Press Room
Learning From History: For CMOs the Cycle is Back
Guy Villax, November 10, 2017
What is happening to the CMO industry (particularly the pharmaceutical fine chemical industry) looks pretty similar to what it did almost 20 years ago.听The attached 13 articles written between 1998 and 2005 -half of which were written by me- recount a well-known story:听exuberance and over-investment results in write-offs and losses.听What happened then was crystal clear to me when in 1998 someone came with a large cheque book convinced that a $500m API business could be built in 3-5 years.听Shortly thereafter a well-known Deutsche Bank analyst鈥檚 report made sure the herd mentality took over.听By 2005 most of the $15bn or so spent in M&A deals were mostly written off and a number of wonderful brands and several major companies had vanished.
It is interesting to note that at the time that some entered the CMO business Honeywell was exiting and said:听鈥...pharmaceutical chemical manufacture is a highly capital intensive business plagued by over-capacity,听clinical trial failures, limited new drug approvals, new drug marketing disappointments, and price wars鈥︹澨
Maybe there is an opportunity to learn from history.听The challenge today is to check whether what looks the same is indeed the same, and whether what is really different can contribute to a different outcome.听What remains to be seen is whether outsiders understand what they are getting into, and one thing is certain: when the dust settles you will have the usual suspects picking up the pieces.
If anything we should be concerned because as of today over $33bn have already been spent in CMO related M&A activity in the last 4 years 鈥 in exactly the same pattern as in 1995-7, 1998-2000.
Yours,
Guy
| # | 罢颈迟濒别听 | Type | Author | Date |
|---|---|---|---|---|
| 1 | The API Solution Provider | article | Guy Villax | 1998 |
| 2 | Aggressive goals - $500m in 3-5 years | ppt | Solutia | 1998 |
| 3 | Deutsche Bank analyst's report on CMO | article | DB | 1999 |
| 4 | 四色AV in the CPHI show daily 2001 | article | Guy Villax | 2001 |
| 5 | Pharma Fine Chemicals - Nothing has changed! | article | Guy Villax | 2002 |
| 6 | Outsourcing: The dust has now settled听 | article | Guy Villax | 2002 |
| 7 | European producers face unique issues | article | Maureen Rouhi | 2005 |
| 8 | Why Fine Chemical Business Development has failed听 | ppt | Peter Pollak | 2005 |
| 9 | GMP fraud - largest ever penalties in criminal pharma听 | web | 2005 | |
| 10 | Clients, competitors and Consultants听 | ppt | Guy Villax | 2005 |
| 11 | Fine Chemicals Revisited听 | article | Guy Villax | 2005 |
| 12 | 5 years after its buying spree鈥听 | article | Clay Boswell | 2005 |
| 13 | The Gold Sheet听 | article听 | Bill Paulson听 | 2006 |
View the full set of documents听(PDF, 8MB)
听
Guy Villax
四色AV
+351 917 888 899
