The mergers and acquisitions activity of pharmaceutical contract manufacturing organizations (CMOs) is continuing at a slowed pace according GlobalData, a data and analytics company.
GlobalData’s latest report, “M&A in the Contract Manufacturing Industry: Implications and Outlook–2023 Edition,” reveals that the mergers and acquisitions activity of CMOs decreased slightly in 2022 compared to 2021. CMOs showed an increasing reluctance to take on debt in 2022 in a challenging borrowing environment due to rising inflation and interest rates. Still, private equity investment in CMOs over the previous five years peaked in 2022, says GlobalData.
Major CMOs Catalent Inc. and Recipharm AB made the most acquisitions of any pharma contract service provider during 2021–2022. Catalent made investments in cell and gene therapies: it acquired both RheinCell Therapeutics and Delphi Genetics. Recipharm also targeted companies with biologic production, with 75% of its acquisitions involving companies with active pharmaceutical ingredients biologic manufacturing sites, according to the report.
“Far fewer private equity companies divested CMOs during 2021–2022 than bought CMOs, indicating that their interest in the CMO industry is growing and investor appetite is strong. Pharma manufacturing persistently prospers regardless of changing economic environments, as demand for pharma products continues to grow,” says Adam Bradbury, pharma analyst at GlobalData.
According to the report, most private equity company acquisitions related to commercial dose CMOs were for targets with injectable capabilities, due to the increase in demand for injectables during the COVID-19 pandemic.
“Many drug manufacturers are facing a COVID cliff in 2023 as vaccine and treatment sales are set to fall greatly. The rising approval and use of biologics and oncology drugs will mean injectable manufacturing will still be needed in the future. Manufacturers will have to switch lines or adapt their production to use capacity previously used for producing vaccines,” says Bradbury.
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