API Manufacturer Due Diligence

On behalf of a private equity client assessing an investment in a contract fine chemical manufacturer, Health Advances forecasted the leading end markets for the CMO’s active pharmaceutical ingredients (API) and provided a competitive assessment of market positioning and customer perceptions.

Situation

  • Health Advances’ client was interested in investing in a contract manufacturer of API.
  • The target CMO was well-established as a niche player with a history of manufacturing specialized fine chemicals and active pharmaceutical ingredients (API).
  • The client was particularly interested in realistic market forecasts of four major drugs in development containing API manufactured by the target company.

Critical Questions to Address

  • Which patient segments are candidates for receiving these drugs once approved?
  • How is the competitive landscape for each of these drugs going to change over the next 5 years? Will alternatives become generic and therefore much lower priced? Will other drugs be approved?
  • How will PBMs decide which of these drugs to include in their formularies and on which tier to place each drug in the formulary?
  • How will physicians segment their patients to determine who will receive prescriptions for their drugs? Prevalent patients and/or newly diagnosed patients?
  • What are the macro trends impacting the API industry? What is the role of future imports?

Health Advances Approach

  • Extensively researched drug pipelines for targeted drugs and studied analogous drugs to understand historic adoption rates of analogous drugs.
  • Completed an extensive set of in-depth interviews with both Key Opinion Leaders and mainstream physicians across three clinical specialties to determine prescribing practices, data required to prescribe a drug, and what they perceive to be the competing drugs on the market.
  • Developed a 10-year US revenue forecast for each of the four selected drugs.

Results

  • Health Advances forecasted that the target company would become profitable in three years with a number of growth opportunities that the client could capitalize on in the future.
  • Following favorable forecasts, Health Advances also evaluated the target’s competitors, relative position in the marketplace, and sector dynamics, and provided confirmation of the CMO’s track record and relationships with OEMs to aid the investor in the final stages of decision-making on this contract manufacturing investment.