Catalent’s fresh problems with costs and productivity may have hurt its prospects for an M&A deal.
Life sciences conglomerate Danaher has ditched a plan to pursue an acquisition of Catalent, Bloomberg reports. The publication first reported back in February that Danaher was interested in buying the CDMO at a “significant premium.”
While Danaher has backed away for now, it could still revive a takeover offer, Bloomberg reports, citing one person familiar with the matter.
It’s not clear exactly when Danaher changed its mind. But Bloomberg’s report comes right after Catalent revealed productivity problems and high costs at three of its facilities—including two of the CDMO’s largest. The company’s chief financial officer, Thomas Castellano, also stepped down.
Catalent’s stock price tumbled about 25% after the news on Friday.
Typically, a stock price retreat gives a potential buyer an opportunity to scoop up a company at a cheaper price if it truly believes in the target’s underlying value.
But that doesn’t appear to be the case between Danaher and Catalent, at least according to Bloomberg’s latest reporting.
Meanwhile, this wasn’t the first time Catalent disappointed the market. The company’s share price had already plummeted by about 60% in the second half of 2022 as its COVID-19 contract manufacturing businesses waned.
As Catalent announced last week, its plans to increase capacity at its gene therapy site in Harmans, Maryland, were slower than expected, and its drug product and drug substance facilities in Bloomington, Indiana, and Brussels face productivity and cost challenges. The company said it expects the problem to materially affect its results until the end of June, or the remainder of its fiscal year 2023.
In a Friday note to investors, William Blair analyst Max Smock pointed out that the three sites are biologic production facilities, which represent “the key business to potentially drive” profit, business growth and stock price appreciation.
Catalent has yet to share the exact reasons behind the efficiency miss. Although Catalent said it expects to resolve the problems by the second half of 2023, Smock wrote that he doesn’t “have confidence in [Catalent] management’s ability to navigate the transition away from COVID and execute consistently moving forward.”