Agilent has agreed to acquire Biovectra for $925 million, the companies said today, in a deal intended to expand the buyer’s contract development and manufacturing (CDMO) portfolio to the production of fast-growing modalities that include messenger RNA (mRNA) and gene editing therapeutics.
Headquartered in Charlottetown, Prince Edward Island, Canada, Biovectra serves biotech and pharmaceutical companies in North America and Europe as a manufacturer of biologics, active pharmaceutical ingredients, and other molecules for targeted therapeutics. Biovectra supports early-stage clinical development to large-scale commercial manufacturing.
Agilent said its acquisition of Biovectra will build upon its specialization in oligonucleotides and CRISPR therapeutics by:
- Offering sterile fill-finish services, plasmid DNA (pDNA) and mRNA capabilities, and lipid nanoparticle (LNP) formulation.
- Providing expertise in segments including antibody drug conjugates (ADCs), highly potent active pharmaceutical ingredients (HPAPIs), and glucagon-like peptide-1 (GLP-1) agonists.
- Creating a single source for gene editing technology by combining Biovectra’s capabilities in biologics with Agilent’s expertise in guide RNA (gRNA) development.
Both Biovectra and Agilent are fully integrated CDMOs with facilities that follow current Good Manufacturing Practices (cGMP). Established nearly 55 years ago, Biovectra operates cGMP facilities located in Nova Scotia and Prince Edward Island.
In Prince Edward Island, Biovectra last November completed a $90 million expansion that entailed construction of a 36,000-square-foot facility specializing in mRNA, pDNA, and LNP formulation. Biovectra said at the time that it had increased vaccine and therapeutic production capacity by 160 million doses per year, and fill/finish capacity by 70 million doses per year. Last year, the governments of Canada and Prince Edward Island announced plans to spend $50 million to create a BioAccelerator, a 75,000 square-foot biomanufacturing facility located in the BioCommons Research Park in Charlottetown.
“We look forward to welcoming Biovectra to Agilent. The company has an outstanding record of innovation, and its employees share our commitment to providing integrated biopharma solutions that continuously deliver more value to customers,” Agilent President and CEO Padraig McDonnell said in a statement. “Biovectra’s manufacturing capabilities further expand Agilent’s end-to-end biopharma offerings into new growth vectors, including workflows that seamlessly integrate analytical instrumentation, consumables, and a wide range of lab services.”
Publicly traded Agilent has projected that its acquisition of Biovectra will lower non-GAAP earnings per share (EPS) by $0.05 in the first full year after closing.
Mixed Feelings
But investors did not appear enthusiastic about the deal. Agilent shares rose 0.5% to $132.49 as of 2:05 p.m. from Friday’s close of $131.78.
“We are mixed on [the] proposed deal,” Tycho Peterson, an equity analyst with Jefferies, commented today in a research note. “We are not surprised to see that reaction to the deal is lukewarm (stock flat), given A[gilent]’s mixed track record around services.”
Peterson cited Agilent’s acquisition of Resolution Biosciences for up to $695 million ($550 million upfront) in 2021, only to sell it two years later to Exact Sciences for an undisclosed price. The Jefferies analyst also cited skepticism among investors about Agilent’s doubling down on the specialized CDMO business reflected in the Biovectra deal plus an earlier $725 million doubling of its manufacturing capacity of therapeutic nucleic acids, in response to rapid growth of a market estimated at $1 billion, plus what it called strong demand for the company’s APIs.
That skepticism, Peterson explained, followed Agilent cutting its guidance to investors after the first and second quarters of its current fiscal year, which ends October 31. Most recently in May, Agilent lowered its full-year revenue outlook to between $6.42 billion to $6.5 billion, down 4.3% to 4.6% from between $6.71 billion to $6.81 billion. Agilent also lowered its fiscal year 2024 non-GAAP earnings guidance to between $5.15 and $5.25 per share, down 5.3% to 5.4% from $5.44 to $5.55 per share.
“The deal would help build additional scale to the existing NASD [Nucleic Acid Solutions Division] business, and looks to be a logical fit following recent comments [by Agilent executives] at our healthcare conference about an active funnel and desire to expand both up and downstream,” Peterson observed.
However, Agilent is paying full price—seven times revenues, 30 to 35 times earnings before interest taxes, depreciation and amortization (EBITDA) compared with other CDMO acquisitions since 2019, which on average were valued at about 21 times EBITDA. Agilent is also paying full price compared with other deals for tools companies, which during the period averaged about seven times revenues and about 26 times EBITDA.
And while Danaher exceeded that average when it expanded its CDMO operations by acquiring Aldevron for $9 billion, Aldevron commands margins twice as large as those of Biovectra, according to Peterson.
Ratcheting Up Competition
“We also see the deal as ratcheting up the competition with DHR [Danaher],” Peterson added, citing Danaher’s expanding focus in recent years on mRNA services, on LNPs (it acquired Precision NanoSystems in 2021, folding it into Cytiva), and on oligo manufacturing capacity. In October 2023, Danaher’s Integrated DNA Technologies (IDT) opened its first therapeutic oligonucleotide manufacturing facility in Coralville, IA.
Privately held Biovectra generated $113 million in revenue last year and said it expected “double-digit” revenue growth in 2024.
Agilent said it will fund the transaction using a mix of debt financing and cash on hand. Agilent reported cash and cash equivalents of $1.671 billion as of April 30, the end of the company’s second fiscal quarter
The transaction is subject to customary closing conditions, including receipt of regulatory approvals, and is expected to close by the end of this year.
Upon completion of the deal, Biovectra will become part of the Agilent Diagnostics and Genomics Group. Diagnostics and Genomics consists of six areas of activity providing APIs for oligo-based therapeutics as well as solutions that include reagents, instruments, software and consumables designed to enable clinical and life sciences research customers to interrogate samples at the cellular and molecular level.
“Biovectra is excited to join Agilent, a company whose dedication to people and customers is very much aligned with ours,” Biovectra CEO Oliver Technow stated. “Biovectra has dedicated nearly 55 years to the relentless pursuit of helping our customers solve complex problems that improve patients’ lives. This synergistic pairing of our capabilities with Agilent’s will further enhance the value we can offer to our customers.”
