Specialist
Former executive at Catalent Inc
Agenda
- Detailing the CDMO (contract development and manufacturing organisation) environment surrounding Catalent (NYSE: CTLT), noting significant trends and developments
- Catalent’s competitive positioning in the C> (cell and gene therapy) manufacturing space, highlighting relevant forms of differentiation
- Service offering analysis, discussing mRNA production capabilities and introduction of UpTempo AAV (adeno-associated virus) platform for gene therapy development, alongside portfolio enhancement implications via Catalent’s commercial partnerships
- Catalent’s technological integration into its various solutions and ability to conduct efficient tech transfers across multiple facilities
- 12-18-month growth trajectory for Catalent, highlighting possible headwinds and tailwind scenarios
Questions
1.
Could you give a broad overview of the current CDMO [contract development and manufacturing organisation] operating environment as it pertains to Catalent? What are some of the broader macro dynamics that have moulded the company to being one of the biggest CDMOs today?
2.
News flow from February 2023 outlined Danaher’s interest in purchasing Catalent at a significant premium, which makes sense following Thermo Fisher’s August 2017 acquisition of Patheon. Would this acquisition make sense if it were to potentially go through, especially from a synergistic perspective? The market seems pretty happy about it initially.
3.
To address the elephant in the room, Catalent’s stock dropped 26% on the morning of 14 April 2023, which has been attributed to operational inefficiencies and a large-scale productivity drop. Could you comment on the omnipresent operational challenges Catalent faces that could be the reason for hampering production? Integration has always remained a challenge for the company, as I’ve heard from specialists in previous Forum Interviews.
4.
Every company has gone through some very tough times when it comes to supply chains in the last couple of years. Despite some positives, Catalent hasn’t been able to implement the software programme for supply chain and has witnessed a lag on timelines. Can you elaborate on this? What do you think might be going on and what might have led to that delay in the implementation of the software programme? What could the company improve on the tech side?
5.
You said Catalent has been performing lower than the expectations put forwards mid-2022, obviously not where the company wants to be right now. This has resulted in a significant drop in stock on 14 April 2023, as well as in the past couple of months. What are your expectations for the book-to-bill, and would you expect it to rebound over the subsequent quarters?
6.
You said Catalent wasn’t able to focus on one thing and had to move from one aspect to another and tried to consolidate a little bit too quickly. Has it taken note and slowed down on the consolidation front, perhaps alluding to a possible organisational restructuring?
7.
Alessandro Maselli became Catalent’s CEO in July 2022, and it was announced on 13 April 2023 that the CFO, Thomas Castellano, is going to be departing. Do you believe the company is successful from a strategic perspective given all the leadership changes as it pertains to top- and bottom-line growth? Does it have a sufficient foothold on the manufacturing costs and revenue generation in order to drive near-term profitability?
8.
The main issue is the manufacturing challenges that Catalent has been facing in its three facilities – Bloomington, Harmans and Brussels. What kind of manufacturing challenges could the company be touching on? It’s received a lot of warning letters as well over the past year. Why is it having so many issues?
9.
You said Catalent has expanded a lot during coronavirus and has done really well, but every CDMO has been met with a risk of underutilisation as they overstocked during the pandemic. Did the company significantly overestimate how much material it would need, and has it turned a corner when it comes to underutilisation, finding new ways to utilise spaces or potential sell offs?
10.
How successfully has Catalent integrated technology into its solutions, especially C> [cell and gene therapy]? You mentioned that the company has been successful in keeping up with the new technologies and platforms, especially on the C> side. Could you discuss which these are and your overall view there?
11.
Catalent recently expanded its Up-Tempo AAV [adeno-associated virus] platform to accelerate development of gene therapies. What additional improvement should we be expecting? The addition of the new clonal line could reduce the time of manufacturing significantly. How realistic is this?
12.
Could you frame the competitive landscape for Catalent, highlighting key market players, especially in the C> plasmid and mRNA manufacturing areas? MRNA has been a strength for the company, so how would you position it in this regard, considering a couple of distinctive factors?
13.
How would the potential acquisition of Catalent by Danaher elevate its positioning in the marketplace relative to Thermo, who has similarly made an acquisition?
14.
On the partnership and collaboration front, it was recently announced that Catalent will continue and expand its existing partnership with Moderna, on which you display great positivity, as well as Sarepta. How have these partnerships proven to be beneficial from a synergistic perspective, and how do these contractual dynamics work?
15.
Catalent has taken drastic measures to achieve cost savings, including headcount reduction since Q2 2022. Given that the company doesn’t have as much labour, how significantly has this hampered productivity on the manufacturing side? Is it still facing impactful labour challenges or would you consider them nominal at this point?
16.
Have overall labour challenges eased or have they turned the corner?
17.
If Danaher said it’s going to acquire Catalent at a significant premium price, how much of a premium are we talking about in terms of valuation? Is it going to be extremely expensive? Danaher can afford it given its market size, but when do you think would be the right time?
18.
What is your 6-12-month corporate growth outlook for Catalent, highlighting headwinds and tailwinds and a couple of key takeaways that investors should be looking at?
19.
Is there anything else that you’d like to highlight around Catalent, that we may have missed or that might be important for investors to know?
Gain access to Premium Content
Submit your details to access up to 5 Forum Transcripts or to request a complimentary one week trial.
The information, material and content contained in this transcript (“Content”) is for information purposes only and does not constitute advice of any type or a trade recommendation and should not form the basis of any investment decision.This transcript has been edited by Third Bridge for ease of reading. Third Bridge Group Limited and its affiliates (together “Third Bridge”) make no representation and accept no liability for the Contentor for any errors, omissions or inaccuracies in respect of it. The views of the specialist expressed in the Content are those of the specialist and they are not endorsed by, nor do they represent the opinion of, Third Bridge. Third Bridge reserves all copyright, intellectual and other property rights in the Content. Any modification, reformatting, copying, displaying, distributing, transmitting, publishing, licensing, creating derivative works from, transferring or selling any Content is strictly prohibited
