Contract Manufacturing Industry Outlook. Jim Miller, President PharmSource, A GlobalData Company

Transcription

1 Contract Manufacturing Industry Outlook Jim Miller, President PharmSource, A GlobalData Company

2 GlobalData: Who we are 2 GlobalData is a leading data & insights solution provider who, for over 40 years, has been helping over 4,000 companies worldwide to make better and more timely decisions OUR PEOPLE 1,700 employees in 23 offices worldwide 740 global analysts supporting clients 1-on-1 more than 315,000 times a year 145 client services and account managers globally driving 90% renewal rates OUR DATA & INSIGHTS Real time tracking of 500,000+ companies, 181,000 M&A deals, 25,000 industry opinion leaders and 2M new product innovations across 80 countries & 2,000 cities Publishing 2,265 reports annually Quoted c.10,000/year by business press e.g. FT, SKYnews & Bloomberg OUR CLIENTS Serving 4,000 clients in 160 countries 73% of the FTSE 100 companies 60% of Fortune 100 companies 66% of DJ Asian Titans 50 index Our mission is to help our clients succeed by decoding the future and reducing the noise & uncertainties surrounding the world of today

3 Agenda Recent industry performance CDMO results R&D spending NDA approvals Implications of M&A activity in CMC services Recent activity metrics Major deals What s next? Concluding comments 3

4 Revenue Growth Revenue Growth Revenue Growth Strong CMO performance continuing in 2017 API leads the way thanks to high value products, broad outsourcing Development reflects growing clinical pipeline Dose hurt by lower value products, stagnant penetration Custom API 60% 50% 60% 50% Dose 60% 50% Development 40% 30% 20% 10% 0% 40% 30% 20% 10% 0% 40% 30% 20% 10% 0% H FY 2016 H FY 2016 Source: public filings H FY

5 R&D Spend - $ billion Funds Raised - $ billion Emerging Biopharma funding drives development activity $4.5 R&D Spend by Emerging Biopharma $25.0 Equity Funding for Emerging Biopharma $4.0 $3.5 $3.0 $2.5 $2.0 $2.7 $2.8 $2.5 $3.9 $3.9 $3.8 $3.7 $3.6 $3.3 $3.4 $20.0 $15.0 $10.0 $5.0 $7 $3 $14 $2 $12 $3 $1 $1 $1.5 $1.0 $0.5 $- Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 $- $3 H $4 $4 $4 H H Secondary Public Offering Initial Public Offering Venture Capital H Source: Public filings Source: PharmSource Lead Sheet 5

6 Number of NDA Approvals CDMO penetration has remained constant despite market growth NDA Approvals and Share of Dose Form Contract Manufactured % % % 40% 30% 20% 10% % Dose Forms Outsourced In only In+Out Out Only % Out mo 0% 6

7 CMO industry showing signs of consolidation Small number of benefit from NMEs but wide participation in new formulations Outsourced NME Approvals Outsourced New Form NME Approvals Outsourced SM API NME Approvals 2-4 NDAs 13 1 NDA NDAs 3 1 NDA NDAs NDAs 3 1 NDA NDAs NDAs 8 Source: PharmSource STRATEGIC ADVANTAGE 7

8 CMC Services M&A Activity CMC has been principal buyer focus $40 billion in value Strong demand Fragmented supply base Strategic buyers predominate PE buyers shut out Average multiples very high 2.7 x revenue 13.4 x EBITDA Buyer Motivation Discovery, 19 Pharma Services M&A Clinical, 23 CMC, 59 Dose, 16 Bio API, 11 SM API, 13 Develop, 19 Private equity 11 Strategic Source: PharmSource STRATEGIC ADVANTAGE 8

9 Major deals re-shaping CMC services industry Buyer Target Price Multiple Thermo Fisher Patheon $ 7,200 M 22x Lonza Capsugel $ 5,500 M 16x Asahi Glass CMC Bio Biomeva $ 600 M 10x Carlyle Group AMRI $ 570 M 9x Catalent Cook Pharmica $ 950 M 17x Eurofins 6 CDMOs $ 300 M*? Recipharm Kemwell $ 92 M 15x UPS Marken $ 570 M? *PharmSource estimate Source: public filings Major deals better position to service Global Bio/Pharma Scale to absorb large volumes of work Scope of services to handle broad range of projects Financial stability Innovation and executive leadership 9

10 % Dose Manufacture Outsourced Scale and scope critical to serving Global Bio/Pharma Top 25 Bio/Pharma are the big growth opportunity for Greatest spend Least penetrated Successful will need to take on much more work w/o increasing risk M&A adds scale and scope to take on bigger share of COGs Large drive business model innovation 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% % of NDAs Outsourced Small Bio/pharma Mid-size Bio/pharma Global Bio/pharma Sourcing Economics $20 B Global Bio/Pharma Company COGs (18%) $ 3,600 M 20% $ 720 M Per 125 $ 6 M Outsourced at 40% $ 1,440 M Per 50 $ 30 M CMO size if 10% of revenue $ 300 M Source: PharmSource STRATEGIC ADVANTAGE 10

11 Revenues-$ million Revenues - $ million Deal close-up: Thermo Fisher acquires Patheon Creates $3 billion CDMO, plugs big hole in Patheon offering Potential to leverage Fisher Clinical dominance to build CTM business Potential to leverage TMO scale in pharma sourcing/supply Upside from recent Patheon NDA approvals $25,000 $20,000 $15,000 $10,000 $5,000 $- Life Sciences Instruments Thermo Fisher $1,000 $3,000 $3,668 $3,668 $3,339 $3,339 $11,000 $11,000 Before Patheon Acquisition Diagnostics After Patheon Acquisition Pharma Services $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $- Source: public filings Patheon Portfolio $1,152 $495 $220 Before Acquisition $1,152 $495 $1,220 After Acquisition Development API Dose 11

12 Revenues $ billion Deal close-up: Lonza acquires Capsugel $6,000 Lonza Re-weights Lonza portfolio back to bio/pharma $5,000 $4,000 $250 $800 Substantially increases Lonza importance in pharma supply chain Increased leverage as strategic supplier $3,000 $2,000 $1,000 $1,849 $1,849 $2,250 $2,250 Accelerates downstream move into drug delivery and dose form Solubility technologies (softgel, spray-dry, liquid-filled capsules) Added micronization $- Before Capsugel Acquisition Specialty Ingredients Capsules After Capsugel Acquisition Custom APIs Drug Delivery Next steps? Source: public filings Injectables buy or build Excipients manufacturer 12

13 Major Japanese corporations investing in advanced therapy Parent CMO Manufacturing Services Year Fujifilm Fujifilm Diosynth (US, UK) Biologics API, 2011 Althea Technologies (US) Biologics API, injectables 2013 Ajinomoto Omnichem (Belgium) Small molecule API GeneDesign (Japan) Oligonucleotide API 2016 Asahi Glass Biomeva (Germany) Biologics API 2016 CMC Biologics (US, Denmark) Biologics API 2016 Kaneka Eurogentec (Netherlands) Biologics API 2010 JSR KBI Biopharma (US) Biologics API 2015 Hitachi Chemical PCT Cell Therapy Services (US) Cell therapy 2017 Nitto Denko Baring Private Equity Nitto Denko Avecia (US) Oligonucleotide API 2011 Irvine Analytical/Avrio Analytical, injectables 2016 Bushu Pharmaceuticals (Japan) Solid dose, injectables 2014 Source: PharmSource STRATEGIC ADVANTAGE 13

14 Private equity deals are few Buyer Target Seller Ardian Capvest Partners Great Point Partners Unither Pharmaceuticals NextPharma Technologies CSM - Clinical Supplies Management Inc. Mandarin Capital Mipharm Partners PCI Pharma Partners Group Services PE flip PE flip Founder Founder PE flip Permira LSNE Founder SK Capital Perrigo API business Divestiture SK Capital Noramco Divestiture The Carlyle Group AMRI Go private PE firms want badly to into CDMO space, even at high multiples PE firms participate as direct buyers and by backing acquisitions by portfolio companies Major sources of deals Other PE firms looking to exit Founders Divestitures PE firms want platform acquisitions to add to, but shy away from green field investment Source: PharmSource STRATEGIC ADVANTAGE 14

15 What s next in CMC services M&A? Where will big needle-moving deals come from? Few truly attractive targets available Large PE-owned CDMOs need restructuring, investment Low margin Old technology, limited capabilities Industry fragmentation limits big deals High valuation expectation Service Providers Owned 4+ Years by PE Firms Entering 2017 Company Accupac Aenova Group Alcami Aphena Pharma Solutions Aptuit Inc. Denison Pharmaceuticals EAG Laboratories Status Sold Sold Sold What to look for Bolt-on smaller deals to add capability Private equity flips PE buying smaller companies Buyers from outside industry Source: PharmSource STRATEGIC ADVANTAGE LSNE NextPharma Technologies Novasep Ritedose ShangPharma Synerlab Group Unither Sold Sold Sold Planning IPO Refinanced Sold 15

16 Summary and conclusion CMO industry enjoy strong revenue growth and profitability thanks to demand from emerging bio/pharma companies Industry performance and outlook are driving M&A activity, with many deals and high valuations Major deals are positioning some major /CDMOs to more strategic suppliers for global bio/pharma companies High valuations and small number of attractive targets may dampen M&A activity Biggest potential risk to industry performance would be a downturn in external funding to emerging bio/pharma, especially reversals in public equity markets 16

17 Questions and more information 17