Catalent Completes Acquisition of Gene Therapy Leader Paragon Bioservices, Inc. for $1.2 Billion
SOMERSET, N.J. – May 20, 2019 — Catalent, Inc. (NYSE: CTLT), the leading global provider of advanced delivery technologies and development solutions for drugs, biologics and consumer health products, today announced that it has completed the $1.2 billion acquisition of Paragon Bioservices, Inc., a leading viral vector development and manufacturing partner for gene therapies.
With the addition of Paragon’s specialized expertise in adeno-associated virus (AAV) vectors, the most commonly used vector to deliver DNA to cells, Catalent is positioned to capitalize on strong industry tailwinds in the potentially $40 billion addressable market for gene therapies. Paragon also brings to Catalent its unique and differentiated scientific, development, and manufacturing capabilities, which will fundamentally enhance Catalent’s biologics business and end-to-end integrated biopharmaceutical solutions for customers.
Paragon recently announced the opening of its new, state-of-the-art commercial manufacturing center near the Baltimore-Washington International (BWI) airport, which is equipped with several 500-liter and 2,000-liter single-use bioreactors for clinical through commercial material production. The new large-scale production campus – now combined with a recently leased second building which will be built out for commercial GMP manufacturing – has the potential for more than 425,000 square feet of manufacturing space upon completion.
Paragon has GMP manufacturing projects underway with more than half of the top 40 leading gene therapy developers worldwide. Catalent is committed to continuing the resource dedication for Paragon’s customers and maintaining a flexible and reliable development and manufacturing partnership for its clients. The company currently employs over 380 individuals at its two Baltimore-area sites, all of whom will join the existing Catalent team of over 11,000 employees.
In connection with the acquisition of Paragon, Catalent Pharma Solutions, Inc., as borrower, and certain other wholly owned subsidiaries of Catalent entered into an amendment, dated as of May 17, 2019, to its existing credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, to provide for, among other things, $950 million of incremental term loans and a $350 million increase to its revolving credit facility. The proceeds of the incremental term loans were used to fund a portion of the acquisition consideration and for general working capital purposes, to pay fees, costs and expenses incurred in connection with the transactions contemplated hereby, for capital expenditures of Paragon and to prepay a portion of the existing term loans.
Also in connection with the acquisition of Paragon, Catalent completed the issuance of $650 million of a new series of convertible preferred stock to funds affiliated with Leonard Green & Partners, L.P. Effective as of the closing of the acquisition, Peter Zippelius, a partner at Leonard Green & Partners, joined Catalent’s Board of Directors.
ABOUT CATALENT
Catalent is the leading global provider of advanced delivery technologies and development solutions for drugs, biologics and consumer health products. With over 85 years serving the industry, Catalent has proven expertise in bringing more customer products to market faster, enhancing product performance and ensuring reliable clinical and commercial product supply. Catalent employs over 11,000 people, including over 1,800 scientists, at more than 30 facilities across five continents, and in fiscal year 2018 generated approximately $2.5 billion in annual revenue. Catalent is headquartered in Somerset, New Jersey. For more information, visit www.catalent.com.
Catalent Biologics provides advanced technologies and integrated solutions for biologic and biosimilar development and manufacturing, from DNA to fill/finish and commercial supply, through its extensive Biologics network including: Bloomington, Indiana, where the company recently announced a twentieth commercial launch of a fill/finish product, and Madison, Wisconsin, home of Catalent Biologics’ proprietary GPEx® technology for stable, high-yielding mammalian cell lines with eleven approved molecules. For more information on Catalent Biologics, visit www.catalent.com/biologics.
More products. Better treatments. Reliably supplied.™
About Paragon Bioservices, Inc.
Paragon Bioservices, Inc. is an industry-leading, private-equity-backed contract development and manufacturing organization (CDMO) whose focus is the development and manufacturing of cutting-edge biopharmaceuticals. Paragon aims to build strong client partnerships with the world’s best biotech and pharma companies, focusing on transformative technologies, including gene therapies (AAV), next-generation vaccines, oncology immunotherapies (oncolytic viruses), and other complex biologics.
ABOUT LEONARD GREEN & PARTNERS
Leonard Green & Partners, L.P. is a leading private equity investment firm founded in 1989 and based in Los Angeles. The firm partners with experienced management teams and often with founders to invest in market-leading companies. Since inception, LGP has invested in over 90 companies in the form of traditional buyouts, going-private transactions, recapitalizations, growth equity, and selective public equity and debt positions. LGP primarily focuses on companies providing services, including consumer, business, and healthcare services, as well as retail, distribution, and industrials. Select past and current investments include IQVIA, MultiPlan, Aspen Dental, Whole Foods Market, Shake Shack, Activision, and Petco. Its most recent fund, Green Equity Investors VII, L.P., closed in 2016 with $9.6 billion of committed capital. For more information, please visit www.leonardgreen.com.
ABOUT CAMDEN PARTNERS
Camden Partners is a multi-strategy private equity firm based in Baltimore, MD. Founded in 1995, the firm focuses on both growth and seed stage investments. Camden Partners’ growth strategy leverages domain expertise in the technology-enabled business services, healthcare services and education sectors to turn lower middle market companies in these sectors into market leaders. Donald W. Hughes, Partner at Camden Partners, represents Camden’s investment on the Board of Directors of Paragon Bioservices.
ABOUT NEWSPRING HEALTH CAPITAL
NewSpring Health Capital is the dedicated healthcare fund of NewSpring Capital, a private equity firm based in Radnor, PA. NewSpring Health Capital partners with management teams to accelerate the success of differentiated healthcare companies, delivering capital for growth, recapitalizations, and mergers & acquisitions within the segments of technology-enabled services, niche clinical providers and specialty pharmaceuticals. Kapila Ratnam, PhD, a partner at NewSpring Capital, has served on the Board of Directors at Paragon Bioservices since 2014 following NewSpring Health Capital’s investment.
FORWARD-LOOKING STATEMENTS
This press release contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally can be identified by the use of statements that include phrases such as “believe,” “expect,” “anticipate”, “intend”, “estimate”, “plan”, “project”, “foresee”, “likely”, “may”, “will”, “would” or other words or phrases with similar meanings, and include the statements regarding Paragon’s 2019 revenues and its future growth rate, as well as the impact of the transaction on our Adjusted Net Income. Similarly, statements that describe our objectives, plans or goals, including our plans to close our agreement to acquire Paragon, to close on the related financing transactions, and to subsequently deleverage our balance sheet, are, or may be, forward-looking statements. These statements are based on current expectations of future events. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections. Some of the factors that could cause actual results to differ include, but are not limited to, the following: any delay or failure to conclude the acquisition of Paragon Bioservices, Inc. or the related financings on the terms previously agreed or difficulty in integrating the acquisition if closed or realizing on the anticipated business from the acquisition; changes to our business, our industry, or the overall economic climate that limit our ability to obtain the desired deleveraging, general industry conditions and competition; product or other liability risk inherent in the design, development, manufacture and marketing of our offerings; inability to enhance our existing or introduce new technology or services in a timely manner; economic conditions, such as interest rate and currency exchange rate fluctuations; technological advances and patents attained by competitors; and our substantial debt and debt service requirements that restrict our operating and financial flexibility and impose significant interest and financial costs; or difficulty in integrating other acquisitions into our existing business, thereby reducing or eliminating the anticipated benefits of the acquisition. For a more detailed discussion of these and other factors, see the information under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018 filed with the Securities and Exchange Commission. All forward-looking statements in this press release speak only as of the date of this press release or as of the date they are made, and we do not undertake to update any forward-looking statement as a result of new information or future events or developments unless and to the extent required by law.
NON-GAAP FINANCIAL MEASURES
Under our credit agreement, our ability to engage in certain activities, such as incurring certain additional indebtedness, making certain investments and paying certain dividends, is tied to ratios based on Adjusted EBITDA (which is defined as “Consolidated EBITDA” in senior secured credit agreement). Adjusted EBITDA is based on the definitions in our credit agreement, is not defined under U.S. generally accepted accounting principles (GAAP), and is subject to important limitations. Adjusted EBITDA is the covenant compliance measure used in certain covenants under our credit agreement, particularly those governing debt incurrence and restricted payments. Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. In this press release, we have referred to Adjusted Net Income, which we calculate by tax-adjusting our calculation of Adjusted EBITDA after deducting depreciation and amortization. Adjusted Net Income is also not a GAAP measure and may also not be comparable to similarly titled measures of other companies.