After 34 announced transactions in 2017, the news that one contract research organization (CRO) bought another CRO is downright yawn-inducing. This space is undergoing rapid consolidation, no question. Before this week, those 34 deals had a combined total of approximately $20.9 billion. Add another deal, and another $950 million, and the market just got a tad smaller.
Catalent, Inc. (NYSE: CTLT) announced the 35th deal in this sector on September 19. Its target, Indiana-based Cook Pharmica LLC, is a biologics-focused contract development and manufacturing organization (CDMO) with capabilities across biologics development, clinical and commercial cell culture manufacturing, formulation, finished-dose manufacturing, and packaging. It was founded in 2004 as a division of the Cook Group.
Catalent expects to finance the all-cash transaction with new unsecured notes and equity. At closing, $750 million will be paid and the balance will be paid in equal installments, without interest, on each of the next four anniversaries of the closing.
For the 12 months ended June 30, 2017, Cook Pharmica generated $179 million in revenue, making a 5.3x multiple, the highest in this category in 2017, by far.
The closest revenue multiple we’ve seen in this category in 2017, at least among deals with published prices, was just 3.5x. That was the result of Hellman & Friedman LLC‘s acquisition of The Carlyle Group‘s (NASDAQ: CG) majority share in Pharmaceutical Product Development, LLC in April for $9.05 billion. The lowest revenue multiple, at 2.2x, came from LabCorp‘s (NYSE: LH) $1.2 billion acquisition of Chiltern, the global CRO, announced in July.
This acquisition strengthens Catalent’s position as a leader in the rapidly growing area of biologics development and analytical services, manufacturing, and finished product supply. Cook Pharmica’s 875,000 square-foot Bloomington facility augments Catalent’s expertise in cell line engineering, bioconjugate development, analytical services, biomanufacturing, prefilled syringe, and blow/fill/seal technologies.
