In about eight months and with the outlay of more than $12 billion, the contract manufacturing industry has been transformed. Thermo Fisher Scientific has completed its $7.2 billion acquisition of CDMO Patheon, just weeks after Lonza completed its $5.5 billion buyout of capsule maker Capsugel.
Thermo Fisher paid $35 a share for Patheon, a sum that amounts to about $5.2 billion, and assumed another $2 billion in debt for the Durham, North Carolina-based CDMO. Waltham, Massachusetts-based Thermo Fisher, which provides services and equipment to the biopharma industry, saw the deal as a way to move into a rapidly growing and related arm of the industry which is now valued at about $40 billion.
RELATED: Patheon, built on a series of acquisitions, is snapped up by Thermo Fisher in $7.2B deal
Patheon was just another small contract operator when, in 2012, top executive James Mullen began a series of deals that transformed the company into a top tier player with 2016 revenues of $1.9 billion. That effort got a major boost in 2014, when Patheon’s then-owner, private equity investor JLL Partners, struck a $2.6 billion deal to merge the CDMO with Netherlands-based Royal DSM, creating DPx Holdings.
JLL executives said they believed the fragmented contract manufacturing industry was ripe for a roll-up at a time when pharma was looking for partners with a spectrum of services and large geographic reach. What followed was more deals as Patheon plucked small independent operations that offered specialized services.
RELATED: Lonza's potential Catalent buy remains under wraps
Not to be eclipsed, Lonza, after several years of retrenchment, decided to go the M&A route to build its size. Last year, sources said the Basel, Switzerland-based company was looking to buy Catalent, another sizeable CDMO. Then late in the year, it announced instead, that it would pay $5.5 billion for Capsugel to get a solid place in that niche of the business. It followed that up in May with a small deal for Netherlands-based PharmaCell, a gene and cell contract manufacturer in Europe.
RELATED: Lonza forecasts $7.9B in annual revenues by 2022, helped by Capsugel buy
Last month, Lonza reported about $2.4 billion in revenue for the first half of the year. But it told investors that by 2022, with Capsugel now onboard, it expects revenues to reach nearly $8 billion annually.