- Catalent announced Monday plans to acquire cell and gene therapy developer Masthercell Global for $315 million in a deal that would further expand the buyer's growing biologics business.
- Masthercell operates a 25,000-square-foot facility in its home town of Gosselies, Belgium, and has an adjacent, commercial-scale plant scheduled to open in fall 2021. The company is carving out a U.S. foothold too, leasing last year a Houston facility outfitted with manufacturing cleanrooms and process development suites.
- The proposed acquisition came alongside Catalent's second quarter earnings report, which showed a 16% net revenue increase year over year. Most of that growth stemmed from the contract manufacturer's biologics segment, which is where the Masthercell business would be tucked into upon completion of the deal.
Acquisitions have worked well for Catalent. Purchases of Cook Pharmica, Juniper Pharmaceuticals and Paragon Bioservices built out the company's biologics, oral drug delivery and specialty drug delivery segments, which in turn led to revenue growth.
Catalent is looking to keep the momentum going with Masthercell and its slate of production centers. The companies expect their deal to close in the third quarter, after which Masthercell's 240 employees will join Catalent's biologics business. That business raked in $225 million over the last three months of 2019, representing an 89% increase year-over-year that more than offset challenges in Catalent's oral and specialty delivery segment.
"Masthercell rounds out our program to be the leader in gene and cell therapy, creating deeper and broader relationships with customers and, like we've seen with Paragon, open up cross-selling opportunities across Catalent's other technology platforms," said CEO John Chiminski on Monday's earnings call.
Like other contract manufacturers, Catalent has been preparing for a cell and gene therapy boom. Acquisitions of AveXis, Spark Therapeutics, Kite Pharma and Juno Therapeutics indicate that big pharma and biotech see this as a promising space. Meanwhile, the Food and Drug Administration envisions that, by 2025, it will be reviewing and approving 10 to 20 cell and gene therapies annually.
Catalent's market research, according to Chiminski, suggests that 65% of cell therapy production is outsourced to third-party manufacturers, as is viral vector production for gene therapy. Though contractors are building out capacity, Chiminski said supply is unlikely to keep pace with demand.
In its earnings presentation, Catalent said it is increasing 2020 capital expenditures from around 11% to 12% of net revenue to around 13% to 14%, mostly due to biologics investments. In particular, the company is directing more money to gene therapy operations. For the second quarter, gene therapy acquisitions were responsible for 56 percentage points of Catalent's biologics revenue growth.
The company now forecasts $2.87 billion to $2.95 billion in 2020 revenue, up from a previous estimate of $2.78 billion to $2.88 billion. Its shares were up 2% to $62.35 apiece in late Monday morning trading.