Earlier in November, Chicago-based Vistria Group and London-based Global Healthcare Opportunities Capital Partners teamed up to acquire a controlling interest in Alcami, a pharmaceutical contract development and manufacturing organization based in Wilmington, North Carolina, from Madison Dearborn Partners and Ampersand Capital Partners. The deal for undisclosed terms is expected to be completed by year’s end.
To learn more about the deal and how it was forged during a time when buyers and sellers may have different expectations on valuations, PE Hub spoke with Jon Maschmeyer, senior partner and co-head of healthcare at Vistria, and Mike Mortimer, founder and managing partner of GHO.
“Through its three business segments – manufacturing, labs and bio storage – Alcami serves as a one-stop shop for the pharma industry, ultimately relieving the strain on the production of transformative medicines,” Maschmeyer explained.
Under its previous PE ownership, Alcami spent $140 million to expand manufacturing capabilities and lab space and acquired TriPharm and MasyBioServices.
Now, Alcami is “well-positioned for accelerated growth due to the recent capital expenditures spent wisely under the direction of a very seasoned management team and the diversification into the attractive bio storage sector via acquisition in 2021,” Maschmeyer said.
Maschmeyer cited many reasons why Vistria is attracted to pharma CDMOs, including: “an increased prevalence by pharmaceutical companies to outsource this function, especially in a recessionary environment; persistent R&D spend by pharma and biotech that tends to be recession-resistant; increased preference to onshore critical manufacturing segments; and capacity constraints in the sterile injectables space where Alcami thrives.”
Alcami is midway through an aggressive organic growth initiative that Maschmeyer anticipates will provide “significant embedded growth” in the first few years of investment.
“Due to the global nature of pharmaceutical R&D and the sector expertise of our European partner GHO Capital, we expect to evaluate acquisitions down the road, with Europe as a potential priority,” said Maschmeyer.
GHO’s game plan
From the GHO perspective, Alcami represents a unique opportunity to invest in a rapidly growing CDMO with complementary capabilities in attractive markets.
“The company is set to accelerate its growth and leveraging our specialist expertise,” Mortimer said. “We are delighted to be supporting them to diversify product and service mix, also pushing into new markets such as Europe.”
Mortimer continued: “As knowledge of disease pathways and ability to harness science become more advanced and complex, there is an increasing need for innovative enablers of therapeutic development. Furthermore, as biotech and larger pharmaceutical companies continue to outsource these drug development services to better control costs and increase efficiency, the CDMO sector has seen outsized growth compared to other segments. At GHO, we see investment in the space as one way to achieve our goal of supporting better, faster, and more accessible healthcare globally.”
He added there are some specific plans in place already.
“The plan is to integrate capabilities across three rapidly growing market segments: drug product manufacturing, lab services and bio storage, and it will give us the ability to service clients across the drug development lifecycle, from pre-clinical through commercial launch.”
GHO has a successful track record of working with other firms – as the London-based firm’s prior investments in Envision Pharma Group, BioAgilytix, Roslin Cell Therapies and Biocare have all seen other private equity managers look to partner with the specialist healthcare firm.
“Partnership and alignment are key pillars of GHO’s investment strategy,” Mortimer said. “We believe that collaborating with leading teams drives superior investment returns.”
As times are tough economically, firms seem to be teaming up on deals more often these days.
“We do see that in a challenging market, where there is increased macro uncertainty, there is a flight to quality,” explained Mortimer. “There is increased interest in stable, high-growth healthcare investments, and that can lead to partnering opportunities. GHO has built a reputation as a reference partner to management teams of healthcare businesses looking to accelerate growth and particularly where that growth is transatlantic – by that we mean taking European businesses to North America and bringing North American businesses to Europe.”
So how exactly was the dealmaking process in today’s environment?
“To achieve this sort of deal requires significant work on all fronts that’s driven by conviction and an impact-oriented thesis,” said Vistria’s Maschmeyer. “On the due diligence side, we worked tirelessly to leave no room for error but most important was the relationship factor. Debt capital markets are difficult, so leaning on our established relationships, strong reputation and meaningful engagement between the buyer and seller became vital to achieve this deal.”
From the other side of the Atlantic, GHO’s Mortimer noted that shared vision was key and kept the focus on gaining agreement on key terms and required diligence.
“The GHO and Vistria teams worked collaboratively with [Madison Dearborn] to work out terms agreeable to all parties.” said Mortimer. “At GHO, we have made a number of investments in this space. Our diligence process leverages our prior experience. We do a significant amount of thematic work in subsectors we find attractive, enabling us to be well ahead of the curve when investment opportunities arise in our sweet-spot.”
He added that partnership and alignment are key pillars of GHO’s investment strategy.
“We believe that collaborating with leading teams drives superior investment returns,” he said. “Often for us that means working with founders and great management teams and in this circumstance we were pleased to also bring in Vistria to work alongside us with a common vision to build a global leader in the CDMO space.”
It also helps that healthcare is somewhat insulated from macro and micro challenges.
“We maintain consistency of approach and a thorough process through changing macro backdrops – investing in healthcare is stable through economic cycles,” Mortimer said. “It’s not a secret that debt markets are more challenging at the moment – it’s a testament to Alcami’s quality that the transaction was well supported.”