The contract development and manufacturing organisation (CDMO) reported its first quarter fiscal year 2017 this week and during a conference call with investors CEO John Chiminski spoke about the increasing standards being demanded by regulators.
“The overall regulatory environment continues to strengthen, meaning that not only has the [US]FDA taken up their game, but certainly a lot of the other regulators around the world have taken up their game,” he said.
“It's just kind of ongoing and sustained with, I would say, generally better regulatory audits, and I'm just basing that upon my 30 years in the industry in terms of how many auditors they bring, how long they stay and what ultimately are things that they observe and have findings on.”
As such, Chiminski said regulatory costs and burdens will only continue increasing, leading to “fewer, bigger, better suppliers” in the “highly capital intensive” CDMO space.
“[For] the smaller players, it becomes more challenging for them to continue to compete and invest,” he continued, “so it does provide, I would say, some competitive barriers to entry or ultimately to success.”
The sector itself has been deemed ripe for consolidation, with Patheon’s $2.65bn merger with DSM being the largest over the past few years. And Catalent itself has also been growing through M&A, adding niche services such as bioavailability tech provider Pharmatek in September.
“So from a Catalent perspective, I would say we're continuing to invest in both our operations and quality,” Chiminski continued. “And I think that's just going to continue along the path that's been going on for the last five to seven years.”
For the first quarter, Catalent reported net sales of $442m, up 5% on the same period last year. Net earnings dropped to $4.6m, from $11.9m in Q1 FY16.