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Water Street acquires AAIPharma’s pharmaceutical development business

Healthcare private equity firm Water Street Healthcare Partners has acquired the pharmaceutical development division of AAIPharma.

Healthcare private equity firm Water Street Healthcare Partners has acquired the pharmaceutical development division of AAIPharma.

Water Street has committed up to USD75m in equity financing to expand the business’ capabilities with the goal of building it into the leading provider of pharmaceutical development services.

The new company is named AAIPharma Services and will retain its headquarters in Wilmington, North Carolina. It serves more than 300 large pharmaceutical and biotechnology companies throughout North America and employs 450-strong team of scientists and professionals who specialize in services that encompass the entire process of pharmaceutical drug development from discovery through commercialization. Its primary areas of expertise include analytical chemistry, formulation development, clinical packaging, oral drug delivery and contract manufacturing.

‘We are thrilled to partner with Water Street to establish ourselves as an independent company,’ says L Lee Karras, who has led the business for the past three years and has been appointed the company’s chief executive. ‘In addition to providing significant capital resources, Water Street offers extensive pharmaceutical expertise that will benefit our company, employees and customers as we embark on a new strategic course. Together with Water Street, we will build on our core strengths to provide our customers with unparalleled knowledge and capabilities that will enable them to successfully navigate the complex drug development process.’

In 2008, pharmaceutical and biotechnology companies invested more than USD115bn in drug research and development globally. They are estimated to have outsourced as much as a quarter of that expense. As requirements and standards for drug approvals continue to intensify and development costs rise, companies are expected to outsource more of their drug development in the future. In fact, analysts project the market for outsourced drug development services will grow at a compound annual rate of more than ten per cent from now through 2015.

‘The rising complexity of drug development and the costs related to maintaining those capabilities in-house are leading global pharmaceutical and biotech companies to increasingly turn to outside resources for assistance,’ says Al Heller, an operating partner with Water Street who has more than 30 years of pharmaceutical experience including leading operations for GD Searle. ‘AAIPharma Services goes beyond traditional levels of support to provide customers with unique expertise and capabilities that creatively address challenges that arise during drug development and manufacturing. The company is highly regarded for collaborating with customers to ensure they consistently achieve high-quality results. This is the unique value proposition that we intend to build on.’

AAIPharma Services is Water Street’s second platform investment in 2009 and first investment in the life sciences sector.

‘We are pleased that Water Street continues to complete investments in sectors of health care that we have identified as attractive for growth,’ says Tim Dugan, managing partner of Water Street. ‘Over the past 30 years, the AAI Pharmaceutical Development business has consistently grown to achieve strong results. As a stand-alone entity, AAIPharma Services is much better positioned to focus on and expand its core business. We will leverage our team’s deep expertise and relationships in the pharmaceutical industry to build on its strong foundation through a combination of organic growth and strategic acquisitions. Ultimately, our goal is to create greater long-term value for customers and the company by establishing AAIPharma Services as the leading provider of drug development services.’

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