Getting to the Finish Line

M&A Feature Introduction
An Industry Stacked: Mergers & Acquisitions
in Discovery, Manufacturing and Fill/Finish

As the supply chain shrinks, it has grown far denser. 
There is no segment of the industry that has been untouched by the 
deep internal layering caused by M&A activity. In this Executive Issue 
feature, we explore how research, manufacturing and packaging have 
shifted with consolidation. 

Part 3: Fill/Finish and Packaging Mergers & Acquisitions

The industry’s accelerating development of biopharmaceuticals, as well as the demand for other parenterally delivered formulations, has put tremendous pressure on the entire supply chain to focus organizational and financial strategies to improve and modernize fill/finish operations.

Demand for Fill/Finish Soaring

The major driving force behind the demand for operationally excellent sterile fill/finish operations is the accelerating pace behind biopharmaceutical development and the rise of biosimilars. Regardless of category, outsourcing the complexity and risk of aseptic sterile filling tasks to experts is the real trend in the fill/finish story.

Researchers at Evaluate Pharma project the global market for drugs will continue to expand at a compound annual growth rate of 6.3% until about 2022, with biologics accounting for 50% of the top 100 products by the end of the study period.¹ Based on input from more than 700 pharmaceutical industry professionals, representing all tiers and segments of the pharma business (41% large, 36% medium-sized, 20% small and 3% emerging) from around the world (Europe 38%, North America 33%, Asia 29%), results of the 2017 Nice Insight CDMO Survey revealed the top reason survey participants engage CDMOs and contract services providers is “access to specialized technologies.”²

Similarly, respondents said they also seek improving quality and gaining expertise in areas their organizations lack. Nice Insight CDMO study data revealed that more than half (54%) engage contract providers for liquid dose form clinical-scale and commercial-scale drug product manufacturing services. Further, roughly a quarter of respondents engaged CDMOs for clinical-scale and commercial-scale filling of prefilled syringe and injectable dose delivery forms.

Innovation’s Impact

It’s obvious that this segment of the pharma contract services supply chain has become increasingly dynamic, partially because of advances in integrated enterprise IT, barrier technologies, environmental conditioning systems, robotics and automation, and control strategies.

According to Philippe Mougin, founder and Chairman of Cenexi Group, a CDMO specializing in injectables, patient safety relies heavily on error-free fill/finish operations. Citing inherent complexity of manufacture and finish, biopharmaceuticals are propelling the use of parenterals, which Mougin explained are expected to make up approximately 17% of the packaging market in the coming years.³

“A sterile product is only as good as the fill/finish line through which it must travel,” noted Mougin, who explained that to assure biopharmaceuticals and parenteral quality remains high and product purity is maintained throughout processing, an aseptic fill-finish process is critical.

Noting that requirements of the Drug Supply Chain Security Act (DSCSA) and the larger Drug Quality and Security Act (DQSA) are ramping up, Mougin points out it is now an “opportune time” for CDMOs to implement fill-finish improvements globally.³

Investments in Capability, Capacity and Quality

Sterile fill/finish services providers are clearly responding to the demand for
capacity and technical ability. It is likely that investment and capital allocation strategies will be ongoing, supporting those goals through a variety of means. These
include acquisition and capacity additions, geographic positioning of assets, and strong moves technologically to achieve market niche or “no molecule barred” goals and other advantageous operational synergies.

Cenexi, for example, integrated extensive experience in sterile drug products, expanding into needle-free injection systems, galenical drug forms and cytotoxic (including antibody drug conjugates, or ADCs) and lyophilization capabilities. In 2017, Cenexi gained its fourth manufacturing site, a sterile operations facility located in Hérouville-Saint-Clair, France.⁴

Expansion and Development

Building momentum through 2017, several companies announced plans to expand, acquire or collaborate in an effort to develop their fill/finish operations in order to fulfill their business goals. Feliza Mirasol highlighted the energy and growth the sector is generating in a report for DCAT Value Chain Insights, noting that CDMOs and CMOs were very active, growing organically and “expanding operations to support the development and manufacturing of parenteral drugs.” Mirasol reported that by March 2017, 18 companies across the sector had announced enhancements to parenteral operations.⁵

AB Bio Technologies, Alcami and AMRI all announced their plans to investors for adding aseptic filling and lyophilization lines and systems during the past 18 to 24 months. Alcami not only made strategic and critical acquisitions to add capacity and depth, but also moved fast to add new lines and focus on prefilled syringes. At the end of 2016, Grifols announced construction of a new plasma fractionation plant in Clayton, North Carolina, adding some 6 million liters of annual fractionation capacity. Construction began in early 2017 and the facility is scheduled to start production by 2022.⁶

Pfizer’s CMO Pfizer CentreOne announced in February 2017 the successful expansion of its fill/finish services at the company’s Kalamazoo, Michigan site. Along with vial-filling of small molecules and biologics, the new Michigan operations expand Pfizer CentreOne’s service portfolio and provide new capacity for filling sterile suspensions.⁷ In August 2017, Ajinomoto Althea announced it was launching a high-performance sterile vial filling line. According to the CDMO, the new line strengthens its product manufacturing capabilities and supports a broader range of drug substance APIs, as well as enabling larger batch sizes and a broader range of filling volumes.⁸

Thinking Big

One of the biggest announcements of the year came in September 2017, when Catalent announced the acquisition of Cook Pharmica for $950 million. The company explained the move was intended to bolster its biologics capability and extend its “capabilities in sterile formulation and fill/finish across liquid and lyophilized vials, prefilled syringes, and cartridges.”⁹

In 2016, Vetter articulated its manufacturing strategy, announcing continued investments to expand fill/finish — including a $320 million investment over 10 years in its Des Plaines, Illinois site and plans to expand packaging operations.¹⁰

Outsourcing Continues

Outsourcing pharma packaging is logical due to complex nature of pharmaceutical packaging operations. In the report “Pharmaceutical Contract Packaging Market: Global Industry Trends, Share, Size, Growth, Opportunity and Forecast 2017-2022,” management strategy analysts from IMARC Group found the global pharmaceutical contract packaging market reached a value of approximately $9 billion in 2016, and that it maintained a CAGR of more than 7% during 2009-2016.¹¹ The contract packaging market is expected to reach a value of nearly $15 billion by 2022.¹¹ This rise can be attributed to rapid and sustained growth in the pharmaceutical industry. Pharmaceutical contract packagers, explained analysts, invest tremendously in R&D to ensure innovation and introduce technologies that ensure product quality.

Expansion and Capital Spending Activity

A report by packaging industry group PMMI issued at the end of 2016 explained that, faced with the regulatory challenges of serialization, unique device identification (UDI), as well as pressures to produce at low cost, healthcare and life sciences manufacturers are looking at purchasing new equipment to replace outdated production lines. Nearly half of healthcare manufacturers interviewed “continue to replace legacy equipment and buy new equipment, while two-thirds of participating companies predict spending more on capital equipment in the next two years.”¹²

For example, PCI Pharma Services made two significant announcements: one covering the acquisition of Millmount Healthcare, near Dublin, which before the acquisition opened a new, state-of-the-art high-potent, high-containment packaging facility; and the other announcing significant expansion to its global serialization capabilities.^13,14

UK–based Sharp Packaging Services announced capacity expansion projects in the US and the UK in 2017, announcing the purchase of Daiichi Sankyo’s 146,000 square-foot pharmaceutical packaging facility in Bethlehem, Pennsylvania, for $14 million, including all equipment and employees.¹⁵ Vetter also announced a major expansion of its secondary packaging capacities — in response, said the company, “to rising customer needs and market demands for complex packaging solutions.” The expansion will add approximately 32,000 square feet of new packaging capacity and include new fully-
automated packaging lines, space for manual and semi-automated packaging processes, and assembly equipment for a wide variety of formats.¹⁶

For 2018 and beyond, the prospects for fill/finish and packaging market players will remain robust. The overall demand for drugs and the rise of parental-form biopharmaceuticals/biosimilars ensures the industry will see growth. 

Read Part 1: A New Landscape: M&A in the Discovery & Research Sector   

Read Part 2: What’s Driving M&A Among Pharma Sponsors?

References

1. World Preview 2016, Outlook to 2022. Rep. EvaluatePharma. Sep. 2016. Web.
2. CDMO — 2017 Nice Insight Contract Development and Manufacturing Survey.
3. Phillippe Mougin. “Harnessing CDMO Expertise for Fill-Finish and Inspection of Sterile Pharmaceuticals.” American Pharmaceutical Review. 29 Jul. 2016. Web.
4. Home. (n.d.). Retrieved December 28, 2017, from http://www.cenexi.com/
5. Feliza Mirasol. “CDMO/CMO Expansion in Parenteral Drug Development and Manufacturing.” DCAT Value Chain Insights. 14 Mar. 2017. Web. 
6. Grifols Will Invest USD 360M To Expand Its Manufacturing Capacities for Plasma-Derived Therapies. Grifols. 3 Aug. 2016. Web.
7. Contract Manufacturer Pfizer CentreOne Expands Fill-Finish Services to Its Kalamazoo, Michigan, Facility. Pfizer. 16 Feb. 2017. Web.
8. “Ajinomoto Althea, Inc. Announces New Aseptic Fill Finish Line.” PR Newswire. 24 Aug. 2017. Web.
9. Eric Palmer. “Catalent Doubles Down on Biologics with $950M Deal for Cook Pharmica.” Fierce Pharma. 19 Sep. 2017. Web.
10. Vetter Embarks on a 300 Million Euro Investment Strategy for Further Development to Its Manufacturing Sites. Vetter. 30 Sep. 2015. Web.
11. Pharmaceutical Contract Packaging Market – Global Industry Analysis, Share, Size, Growth, Trends, And Forecast Report 2017 – 2022. BioPharma Dive. 29 Jun. 2017. Web.
12. U.S. Remains Largest Market For Pharmaceuticals and Medical Devices. PMMI. 6 Nov. 2016. Web. 
13. Acquisition of Millmount Healthcare. PCI Services. 2 Oct. 2017. Web.
14. PCI Pharma Services Announces Significant Expansion in Serialization Technology. PCI Services. 8 Mar. 2017. Web.
15. Sharp Packaging Services, a division of UDG Healthcare plc, announces capacity expansion in the US and UK. UDG Healthcare plc. 3 Apr. 2017. Web.
16. Vetter to Expand its Secondary Packaging Service Capacity to Meet Rising Demands. Vetter. 19 Oct. 2017. Web.