The Swiss pharmaceutical services firm Lonza has agreed to acquire Capsugel, a specialist in oral drug delivery technologies, from the private equity firm KKR for $5.5 billion. The deal follows others in which drug chemical manufacturers have added services such as final dosage formulation to create what has been dubbed a contract development and manufacturing organization, or CDMO.
KKR acquired Capsugel from Pfizer five years ago for $2.4 billion. The company markets a variety of drug delivery technologies, including liquid formulation, but more than 80% of its sales are of hard gelatin capsules. Capsugel has acquired several smaller firms in an effort to broaden its services.
Lonza, a leader in pharmaceutical chemicals and pioneer in contract biologics manufacturing, says that Capsugel will enhance its bioavailability technology expertise and bring it close to the end consumer, or patient. The deal “accelerates our health care continuum strategy by giving us broader exposure to the fast-growing pharma and consumer health care markets,” says CEO Richard Ridinger.
Capsugel’s roughly $1 billion in annual sales will increase Lonza’s sales to about $4.6 billion.
A similar CDMO-forming deal was the 2014 combination of final-dose formulation firm Patheon with DSM’s pharmaceutical chemicals business. Lonza had attempted to lead the CDMO trend with a pass at Patheon in 2009. But the deal failed, and industry watchers criticized it as an ill-fated attempt to combine disparate businesses.
Times have changed. “It seems like we have a major addition to competitors to companies like Patheon,” says James Bruno, president of the consulting firm Chemical & Pharmaceutical Solutions. He says he will be watching to see how the deal impacts Lonza’s biologics business.
Separately, Lonza is selling its peptide business to PolyPeptide Laboratories for an undisclosed sum. Lonza bought the Belgium-based operation from UCB 10 years ago but says it now views peptides as a niche business having only limited synergies with its predominantly small-molecule technologies.