Private equity investors JLL Partners put a sharp focus on the potential in the CMO industry last month when it orchestrated a $2.6 billion deal merging two contract manufacturing companies into a global operation. It also illustrated the pressure smaller players are under to beef up if they are to compete. Pharma Tech Industries (PTI) got ahead of that curve by doing just that.
The Athens, GA-based company has invested $8.5 million into drug manufacturing operations in its Royston, GA, plant, adding 8 clean rooms and 50 jobs. The additions come shortly after the CMO expanded its facilities in Union, MO, near St. Louis, where it makes powdered pharmaceutical products by 60,000 square feet. That 40% expansion brought its total to 160,000 square feet, primarily for producing ingestible powders.
As Big Pharma companies are cutting back their own manufacturing networks to shed jobs and costs, the contract manufacturing industry is expected to benefit. Players like JLL Partners see that big operations with multiple sites, lots of options and low costs will probably have an advantage. JLL last month agreed to lay out $489 million in cash and give DSM Pharmaceutical Products (DPP) a $200 million note for 51% ownership in the new company. It also contributed Canada-based Patheon, the contract manufacturing operation it already controlled.
The combination creates a contract manufacturing and services company with 23 drug development and manufacturing sites in North America, Europe, Latin America and Australia. Paul Levy, cofounder of the investment group, said it sees the CMO market as "highly fragmented" and the investors expect to pick up more small- to medium-sized companies to round out their new company.
But smaller players see their own opportunities to grab a piece of this growing market. In October, contract manufacturer IDT Biologika and a related company, Oncotec Pharma Produktion, announced a combined €70 million investment into vaccine and parenteral sterile fill-and-finish capacities and sterile parenteral oncology drug manufacturing capacity. And in September, Aesica, the U.K.-based contract manufacturer, brought a £30 million ($48.3 million) plant online to manufacture Type 2 diabetes products, a growing niche in the industry.
- here's the release
JLL expects to buy more CMOs
German contract manufacturers invest €70 million on expansions
Aesica invests $48M in U.K. plant to make diabetes drugs