Smart CRO and CMO executives are using the strong current market environment as an opportunity to establish a solid long-term
base for their companies. They are investing in business strategies and capabilities that distinguish them from the pack and
will position their companies for success even if financial support for early-stage companies declines. They want to make
sure they create their own luck in the future.
Jubilant buys Hollister-Stier
The big news at this year's Interphex trade show in New York was the sale of contract injectable manufacturer Hollister-Stier, Inc. (Spokane, Washington) to the India-based Jubilant Organosys (Uttar Pradesh, India,). The sale itself wasn't a surprise—Hollister-Stier was owned by a private equity firm and was often
the subject of buyout rumors—but the price and the buyer both raised eyebrows.
Jubilant is paying $138.5 million for Hollister-Stier, representing a multiple of nearly 13 times Hollister-Stier's profits
before interest, taxes and depreciation (EBITDA). That multiple is 30% greater than that paid by the Blackstone Group when
it bought Cardinal Health's Pharmaceutical Technologies and Services business earlier this year. Large multiples are not unusual
for platform acquisitions, i.e., companies that provide a base from which to build a larger enterprise through additional acquisitions, but they are unusual
for niche businesses like Hollister-Stier.
No doubt Jubilant justified its bid on the prospects for Hollister-Stier's injectable CMO business. Contract manufacturing
revenue accounted for just $33 million of the company's $55 million total sales (allergy products accounted for the remainder),
but the CMO business grew 33% in 2006 and is expected to accelerate when the company completes installation and validation
of a new high-speed filling line and more lyophilization capacity.
The emergence of Jubilant Organosys as the buyer also was a surprise, because there was a presumption in the industry that
an Indian company would not pay for a premium property. Indian chemical and dose manufacturers have been active acquirers
of businesses in Europe and North America in recent years, but generally these acquisitions have been somewhat distressed
operations that most investors have shied away from. Examples include the acquisition of Pfizer's (New York, NY) Morpeth, UK, manufacturing site by Nicolas Piramal, and the acquisition of API manufacturers Carbogen and Amcis (Bubendorf, Switzerland) from Solutia, Inc. (St Louis, MO) by Dishman Pharmaceuticals and Chemicals (Gujarat, India).
However, Jubilant has been aggressive about establishing itself in the contract services space. It acquired US-based clinical
CRO Target Research Associates, now known as Clinsys Clinical Research, Inc. (Berkeley Heights, NJ) in 2005, and signed a major discovery deal with Eli Lilly in 2006. Its Pharmaceutical and Life Science Products group, which
includes contract services and generic API manufacturing, had sales of $232 million in its fiscal year, which ended March
The acquisition market for contract services opportunities is characterized right now by many willing buyers but few willing
sellers, meaning competition should drive up company valuations. The Hollister-Stier/Jubilant deal suggests that private equity
companies won't have the opportunities all to themselves.
Jim Miller is president of pharmsource information services, inc., and publisher of bio/pharmaceutical outsourcing report, tel. 703.383.4903, fax 703.383.4905, firstname.lastname@example.org
Company Web sites
The following is a list of Web sites for the companies mentioned in this column:
Dishman Pharmaceuticals and Chemicals,