The broad scope of the pharmaceutical manufacturing landscape is making merger and acquisition activity in the sector ever more complex with several varying factors driving decisions, according to a recent CPhI Webinar sponsored by PharmaVentures.

In the webinar, ‘How is M&A Shifting the Pharma Manufacturing Landscape?’ delegates heard that these factors include regulatory, emerging technologies including specialist manufacturing, ownership of and access to intellectual property, cost, productivity and skills and geography.

Opening the session, Fintan Walton, CEO and Founder, PharmaVentures said the current manufacturing sector consisted of established pharma companies doing their own in-house manufacturing, pharma firms with CDMO operations such as Boehringer Ingelheim, pure CDMO players such as Lonza and Catalent, and traditional diversified service contractors such as Thermo Fisher.

“And then we have new ideas appearing in our sector where we have a company like CSL entering a relationship with Thermo Fisher where they lease the manufacturing facility in Switzerland and will have the ability to do manufacturing on behalf of CSL but can also bring in their own contracted services,” he added.

He told the audience that M&A itself is driving the shape of the manufacturing landscape through a variety of different types of deals.

He said established pharma firms were buying similar companies, giving the example of BMS’ acquisition of Celgene and Abbvie’s purchase of Allergan, while CDMOs were buying manufacturing operations or other CDMOs.

“And then we have non-CDMOs buying CDMOs and entering the field, such as Thermo Fisher – it’s a very active field,” he said.

When asked what the motivation was for a Big Pharma company to sell manufacturing infrastructure rather than just retain it, John FitzGerald, Senior Director, Business Development & Acquisitions, AbbVie drew on his company’s recent acquisition of Allergan as an example.

“When you buy a company as big as Allergen, there’s going to be some pieces that probably don’t fit with your current and mid-term strategy and so what you try to do is get some value from that because typically there are targets you need to hit from a business perspective such as cost savings,” he said. “We looked at where we were right now and where we were going to be in the future and one of the things that was important to us was finding a home for one of the new sites we had acquired and from a people perspective you want to try to ensure that they retain their jobs at the company.”

He added that in the roughly ten-month process of selling Allergan Biologics’ 150-staff biomanufacturing site to CDMO Pharmaron, AbbVie had developed a good relationship with the buyer “and actually we’d used Pharmaron from the CDMO perspective to begin with” but said this was not a driving consideration of the strategic decision to sell.

“We were not only looking as CDMOs [as buyers] but also at strategics and financials such as private equity companies that would make the best fit and continue on with the operations,” he added.

William Marth, Managing Partner at North Ocean Ventures said that one of the biggest concerns for CDMOs when buying a manufacturing facility from a large pharmaceutical company was having to take on an operating system serving a variety of clients rather than just one.

“Therefore, getting that culture to understand this challenge and adapt very quickly is important,” he said. “The other issue today is buying an existing CDMO itself, the multiples are so high because the demand is so hot that it can’t be done so you essentially have to look for these pieces from pharma companies or other players to put together your own CDMO to offer the right capabilities that Pharma would like to use.”

The webinar also features Andreas Raabe, Managing Partner & Founder, Adragos Pharma, Jansen Jacob, Vice President, PharmaVentures and Ozgur Akbulut, Director - Global Divestments and Contract Manufacturing Lead, Takeda.