- Active pharmaceutical ingredient maker Cambrex announced Monday that it will pay $425 million to acquire contract development and manufacturing organization Halo Pharma.
- The deal gives Cambrex an entrance into the CDMO market, particularly in contracting for development of dosage forms. Halo specializes in oral solids, liquids, creams, sterile and non-sterile ointments.
- Cambrex is funding the transaction through a mix of cash and borrowings against its $500 million senior credit facility. Halo is majority owned by funds held by SK Capital Partners. The deal is expected to close in the third quarter.
The nearly half-a-billion-dollar deal gives Cambrex access to a wealth of expertise under the Halo umbrella, particularly in specialized dosage forms. These types of offerings tend to be handled by only a small number of manufacturers because of their complexity.
Cambrex also picks up Halo's two manufacturing plants in Whippany, New Jersey, and Montreal, Canada. The two plants amount to 430,000 square feet of plant space. Halo is currently working on 100 different product development projects and expects to bring in $100 million in 2018. Its 450 employees will become part of the Cambrex team.
"This acquisition opens a completely new segment of the market for Cambrex in finished dose development and manufacturing," said Cambrex CEO Steve Kiosk, in a statement. "We believe the combination of Cambrex and Halo will attract new customers to the combined company and allow us to more efficiently broaden our pipeline of products, while continuing to capitalize on the rapidly-growing pharmaceutical services market."
The pharma services industry has become a more integral part of the pharma value chain as big and small drugmakers alike rely on third party contractors to augment their own internal manufacturing and supply chains. While contract manufacturing services were once seen as niche, turning to CMOs and CDMOs has become a way for pharma and biotechs to curb some of the high costs associated with manufacturing.
According to a report from EY, the CDMO market was worth $62 billion in 2016, and growing at a rate of 6% to 7% annually, outpacing the broader pharma sector.
At the same time, the CDMO market has consolidated as smaller players are bought up by larger organizations looking to gain expertise in niche areas. Some of the biggest deals have included Lonza's $5.5 billion buy of Capsugel, and Thermo Fisher Scientific's $7.2 billion buy of Patheon.