The push for pharmaceutical innovation has prompted drug sponsors to streamline their supply chains and dedicate those resources toward faster product development, which has propelled growth in the Pharmaceutical Services Outsourcing industry, according to the Healthcare & Life Sciences Insider, an industry report released by Brown Gibbons Lang & Company (BGL). Secular drivers, including increased R&D spending globally, a growing cell and gene therapy (CGT) pipeline, and a healthy biotech funding environment, are expected to sustain market growth.
This report examines the various markets within Pharma Services, a fragmented industry that is increasingly moving towards integrated, single-source solutions as drug sponsors look to cut time and cost from bringing drugs to market. The report also features a roundtable spotlight on CGT, a novel field that is seeing rapid growth and affording opportunities for outsourcing providers. Executives share insights on developing trends and future investment in the CGT market.
Sponsor challenges in CGT are translating into opportunities for outsourcing providers, according to Michael Khavinson, chief executive officer of Azzur Group and a participant in the report, “Providers of services and solutions that result in bringing the manufacturing closer to the patient; accelerating the start-up, manufacturing, or delivery process; or facilitate faster turnaround between batches have an opportunity to help.” Khavinson anticipates the CGT sector will see M&A activity accelerate over the next few years, adding, “M&As will see an uptick due to the large number of start-ups in the CGT space in the last few years. Several products in development in the CGT space are partnerships between companies, some of which will likely result in M&As.”
Vendor consolidation and outsourcing of content from drug sponsors is driving M&A across the Pharma Services supply chain, leading participants to seek acquisitions to build capabilities and serve as end-to-end solutions providers, with biologics (CGT) among the targeted growth areas. PPD, Charles River, Catalent, Recipharm, and Thermo Fisher Scientific have been among some of the industry’s most active consolidators. Catalent, a leading publicly-traded contract manufacturing and development organization (CDMO), is accelerating growth in biologics through acquisitions (Paragon Bioservices, MaSTherCell Global), more than doubling its portfolio since 2014. The company has targeted more than 50 percent of revenue by 2024—up from 27 percent in 2020.
Private equity groups are attracted to the sector’s growth profile and fragmentation, emerging as buyers in several high-profile transactions such as Cambrex (Permira Advisers), Parexel (Pamplona Capital Management), and AMRI (The Carlyle Group and GTCR). Sponsors have been parties to corporate carve-outs, such as Altaris Capital Partners (3M Drug Delivery Systems, n/k/a as Kindeva Drug Delivery) and H.I.G. Capital (BioVectra) in the CDMO space and Arsenal Capital Partners (Healthcare Packaging Business of Clariant AG, n/k/a as Airnov Healthcare Packaging) in Packaging, each announcing the formation of new growth platforms in Pharma Services over the last six months.