Catalent pulls off $1.2B deal for gene therapy CDMO Paragon Bioservices

In the second major buyout of a gene therapy manufacturer in the last three weeks, Catalent snapped up Paragon Bioservices in a $1.2 billion deal.

The all-cash deal with Paragon and private equity investors NewSpring Health Capital and Camden Partners will get Catalent a newly completed commercial-scale manufacturing facility near Baltimore and its 380 employees. Catalent said Paragon’s expertise with adeno-associated virus vectors, plasmids and lentivirus vectors will position Catalent firmly to capture some of the $40 billion gene therapy market. 

"Paragon’s unparalleled expertise in the rapidly growing market of gene therapy manufacturing will be a transformative addition to our business that we believe will accelerate our long-term growth," Catalent CEO John Chiminski said in a statement.

Catalent said it expects Paragon to begin paying for itself immediately with an anticipated $200 million in revenue in 2019. It said nearly 90% of that is already committed in signed contracts.

While that represents only a fraction of Catalent’s near-term business, the Somerset, New Jersey-based CDMO said with the market for oncolytic viruses, CAR-T cell therapies and next-generation vaccines expected to grow at about 25% a year, Paragon’s contribution should outpace the market in the meantime.

The company said Paragon CEO Pete Buzy will continue to oversee the operation, which includes its 380 employees and its 200,000-square-foot GMP gene therapy biomanufacturing facility. The operation near Baltimore is equipped with several 500 L and 2000 L single-use bioreactors for clinical through commercial material production. Paragon last Thursday held a grand opening ceremony for its recently expanded facility.

The deal comes in the midst of a major buildup and build-out of gene therapy manufacturing operations. Just two weeks ago, Catalent competitor Thermo Fisher Scientific announced it is buying Cambridge-based viral vector player Brammer Bio for $1.7 billion. Brammer, which is owned by Ampersand Capital Partners, has manufacturing locations in Massachusetts and Florida along with 600 employees. It is expected to produce $250 million in revenue this year and also expected to outrun the market growth rate. Thermo Fisher says the deal should add about $0.10 per share in the first full year of ownership.

These deals come as Novartis, Gilead Sciences and Spark Therapeutics already have gene therapies approved in the U.S., and several more of the potential cures are wending their way through the development and approval processes. Novartis is looking for a second gene therapy approval soon for its spinal muscular atrophy treatment Zolgensma. Roche has agreed to buy Spark for $4.3 billion as it tries to play catch-up in the field.

Many gene therapy biotechs are committing money to building their own specialized manufacturing facilities while also looking for redundancy from contractors. Swiss CDMO giant Lonza expanded its offerings last year when it opened a 300,000-square-foot facility in the Houston, Texas, suburb of Pearland, which it claims is the largest dedicated cell-and-gene-therapy manufacturing facility in the world.

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