Investment Opportunities in Pharma: A Data-Driven Exploration of CDMO Appeal
|The report discusses the current state of the contract development and manufacturing organization (CDMO) market within the pharmaceutical industry, emphasizing the increased interest from private equity (PE) investors.
The pharmaceutical industry has shown consistent growth, driven by factors such as an aging population and rising incomes. This has led to a surge in demand for specialized development and manufacturing expertise, prompting pharmaceutical companies to turn to strategic outsourcing, particularly in the CDMO sector.
Lincoln International and ramarketing’s co-authored report explores recent trends, growth drivers, factors powering PE interest and sale positioning tips for CDMOs.
- Click here to download a printable version of this perspective.
- Sign up to receive Lincoln's perspectives
The trends in the pharmaceutical outsourcing space highlight the growing demand for external providers due to the increasing complexity of drug development, especially in areas like biologics and cell and gene therapies. The COVID-19 pandemic has further accelerated the reliance on external resources for drug discovery and development. Challenges, such as excess capacity and reduced biotech funding, have impacted CDMOs, but trust, transparency and high-quality service remain crucial for maintaining strong relationships with clients.
The report also delves into market drivers accelerating CDMO growth, including partnerships, bioprocessing excellence, research and development (R&D) laboratory infrastructure, sustainability, digitalization, supply chain resilience and regulatory compliance expertise. The analysis of mergers and acquisitions (M&A) trends in the CDMO space reveals a recent slowdown in transactions and values, but the overall 10-year trend indicates sustained interest and private capital inflow. PE transactions represent close to 80% of all M&A activity in the last three years, with a majority of cross-border deals.
From 2017 to early 2021, the biopharma CDMO index experienced substantial growth, surpassing the Standard and Poor’s (S&P) 500 due to increased demand and capacity shortages. However, from 2021 onwards, CDMO multiples fluctuated and decreased. Despite this, the mean EV / EBITDA and EV / Revenue multiples from January 2019 to August 2023 were 19.8X and 3.7X, respectively, still representing a 30-40% increase over the S&P 500 multiples during the same period.
Factors driving PE interest in CDMOs include product class differentiation, strategic portfolio growth, efficiency, digitization, development and manufacturing capabilities and global footprint and accreditation. The report also provides insights into how CDMOs can adopt branding and messaging strategies to position themselves as attractive PE targets.
In conclusion, despite recent challenges such as the “COVID-19 cliff,” CDMOs are well-positioned to contribute to the evolving pharmaceutical landscape. PE interest underscores the attractiveness of CDMOs as investment opportunities, and the report anticipates a positive outlook for the industry, aligning with the broader trends in pharmaceutical outsourcing.
The report is a collaborative effort between ramarketing and Lincoln International, highlighting their expertise in life science marketing and investment banking advisory, respectively.
Please complete the form below to request a copy of this report.
By submitting this request, you permit us to also share your contact information with ramarketing.
Meet Professionals with Complementary Expertise in Healthcare
I enjoy working closely with clients to overcome challenging situations and to develop strategies to meet their business goals.
Managing Director | European Co-head HealthcareFrankfurt
Related Perspectives in Healthcare
What Price is Right? Trends and Opportunities for Private Equity in Pharma Market Access
The cost of developing new drugs is staggering. Among the top 20 global biopharmas, the average cost of developing a candidate from discovery through clinical trials to market was approximately… Read More
Scrip Asks…What Does 2024 Hold for Biopharma?
James West, Managing Director in Lincoln’s Healthcare Group, recently discussed his expectations for the biopharma market in 2024 as part of Scrip’s series. Part One – Business Strategy and Leadership… Read More
HealthInvestor | CMA Launches Review of Vet Sector
Originally posted by HealthInvestor on September 7, 2023. The Competition and Markets Authority (CMA) has begun reviewing UK veterinary services to uncover how well the market is working for pet… Read More
Recent Transactions in Healthcare
Lincoln International advised Aquiline Capital Partners on the acquisition of Health Prime from GPB Capital Holdings
Lincoln International advised Talisman Capital Partners on the sale of ADVOCATE RCM to Ventra Health, a portfolio company of Varsity Healthcare Partners
Lincoln International advised Mars on the sale of Diamond Animal Health to Veterinary Pharmaceutical Solutions, a portfolio company of Granite Creek Capital Partners
Lincoln International advised 7Mind on its sale to Gymondo, a portfolio company of Oakley Capital
Lincoln International advised Olive AI on the sale of substantially all of its assets to Waystar and Humata Health
Lincoln International advised EQT on the acquisition of a controlling stake in Indira IVF from TA Associates and promoter family
Lincoln International advised Scantox Group, a portfolio company of Impilo, on its acquisition of QPS Austria’s Neuropharmacology Division
Lincoln International advised Seven Hills Capital on raising capital for Reliable Medical