FFL Partners has broadened its portfolio by making an undisclosed investment in Johnson County Clin-Trials, a clinical research platform serving pharmaceutical and biotech companies and contract research organizations. The move is part of a long-term strategy to invest in the clinical research field, says FFL Partner Karen Winterhof. Here’s more on their investment thesis.

“We currently have one acquisition under letter of intent and plan to pursue more acquisitions,” Winterhorf says. “We are excited to partner with like-minded founders with an emphasis on retaining local culture, while improving patient enrollment and execution capabilities.”

Headquartered in Lenexa, Kan., JCCT specializes in Phase I–IV clinical trials, encompassing both healthy volunteers and special populations. Since its inception in 2005, the company has successfully concluded roughly 300 clinical trials, engaging more than 15,000 study participants.

Winterhof describes the sector as highly fragmented and says 90 percent is composed of single-site players, primarily owned by doctors who are new to clinical trials.

JCCT “exceeds patient enrollment expectations, a key pain point for pharma sponsors,” she says. “The founders are excellent operators that have consistently run a highly compliant clinical research organization.”

The business model does not rely on the success of market-approved drugs; 90 percent of those fail in clinical trials. JCCT is compensated on its ability to enroll and continue to engage patients who qualify for trials.

“These investments generally do not rely on the underlying drugs going to market, but rather the spend to test the feasibility,” Winterhof says. “Clinical research sites rely more on the continued, stable research and development expenditure from pharma sponsors than ultimate drug success or profitability.”

JCCT’s methodologies include both healthy volunteers and special populations trials and first-in-human studies.

The company has helped pharmaceutical and biotechnology companies in the development and approval of 20-plus new or improved drugs and vaccines brought to market, including those funded by the U.S. Department of Defense, National Institutes of Health and its Division of Microbiology and Infectious Diseases, Winterhof says.

Allan Zaenger, a registered pharmacist and founder/owner of Pharmaceutical Horizons, which engineers efficient and effective drug therapy, says pharmaceutical research is an attractive market for private equity firms because of the big dollars flowing from the pharmaceutical giants and the U.S. government.

And it appears to be stable, as cures are elusive for several maladies. Big Pharma and the government are willing to spend big money to get effective drugs on the market, says Zaenger, who is unfamiliar with the FFL Partners deal with Johnson County Clin-Trials.

But there is risk too, Zaenger says.

If a drug languishes in clinical trials and the cost goes up – although ultimately approved by the Federal Drug Administration – its market rate might be too expensive for the private buyer and most insurance plans.

That could ultimately affect research-and-development dollars, he says. “We’ve got drug companies developing drugs for weight loss,” Zaenger says as an example. “These weight loss drugs are tens of thousands of dollars per year. We have [insurance] plans right now that exclude coverage for weight loss.”