Edgemont in the News

David Blume Quoted in Centerwatch Monthly on Preparing Sites for Acquisition

david-blume-3David Blume
Co-founder and Managing Director of Edgemont
Senior Banker at Bear Stearns and Lehman Brothers
Founded and led the Outsourced Pharmaceutical Services Team at Bear Stearns

“Investors and large corporate entities have finally come to realize that the way research is conducted with research sites is incredibly inefficient,” said David K. Blume, managing director, Edgemont Capital Partners. “The $60 billion R&D industry depends on the execution of clinical trial protocols conducted by small, independent mom-and-pop investigator sites. This enormous industry is balanced on the head of a pin, depending on these small entities to recruit the subjects and do the work. That is changing and it’s changing rapidly in a dramatic way.”

Sites that lack a high degree of specialization and recognized leadership position in therapeutic category, according to Edgemont’s Blume, could make themselves more attractive to buyers by diversifying across multiple therapeutic areas.

“Having a high-quality database of validated subjects that you can show are active and that you recruit actively out of the database has real value. Any other proven subject recruitment tools also make sites more appealing,” Blume said. “The ability to operate multiple locations also gives you enhanced value.”

“Many times, we will get involved and the company has to bring in outside parties to convert their cash basis financial statements to accrual. Sometimes that process is so lengthy that the buyers get frustrated and move on. Accurate financial results on an accrual basis greatly enhances the ability to get a deal done and, beyond just being a threshold consideration, adds value to the site in a sale.” said Edgemont’s Blume.

Edgemont’s Blume said one of the challenges for site companies as they explore this path is the “size issue” because it’s difficult below a certain threshold size to run a process and get a premium value. Buyers, if they are going to invest the time and energy in a transaction, want to be able to make a significant difference in the business.

“If you have a $100 million organization and are buying a $1 million revenue site business, it’s a lot of effort for not a lot of gain. I encourage small site companies to think about trying to team up, partner or form alliances with other smaller sites to try and gain some critical mass on their own. It’s very difficult to merge these companies because nobody has the capital to do that, but they can at least aggregate themselves in some way and gain a little bit of stature. It’s very difficult when you have these very small sites. In the current environment, that is one of the biggest challenges for these small site owners,” Blume said.