When EQT acquired a majority interest in Aldevron for $3.4 billion in 2019, the Stockholm investment firm bet on the rapidly growing market for cell and gene therapies, a new category of genetic medicine aimed at treating previously incurable diseases.
Less than two years after acquiring Aldevron, EQT sold it to Danaher for $9.6 billion in 2021. While EQT declined to comment on financial returns, a source familiar with the transaction said the deal represented an IRR of nearly 90 percent and a MOIC of more than 3x.
Headquartered in Fargo, North Dakota, Aldevron manufactures plasmid DNA, which is a material needed to synthesize mRNA therapies and vaccines, including the covid-19 mRNA vaccine.
“High quality plasmids are very difficult to manufacture at scale – there is a lot of custom work, and many of the products that Aldevron manufactures are ‘first of its kind,’” explains Eric Liu, partner and co-head of EQT’s global healthcare sector team. Aldevron co-founders Michael Chambers and John Ballantyne “had been making plasmids since 1998, and they have more expertise and experience in this than anyone else in the world.”
To help transform Aldevron from a niche supplier to a scalable manufacturer, EQT made many significant moves.
With Chambers transitioning to an executive chairman role, EQT recruited Kevin Ballinger, former president of Boston Scientific’s largest division, to serve as Aldevron’s CEO. EQT also broadened the management team with a slew of new hires, including CFO.
EQT also recruited a new board. Sheri McCoy (former CEO of Avon) was appointed as non-executive chairperson; and Chris Coughlin (the former CFO of Tyco and Pharmacia), Jeff Huber (founding CEO of Grail) and John Ballbach (former CEO of VWR) were appointed as directors.
Under EQT’s ownership, Aldevron invested $100 million to build a 189,000-square-foot manufacturing facility in Fargo, North Dakota. The facility, which EQT says is the largest Good Manufacturing Practice-grade plasmid DNA facility in the world, opened in May 2021.
“At the height of covid, many labs were closed, and many gene therapy clinical trials were postponed, which negatively impacted demand. There was a lot of uncertainty around how things would play out. At that point, we had to decide whether to keep investing, or to pull the breaks and preserve cash. We decided to keep going” Eric Liu, EQT
In the same month, Aldevron announced an extended collaboration to support Moderna’s covid-19 vaccine and other mRNA programs in Moderna’s pipeline. Aldevron had been working with Moderna for nearly a decade.
EQT’s strategy yielded impressive results. During the investment firm’s ownership, Aldevron’s revenues increased by 113 percent, EBITDA increased by 88 percent and employee headcount grew from 385 to 658.
While the pandemic opened up possibilities for Aldevron, it also “added significant complexities to execution,” Liu explains. “At the height of covid, many labs were closed, and many gene therapy clinical trials were postponed, which negatively impacted demand,” he says.
“There was a lot of uncertainty around how things would play out. At that point, we had to decide whether to keep investing, or to pull the breaks and preserve cash. We decided to keep going, and that ultimately helped put the company in the strong position that it is in today. We were fortunate to have a world-class board of directors throughout this journey and an excellent partner in TA Associates.”
Liu says that EQT was not actively selling Aldevron, but several strategic buyers reached out to express interest. “At some point, the inbound interest was sufficiently credible and high enough in value that we had to explore it, even though it wasn’t our original intention to sell Aldevron after two years.”
Why was Danaher the right buyer? “Danaher is a market leader in the life sciences space, with significant global scale, and several other operating companies in the sector that are synergistic with Aldevron,” Liu says. “They are fantastic operators and an excellent long-term home for Aldevron. The mission of Aldevron is to deliver life-changing therapies to patients, and as part of a large strategic player with significant resources, Aldevron is well positioned to achieve its mission even more effectively.”
The Aldevron story underscores the importance of thematic investing and of backing market leaders, Liu says. Market leaders “tend to have more margin for error when events like covid-19 occur. Market leaders are also better positioned to attract and retain management talent.”
What’s next for healthcare investments at EQT?
The firm will continue to invest in large-cap healthcare buyouts and is also deepening its commitment to the healthcare sector. On March 1, EQT closed the acquisition of Life Sciences Partners, which Liu describes as “one of the leading life science venture capital firms in Europe,” and launched EQT Life Sciences as a new business line. “This addition further strengthens our industry-leading healthcare franchise and brings a deep scientific knowledge base.”
EQT: The Winning Numbers
Total enterprise value on purchase by EQT in 2019
Increase in revenues
Total enterprise value of sale to Danaher in 2021