A potential takeover of Catalent by life sciences giant Danaher could reflect Thermo Fisher’s 2017 buyout of Patheon according to analysts, who value the CDMO at $20+ billion.

Danaher Corporation is eying up a potential bid for contract development and manufacturing organization (CDMO) Catalent, according to people familiar with the matter, Bloomberg reported this weekend.

When contacted, a Catalent spokesperson told us: “As a matter of company policy, the Company does not comment on market rumors or speculation.”

Catalent’s share price jumped 18.3% in pre-market trading this morning in response to the rumor to $56.05, giving the CDMO a market value of around $10 billion.

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The addition of Catalent would bring a full gamut of CDMO services to Danaher, including oral dose, biologics, cell and gene therapy, drug delivery tech services, clinical services, and packaging capabilities.

While still just speculation, the acquisition makes sense for Danaher and the industry as a while, according to analysts at Jefferies, who noted such a deal would resemble that of another life sciences monolith, Thermo Fisher, in its $7.2 billion takeover of Patheon.

“Thermo’s acquisition of Patheon in 2017 prompts investors to think that Danaher might be interested in the same. Patheon was a ~$2 billion rev company that had posted lumpy results. By many measures, that deal has been a success,” analyst David Windley wrote.

He added “average CDMO take-out valuation since that time has been much higher,” with the past 28 deals in the space paying 23.5 times the trailing 12 months EBITDA (earnings before interest, taxes, depreciation and amortization). Excluding five deals in 2020-21 he said were skewed by “a clamor for CGT [cell & gene therapy] assets,” the average has hovered around the 17 times Thermo paid for Patheon.

“That would value Catalent at $20.7 billion and just under $93 per share.”

Vendor/CDMO combo

The concept of life science tools and equipment firms playing in the manufacturing space is not uncommon. Beyond Thermo Fisher (which doubled down on CDMO services post-Patheon with deals including the $1.7 billion Brammer Bio buy), Danaher itself entered the pureplay CDMO space in 2021, paying $9.6 billion for protein production, plasmid DNA, and mRNA services firm Aldevron.

Meanwhile, Merck KGaA – mentioned by Jefferies as another name thrown about in questions from investors as a potential Catalent suitor over the past few weeks – operates CDMO services through its MilliporeSigma life sciences business, and has bolstered the division through investments including the $780 million acquisition of Exelead last year.

The economic prospect of a vendor-manufacturing combination was also a major driver of speculation involving Catalent itself last August, when the CDMO was rumored to have made an unsolicited bid for bioprocess firm Repligen.