP are focused on EMS and pre-hospital medical supplies, while Tri-anim specializes in acute care and respiratory products. Together, Sarnova offers more than 100,000 health care products to thousands of emergency care providers, hospitals and advanced patient-care facilities nationwide. Sarnova is a company of Water Street Healthcare Partners, a strategic private equity firm focused exclusively on health care. For more information, visit www.sarnova.com.

Water Street divested PDC after spending five years building the company into a global leader in patient safety identification (ID) through a combination of strategic acquisitions and organic initiatives.  Headquartered in Valencia, Calif., PDC designs and manufactures products used by hospitals across the United States to reduce medical errors, and integrate and share patient data.

Water Street partnered with PDC’s founders and management team in 2007 to invest in the company when it specialized in health care ID wristbands.  Two years later, Water Street facilitated PDC’s acquisition of TimeMed Labeling Systems, Inc. to expand the company’s products into health care labeling systems.  In 2010, Water Street initiated an industry-leading merger between PDC and The St. John Companies to create the world’s foremost provider of health care wristbands, specialty labels and identification solutions.  The firm recruited an experienced management team to lead the combined company.   It invested in PDC’s infrastructure including a new headquarters, manufacturing facility and technology platform to more effectively serve customers.

“PDC is an excellent example of the long-term value Water Street can create in partnership with founders and executives of middle-market health care companies.  When we first met with PDC’s founders, we proposed a strategic path to build on the company’s strength in hospital ID wristbands.  We invested in the company’s product development and manufacturing capabilities, and significantly broadened its product portfolio to transform PDC into a global leader in patient safety identification,” said Curt Selquist, an operating partner with Water Street and chairman of PDC.  “We are pleased that the successful execution of our strategy resulted in a highly regarded market leader purchasing PDC to further its long-term growth.”

Brady President and Chief Executive Officer Frank M. Jaehnert stated, “The acquisition of PDC provides an anchor position for Brady in the attractive health care identification space and fits well with our mission to identify and protect premises, products and people.  The company’s management expertise, large customer base, strong channels to market, and broad product offering have made PDC the domestic market leader in health care identification.  The strengths of PDC, together with Brady’s health care identification product offering, deep materials and printer expertise, and our global footprint, make this a very attractive business combination.”

PDC, with annual sales of approximately $173 million, is a leader in identification products primarily for the healthcare market, specializing in patient wristbands, specialty labels and identification systems used in hospitals to reduce medical errors and integrate and share patient data.

PDC, founded in 1956, is based in Valencia, Cal., and employs approximately 1,000 people globally.  The company has manufacturing facilities in Tijuana, Mexico and Port Orange, Fla., and a European sales office with light manufacturing in Nivelles, Belgium.  PDC’s healthcare wristband and label systems are used by most U.S. hospitals and reach every touch point in the delivery of patient care, from admissions to discharge.  PDC’s products also meet important patient safety guidelines of The Joint Commission, FDA, AHA, and HIPAA.  In addition to its primary focus on healthcare identification, PDC also offers wristband products for the leisure and entertainment industries and for crowd control and law enforcement utilizing technologies including RFID, holograms and barcodes.  PDC products are sold through a direct sales force, distributors and system integrators.

“The acquisition of PDC, a leader in the U.S. healthcare identification space, provides an important anchor position for Brady in the attractive healthcare market and fits well with our mission to identify and protect premises, products and people, and our vision to be the market leader in all of our businesses,” said Brady President and Chief Executive Officer Frank M. Jaehnert.  “PDC’s highly regarded management team comes with deep experience in the healthcare identification space and has been very successful in building PDC into the strong business that it is today.  PDC’s large customer base, strong channels to market and broad product offering together with Brady’s laboratory and people identification products, deep materials and printer expertise, and global footprint, make this a very attractive business combination and provide a strong foundation to build upon PDC’s market leading position.”

Curt Selquist, an operating partner with Water Street and chairman of PDC stated, “Over the last five years, we expanded and enhanced PDC’s product development and manufacturing capabilities, and significantly broadened its portfolio of identification products through strategic acquisitions.  The sale of PDC to such a highly regarded market leader in identification solutions fulfills our mission of having PDC end up with a company that continues this mission of long-term profitable growth.”

Excluding one-time acquisition-related costs, Brady expects this acquisition to be slightly accretive to earnings per diluted share for the remainder of fiscal 2013, and $0.10 to $0.15 accretive to earnings per diluted share in the first full fiscal year.  The non-recurring acquisition-related costs are expected to include a one-time, non-cash tax charge of $25 to $30 million related to the repatriation of cash to the U.S. in financing this acquisition and $8 to $12 million of other acquisition-related expenses.

Brady will hold a conference call to discuss this announcement at 7:30 a.m. Central Time on December 31, 2012.  Interested parties can listen to the live Web cast by logging on to www.bradycorp.com.

 Brady Corporation is an international manufacturer and marketer of complete solutions that identify and protect premises, products and people. Its products help customers increase safety, security, productivity and performance and include high-performance labels and signs, safety devices, printing systems and software, and precision die-cut materials. Founded in 1914, the company has more than 1 million customers in electronics, telecommunications, manufacturing, electrical, construction, , medical and a variety of other industries.  Brady is headquartered in Milwaukee and as of July 31, 2012, employed approximately 6,900 people at operations in the Americas, EMEA and Asia-Pacific. Brady’s fiscal 2012 sales were approximately $1.32 billion.  Brady stock trades on the New York Stock Exchange under the symbol BRC.  More information is available on the Internet at www.bradycorp.com or www.pdcorp.com .

The fund closed at its cap of $750 million of investor commitments, exceeding the original target of $650 million when fundraising began in early June.  Investors in the fund include leading domestic and international pension funds, endowments and financial institutions, most of which have invested in Water Street since the firm raised its first fund in 2006.

“We are very pleased with the value Water Street has built in its group of health care companies, and the strong results its team has achieved over the past six years,” said Investment Director Brian Welker, Allianz Capital Partners, an investor in Water Street since 2006. “What we appreciate most about Water Street is how it engages its entire team in the value creation process.  It leverages the vast experience of its operating partners with the financial expertise of its investment partners to proactively source and invest in attractive companies, strategically expand their products and services, and build them into market leaders.”

Water Street has completed more than 30 strategic acquisitions and mergers, the majority of which were privately negotiated, to build 16 market-leading health care companies in six years.  The firm has acquired and grown its companies through partnerships with the world’s premier health care corporations including Johnson & Johnson, Medtronic, Inc. and Gentiva Health Services, Inc., as well as founders and executives of middle-market companies.  In the past three months, Water Street acquired Breg, Inc. from Orthofix International, N.V., divested its dental pharmaceutical company, OraPharma, to Valeant Pharmaceuticals International, Inc., and divested Physiotherapy Associates after building into a national outpatient rehabilitation services leader.

“We are deeply grateful to our investors for their overwhelming support of Water Street.  Their recognition of the results our team has achieved and enthusiasm for our strategy enabled us to raise this fund efficiently.  Importantly, by extending our partnership, investors continue to support our strategy of building market-leading companies of greater long-term value in targeted growth segments of health care.  We will continue to invest our team’s deep health care expertise, extensive operating experience and network of industry relationships to create transformational growth for our companies and deliver outstanding results for our investors,” said Tim Dugan, managing partner, Water Street.

With Fund III, Water Street’s total capital under management increases to nearly $2 billion.  Water Street will continue to pursue proprietary investments in four segments of health care: medical and diagnostic products and devices, specialty distribution, outsourced health care services, and specialty pharmaceutical products and services.  Target investments range in size from $50 million to $500 million in value.  Water Street will continue to grow its companies through a combination of strategic acquisitions and organic initiatives.

Water Street closed its inaugural equity fund of $370 million in 2006 and its second equity fund of $650 million in 2008.

Mr. Essig is the former chief executive officer of Integra LifeSciences Holdings Corporation, having retired from the position earlier this year.  The appointment of Mr. Essig is Breg’s first outside board appointment since Water Street Healthcare Partners, a strategic private equity firm focused exclusively on the health care industry, invested in Breg last month with plans to build it into a market leader specializing in nonsurgical orthopedic products.

“We are thrilled to have an executive of Stuart’s caliber and experience join our board,” said Brad Lee, president, Breg.  “Together with Water Street, we plan to expand Breg to play a greater role in advancing the growing area of nonsurgical orthopedic care.  Stuart’s expertise in the medical products sector and his experience growing Integra into a global leader will be extremely beneficial to our management team as we embark on a strategy to broaden Breg’s portfolio of products and value-added services.”

During his 14-year tenure as Integra’s CEO, Mr. Essig transformed the company from a single-technology organization with $15 million in annual revenues to a global surgical products company with more than $780 million revenues in 2011.  Prior to Integra, Mr. Essig served as managing director of health care for Goldman, Sachs & Co., where he specialized in mergers and acquisitions for medical device, pharmaceutical and biotechnology companies. Mr. Essig currently serves as non-executive chairman of Integra LifeSciences and a board member of St. Jude Medical Corporation.  He previously was a director of Zimmer Holdings, Inc., and a member of the executive committee and treasurer of the Advanced Medical Technology Association (ADVAMED).

“Our team has built a strong relationship with Stuart over the past 14 years, as he spearheaded Integra’s impressive growth through a combination of innovation and consolidation.  Stuart’s approach to growth complements Water Street’s value creation model, which builds companies into market leaders through both organic strategies and transformational acquisitions.  We are pleased to have recruited Stuart to the board as chairman and look forward to him assuming a leadership role in working with Brad and the Breg management team,” said Curt Selquist, an operating partner with Water Street and a board member of Breg.

Breg provides premium, high-value sports medicine products and services that advance orthopedic patient care. From pioneering cold therapy and innovative bracing to caring customer service and award-winning orthopedic practice solutions, Breg delivers a 360°customer experience unmatched in the industry. Founded in 1989, Breg is based in Carlsbad, CA, and is a company of Water Street Healthcare Partners, a strategic private equity firm focused exclusively on health care. Visit www.breg.com.

The company announced the appointment as it continues the expansion of its specialty care management services to payers and physician practices across the United States.

Mr. Mirt brings to New Century Health more than 30 years of leadership experience in the health insurance industry. Most recently, he was president of HealthSpring, one of the largest Medicare Advantage plans in the United States. The company was acquired by Cigna Corporation earlier this year. Previously, Mr. Mirt was executive vice president and chief operating officer of AmeriChoice,a UnitedHealth Group company offering health care coverage to Medicaid beneficiaries. He also served as regional president of Cigna Healthcare.

“We are very pleased to have recruited Mike to New Century Health. His extensive experience in building highly specialized insurance businesses will bring a valuable perspective to the company as we expand our services to more payers, particularly those that serve the Medicare market,” said Steve Cosler, chairman of New Century Health and an operating partner with Water Street Healthcare Partners.

Founded in 2002, New Century Health was acquired by Water Street, a strategic private equity firm focused exclusively on health care, in 2010. To accelerate the company’s position as the leading specialty care services provider, Water Street recruited industry leaders to the management team, and invested in New Century Health’s infrastructure and technology. New Century Health has grown to serve more than 2 million people covered by Medicare, Medicaid and commercial payers.

“We are honored to have Mike serve on our board of directors,” said Atul Dhir, M.D., Ph.D., chief executive officer of New Century Health. “His distinguished leadership experience will provide us with invaluable guidance as we expand payer and physician access to our pioneering, quality-based health care solutions.”

New Century Health is a national specialty care management company that provides comprehensive technology and clinical solutions to enhance the quality and efficiency of patient care. Its customers include both regional and national health plans, and physician practices providing specialty care services to Medicare, Medicaid and commercial members. New Century Health, an official licensee of the NCCN Drugs & Biologics CompendiumTM, is also collaborating with the American Cancer Society and the American Heart Association to promote guidelines-based treatment for oncology, cardiology and other specialties. To learn more about New Century Health, visit www.NewCenturyHealth.com.

Headquartered in Horsham, Pennsylvania, OraPharma is a leading specialty pharmaceutical company focused on dental and oral health care.

Water Street acquired OraPharma from Johnson & Johnson in 2010. The firm established OraPharma as a standalone company, and recruited a high-caliber management team led by Janet Vergis, former chief executive officer of Janssen Pharmacutica. Water Street leveraged its years of experience in the pharmaceutical sector to work with management to accelerate OraPharma’s growth, and pursue attractive new product and market opportunities.

“OraPharma was already a strong business when we acquired it from Johnson & Johnson. Together with management, we created and implemented a strategic plan that further built on the company’s capabilities and advanced future opportunities for growth. We are pleased that the value we built in OraPharma led to one of the world’s leading specialty pharmaceutical companies investing in the company and its future,” said Pete Strothman, principal, Water Street.

Total consideration is approximately $312 million and up to $114 million in potential contingent payments based on certain milestones, including revenue targets. OraPharma’s lead product is Arestin, a locally administered antibiotic for the treatment of periodontitis that utilizes an advanced controlled-release delivery system and is indicated for use in conjunction with scaling and root planing for the treatment of adult periodontitis. OraPharma currently has the largest specialized pharmaceutical salesforce in the dental industry and, as of March 31st, 2012, OraPharma’s trailing twelve month net revenue was approximately $95 million with the business growing at a high single digit rate. The transaction is expected to close in June 2012, subject to the satisfaction of certain closing conditions, and is expected to be accretive in 2012.

“We are excited to enter a new attractive market segment with an already established sales infrastructure focused entirely on the dental community,” said J. Michael Pearson, chairman and chief executive officer. “We believe that this market segment has similar characteristics to the dermatology, podiatry and ophthalmology markets and should offer us the opportunity to cross-sell some of our current products, most notably our new topical prescription cold sore medication, Xerese. We believe the OraPharma business is a new growth platform from which to build additional opportunities in the future.”

Valeant Pharmaceuticals International, Inc. (NYSE/TSX: VRX) is a multinational specialty pharmaceutical company that develops, manufactures and markets a broad range of pharmaceutical products primarily in the areas of neurology, dermatology and branded generics. More information about Valeant Pharmaceuticals International, Inc. can be found at www.valeant.com.