The largest CMOs are still keen to acquire other companies despite general investor hesitancy during the pandemic, a GlobalData analysis shows. Even during the height of the COVID-19 crisis in 2020, large CMOs acquired other service providers to add new capabilities or increase the scale of production. This pattern applies not only to high-profile services such as gene and cell therapy manufacturing but also to more traditional commercial dose manufacturing services.
The figures below are taken from the upcoming Q3 report Contract Pharmaceutical Dose Manufacturing Industry: Composition, Size, Market Share and Outlook – 2021 Edition.
There is a long history of pharma companies selling their European manufacturing sites to CMOs keen to build capacity. As Figure 1 shows, 50% of commercial-stage contract dose facilities sold over the last five years were acquired by European-headquartered companies. In 2020, large European CMOs Delpharm (Boulogne-Billancourt, France) and Siegfried Holding AG (Zofingen, Switzerland) acquired facilities from pharma companies.
On October 15, 2020, Delpharm SAS acquired Poznan manufacturing facility in Poland from GlaxoSmithKline Plc (Brentford, UK), and transferred 700 employees. Delpharm agreed to continue manufacturing GSK products at the plant for more than five years. On September 29, 2020, Siegfried agreed to acquire two pharmaceutical manufacturing sites near Barcelona, Spain, from Novartis (Basel, Switzerland). The sites specialize in ophthalmic steriles (El Masnou) as well as oral solid dosage forms and capsules used in inhalation devices (Barbera del Valles). Together they employ 1,000 people.
Private Equity’s Growing Interest
Over the past five years, private equity firms have shown an increasing appetite for dose CMOs licensed to supply to the developed markets of the US, Canada, Europe, or Japan. The report M&A in the Contract Manufacturing Industry: Implications and Outlook – 2021 Edition (June 2021) highlights that between 2018 and 2020, private equity firms rapidly increased their investment in the CMO industry. Private equity firms acquired almost 70 pharmaceutical contract manufacturing companies, and PE-backed CMOs acquired eight during 2018–2020.
Private equity firms now own many of the world’s leading CMOs, such as Recipharm (Stockholm, Sweden), Cambrex Corp (East Rutherford, NJ, US), and PCI Pharma Services (Philadelphia, PA, US). Besides the large volume, valuations in recent private equity-related deals are remarkable. In December 2020, EQT IX Fund, through Roar BidCo AB, agreed to acquire Recipharm AB, one of the largest dose CMOs, for approximately $2.1B. Lars Backsell, chairman of the board of Recipharm, and Thomas Eldered, board member and CEO of Recipharm, are shareholders of Recipharm and participated with EQT IX in the offer.