Catalent to acquire gene therapy-focused Paragon Bioservices for $1.2 billion

Catalent has agreed to purchase Paragon Bioservices, a viral vector development and manufacturing partner for gene therapies, for $1.2 billion, the companies announced Monday. John Chiminski, chief executive at Catalent, said the acquisition brings the company "a complementary capability that will fundamentally enhance our biologics business and our end-to-end integrated biopharmaceutical solutions." 

According to Catalent, Paragon brings "specialised expertise in adeno-associated virus vectors, the most commonly used delivery system for gene therapy, as well as unique capabilities in GMP plasmids and lentivirus vectors." Moreover, Paragon's capabilities "have positioned it to capitalise on strong industry tailwinds in the potentially $40-billion addressable market for gene therapy," Catalent added.

Following closure of the deal, which is expected in the second quarter, Paragon's operations will continue to be led by current CEO Pete Buzy. Additionally, Paragon's management team and about 380 Paragon employees will join the combined company. 

Catalent indicated that it will fund the purchase using proceeds from a $650-million incremental term loan as well as the issuance of $650 million in new stock. The drugmaker indicated that the leftover funding will support an ongoing expansion of Paragon's facilities in Maryland. 

Catalent said the deal will be accretive to its adjusted net income per share in the second full fiscal year after closing, becoming significantly accretive thereafter. Further, it anticipates more than $200 million in revenue for Paragon in 2019, with almost 90 percent of this amount already reflected in signed contracts. The company also predicted that "for the foreseeable future," Paragon is expected to outpace the estimated sustained medium-term growth rate of 25 percent in the gene-therapy market.

The agreement comes after Catalent acquired Juniper Pharmaceuticals for $11.50 per share last August. Catalent also completed its takeover of biologics manufacturer Cook Pharmica the previous year.

Other recent acquisitions in the gene-therapy space include Roche's deal to purchase Spark Therapeutics for $4.3 billion, while Novartis reached an agreement last year to acquire AveXis for $8.7 billion. 

Separately on Monday, Paragon announced plans to expand its collaboration with Sarepta Therapeutics focused on gene-therapy manufacturing.

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