CXV On The Crest Of A Pharma Wave
With a major investment by Water Street under its belt, Frank Madden tells Gerry Byrne about his Cork-based company’s global ambitions in the pharmaceutical services industry
You have to pay attention when it comes to Cork IT firm Crest Solutions, also known as CXV Global. A recent press release stated that CXV Global, a transatlantic strategic alliance comprised of Crest Solutions, Xyntek Inc and VistaLink, is combining the three businesses under common ownership with Panacea Technologies.
The press release went on: “A significant investment has also been made by healthcare investor Water Street Healthcare Partners.” And a bit further on after that: “Water Street has also subsequently committed significant capital to further expand the new platform’s global footprint and solutions.”
There is a company called CXV Global Ltd, which has no filed accounts as it was only set up in 2020. CXV is a vehicle for a 50/50 partnership between Crest Solutions, established in 1998 by Frank Madden, and American peer Xyntek, which has been trading out of Newtown in Pennsylvania since 1986. Crest Solutions and Xyntek are both in the business of assisting pharma companies with various aspects of the manufacturing production lines.
VistaLink, the third part of the CXV Global triumvirate, is a Belgian company where Crest has been a 50% shareholder since 2012. Frank Madden combined the three ventures into a partnership, and the result has been good for Crest Solutions, with its annual turnover increasing to €25m in 2021 from €18m three years earlier.
Meanwhile, over in Philadelphia is Panacea Technologies. It was founded in 1996 when it spearheaded the
automation design for the largest biotech facility in the world. Panacea’s owner is Water Street, a Chicago private equity house with a focus on various aspect of healthcare investment.
According to Madden, Water Street will fund CXV acquisitions a bid to consolidate the sector and make CXV one of its leading players. Otherwise, Madden is keeping his financial cards close to his chest. The nearest he comes disclosing how much Water Street is paying for the three partners in CXV Global is to reference “nine figures”.
It’s a far cry from 25 years ago when Madden, then an engineer with Apple, wrote computer programs at home in his own time to track and analyse production of printed circuit boards. He was trying to improve manufacturing performance at Apple’s Cork subsidiary, which was eventually shuttered.
Madden used his redundancy money to set up Crest Solutions. He had been an early convert to Industrial Vision, the use of cameras and specialised AI software to track progress on production lines. He soon discovered big pharma was keen.
“We wrapped it in software compliance for the pharmaceutical industry,” he explains. “It’s a very heavily regulated industry and that was the backbone of what we did.” One regulation, for example, required pharmaceutical factories to track every aspect of production in real-time. This became known as serialisation which, among other things, was designed to fight counterfeiting.
“Luckily for us the barcode that is used in serialisation can only be read with a digital camera,” Madden explains. “That propelled us into becoming a front runner, and we ended up serialising and tracking and tracing products on the production line for the largest pharma companies in the world.
You put a unique number on each product, and you can track that right through to where it is dispensed and confirm it is a genuine product. We are the people in factories putting the licence plate, as it were, on the packages. We built our business on it.”
More recently, a Crest product called Digital Line Clearance was developed to satisfy new US rules that require drug production lines to be forensically examined before a different product, or strength of product, is produced on the line. The checking process previously required workers armed with flashlights to examine the line, which could take several hours.
Digital Line Clearance, using up to 100 cameras and computers bristling with
machine learning software, can complete the process in 15 minutes. Better still, Madden estimates that pharma manufacturers will be investing in the technology in a matter of months.
By joining forces, CXV Global and Panacea Technologies offer life sciences companies a portfolio of technologies and professional services that maximise the efficiency of their worldwide operations across their entire product life cycle.
Last summer, Madden and his board called in PwC to look at the group’s options for expansion and the sort of funding that might work best. “We needed to change our funding model away from the customer-funded business platform we traditionally employed because we were expanding so quickly,” he recalls. “We have been hiring two new people a week for the past two years and we certainly see that level of expansion adding a hundred jobs a year for the next number of years.”
Still, he doesn’t regret the customerfunded business model. “It gets you very close to the customers and enables you to develop what they are asking for, as opposed to what you think is a good idea. We’ve always had new ideas and new products because the customers are driving our innovation.”
The options suggested by PwC included a trade sale (which Madden says they did not really want), venture capital investment, or private equity funding. “We chose private equity because that would enable us to spend on our own strategy over the next five years with really solid funding behind us, while still be pretty much in control of our own destiny,” says Madden.
And so, Water Street got the gig. Says Madden (54): “They are specialists in pharmaceutical service businesses and they look for a platform company that has a significant presence in a fragmented industry,” he explains. “They then use mergers and acquisitions and investing in the strategy of the company to build a €1 billion entity. We have changed our funding model from a customer funded business to a private equity funded business. This is a big change for us and we are still getting used to it.”
What does he think attracted Water Street to CXV? “If you examine companies in the industrial automation market, especially those specialising in Industrial Vision, you don’t find any really big international players that can service our customers. Some of them have up to 300 factories and they want a standardised solution across all of them on a global business scale.”
Madden says Water Street believes CXV can go global and become that standardised solution. “The strategy is to buy businesses like ours around the world where our customers are. Private equity investment that is willing to invest hundreds of millions means we can do that in a shorter timeframe.
“Developing subsidiaries in this sector is extremely slow, so we have always partnered with companies in order to build a presence. We would much prefer to buy companies that already know the regions and have customers. In almost every Western economy there is a shortage of skills. Better to acquire it than try to build it from the ground up.”
Madden adds: “We expect to be buying three or four companies a year over the next five years. Our strategy will be to consolidate what is a very fragmented market. We have a team that is looking at making acquisitions of Industrial Vision companies right across Europe and the US specifically with experience in the pharmaceutical sector.”
Madden, who hails from Ballaghaderreen in Co. Roscommon, seems to be as happy in Cork as he might be in Silicon Valley. “The great thing about Ireland is that we have so many pharma companies here. It’s a great place for us to try out products and still give us access to a global market.”
CXV Global now employs c.500 people worldwide, 300 of whom are in Cork. “The driving force of what we are doing is centred here in Cork. Crest Solutions in Ireland alone is growing at the rate of a hundred people a year. Despite the rate at which we grow, we aim to keep the same level of intimacy with our customers to be able to service them on a global level with the same level of high service as before.”
‘We are the people in factories putting the licence plate on the packages’