Strong M&A outlook for mid-market pharma

Tom Cowap

Published January 2017

The dynamics highlighted by this year’s Catalyst Pharma Fast 50 show that the sector is prime for further acquisitions and private equity investment.

The strong market fundamentals and changing pressures on the pharmaceutical industry worldwide, are driving exceptional growth rates in mid-market pharma – with the highest ranking members of this year’s report growing as fast as 75% a year.

An ageing population putting increasing demands on all aspects of healthcare systems and an industry largely immune from macroeconomic cycles makes this a particularly interesting area in which to invest for private equity. Similarly, companies growing at these rates naturally drives acquisition activity in order to compete and keep the scale needed to service a fast growing client base.

A number of the Pharma 50 have recently seen PE investment. Quotient Clinical, which enables customers to improve research and development productivity whilst also accelerating drug development timelines via their differentiated service proposition, were backed by GHO Capital partners in December 2015. LGC life sciences, the global measurement and testing company for life sciences, took investment from KKR in late 2015/early 2016. LGC is testimony to the success of acquisitions in the space – having made 12 acquisitions while under Bridgepoint ownership to grow revenue by almost £100m over five years before its purchase by KKR. Then in late 2016, while we were pulling the Pharma Fast 50 together, HG Capital invested in Evaluate group, a provider of mission critical commercial information for complex business decisions to the pharmaceutical industry. And it’s not just companies in the Pharma 50 that have seen acquisition activity. Only this month LDC has announced it’s backed the management buyout of Fishawack group – the specialist provider of scientific communications services to global pharmaceutical companies. This spate of PE investments is likely to drive further acquisitions in the space – LDC has already announced its commitment of further equity to accelerate Fishawack’s growth via potential acquisitions and the French drug-maker Etypharma has signed an agreement this month to purchase Martindale Pharmaceuticals, the UK specialist provider of medicines in the field of opioid addiction, emergency care and sterile injectables.

With continuing growth, strong fundamentals not set to cease, and low interest rates continuing to make acquisitions cheap this trend is only set to continue, and we expect the businesses in The Catalyst Pharma Fast 50 will have their choice of suitors for investment and acquisitions. To see more on those companies and the sector read our report here.

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Tom Cowap
T: +44 (0) 20 7246 0512
E: tomcowap@catalystcf.co.uk