Katy Spink, COO & Managing Partner
I was born and bred in California. As an adult, I’ve been working in California’s cell & gene therapy space since long before anyone in their right mind would have used “cell & gene therapy” and “gold” in the same sentence.
I wonder if other former California schoolchildren are predisposed to see our Gold Rush history reflected in the events of our lifetime: the real estate market, the dot-com revolution, and now the exploding field of regenerative medicine. We reference the gold rush with abandon when we see a valuable trend and, if anything’s more notable than how often we use that metaphor, it’s how often the metaphor is right on the money.
The first wave of this particular rush began in late 2017 and early 2018 with the nearly back-to-back announcement of two therapeutic company acquisitions that turned the heads of the investment community in a big way: Gilead/Kite ($11.9B) and Celgene/Juno ($9B). According to the Alliance for Regenerative Medicine’s most recent annual report, from 2017 to 2018 we saw an extraordinary 73% increase in funding ($13.3B, up from $7.5B).
When we get the chance to dig into their 2019 annual report, I anticipate that ARM’s data will back up what we’ve noticed: that big deals from the therapeutics world have begat the beginnings of a similarly massive influx of interest and money into C> tools & tech. [And by the way, those therapeutic deals aren’t coming to an end anytime soon…just look at 2019 with BMS/Celgene ($74B), Roche/Spark ($4.3B), Biogen/Nightstar ($800M), and Novartis/AveXis ($8.7B).]
Think of cell & gene therapy tools & tech as the picks & shovels of the gold rush. They may not have been the sexiest of investments, but the news of the day wouldn’t have been possible without them. They’re…well, the closest to a sure thing that an investor can access, because without the necessary tools, you’re not going to find any new gold. In fact, thinking back to my early years in the industry, the limited availability off-the-shelf tools & tech solutions was a major hindrance to progress.
The 2019 tools & tech splash is everywhere. Off the top of my head and in chronological order, here are a few of the top cell and gene therapy tools & tech M&As in the last twelve months alone:
- Novartis acquires CellforCure in a move to expand its CAR-T manufacturing capabilities (February; financials not disclosed)
- Thermo Fisher Scientific acquires Brammer Bio (March; $1.7B)
- Catalent acquires Paragon Bioservices, Inc. (April; $1.2B)
- EQT acquires a majority interest in Aldevron (July; financials not disclosed)
- Arcline Investment Management acquires a majority interest in Akron Biotechnology (Sept; financials not disclosed)
- MilliporeSigma acquires FloDesign Sonics for their acoustic cell processing platform (Oct; financials not disclosed)
- Sartorius Stedim Biotech acquires Danaher’s Life Science chromatography hardware, resins, and their microcarrier businesses (Oct; $750M)
- Cognate BioServices acquires Cobra Biologics for their plasmid DNA and viral vector services (Nov; financials not disclosed)
Given the predominance of private companies in this list who aren’t required to show us their price tag, we can’t easily get a sense of the valuation at play. What we can get a sense of, though, is the sheer volume of recent M&As. And, given that (to the best of our knowledge) most of these acquired companies were themselves making vast strides at the time of their purchase, I don’t believe we’re looking at a list of distressed assets being sold for parts. I think we’re seeing partnerships that were too valuable to pass up. It’s a pretty solid limb I’m going out on when I say that acquiring cell and gene therapy’s tools & tech is the—very valuable—order of the day.
Something else of particular note as we watch the space mature is the increasing presence of private equity investment. Two of the above deals (Arcline/Akron and EQT/Aldevron) represent direct purchase of majority stakes in C> tools & technology companies by PE investors. Additionally, the funding for the Cognate/Cobra deal was provided by the blue chip private equity firm EW Healthcare Partners…and the examples don’t stop there. In the interest of full disclosure I should remind our readers that Arcline and Dark Horse have a strategic partnership in place…which, by the way, is yet another indicator of the growing interest of PE in the C> tools & tech space. At Dark Horse we often have the luxury of a sneak peek into the future when we consider the trends indicated by our clients’ interests—and lately, that interest has seen a considerable uptick in PE due diligence requests for tools & tech assets.
When we consider that PE will always be drawn to lower risk investments than VC, it’s no surprise that we’re seeing that money directed towards the tools & tech space rather than the ever-riskier therapeutic-specific investments. What is a surprise is how quickly any form of investment in C> became considered enough of a sure thing to entice private equity.
I know what I’ll be keeping an eye on as we move into this century’s roaring twenties: the further heating up of tools/tech/service investments and the resulting yield in life-changing therapies, the likes of which this California schoolchild had previously only dreamt.