At CDMO Live 2025 a panel of M&A advisors and consultants explored how private equity investment has transformed the contract manufacturing sector, whilst examining current challenges from geopolitical uncertainty to market volatility.
The session, sponsored by TH Healthcare & Life Sciences, featured chair Kurt Nielsen (Managing Partner, Longview Leader LLC), Dierk Beyer (Managing Director, Raymond James), Asif Shahinsha (Executive Director, TH Healthcare & Life Sciences), and Vishnu Dwadasi (Director Life Sciences, West Monroe).
Listen to the full panel on the PharmaSource podcast
From Carve-out Fever to Strategic Platforms
The CDMO industry’s evolution from simple pharma asset carve-outs to sophisticated strategic platforms marks a fundamental shift in PE behaviour, according to Dierk Beyer.
“In the past, it was this naivete… Today you are looking at much more educated private equities that are really interested in building a platform,” Beyer explained. He noted that today’s PE firms focus on “dedicated scale and certain technology in certain areas” rather than pursuing growth at all costs.
Asif Shahinsha, highlighted how the character of PE investors has evolved: “Most of the early private equity investors in CDMOs were not life sciences specialist funds. They were all business services investors who liked any B2B business had a steady, sticky, long-term contract.”
Today’s specialist funds like Archimed and Ampersand “appreciate the pain points and the nuances” of the drug development value chain, Shahinsha added.
Bulls or Bears? Market Sentiment Divided
When asked about PE behaviour in the current market, the panel revealed both opportunity and caution.
Vishnu Dwadasi identified “cautious optimism” as the prevailing mood. “A lot of our clients are looking at undervalued or underutilised assets and trying to bolt onto assets they currently have in their portfolio,” he said.
However, volatility remains a significant concern. “The elephant in the room is tariffs,” Shahinsha stated bluntly. “Any acquirer who we are advising… pencils down. I don’t know how to price the asset right.”
The days of guaranteed long-term contracts from big pharma carve-outs appear to be over, presenting both challenges and opportunities for CDMO operators.”
“When you would buy a Novartis selling the site, it came with a five to 10 year contract, so the BD was embedded in it,” Shahinsha recalled. “Today, if you ask any BD person… they are fighting with several other BD professionals for that piece of work.”
Beyer echoed this sentiment about the changing landscape: “Finding the right asset that fulfils the right requirements… is something where private equities are becoming more choosy.”
Regional Focus in an Uncertain World
The panel identified a shift towards regionalisation as one response to geopolitical uncertainty.
“The safe bet private equities are running today is focus on regionalisation, but also the flexibility to very quickly change the strategy,” Beyer suggested. This marks a departure from the transcontinental approach that dominated five years ago.
Looking ahead, the panel expressed unanimous optimism about the sector’s future, with digital transformation emerging as a key driver.
“I think one thing to highlight is they are willing to invest in digital transformation, which is historically something not seen,” Dwadasi noted. “I think that’s going to drive efficiency and eventually being able to leverage AI.”
Key Takeaways
- The CDMO sector has matured from simple carve-outs to sophisticated strategic platforms requiring specialist PE knowledge
- Current market conditions present “cautious optimism” with opportunities in undervalued assets despite tariff uncertainty
- Regionalisation strategies offer protection against geopolitical volatility whilst maintaining flexibility for future internationalisation
- Digital transformation and AI implementation represent the next major growth driver for the sector
- Best days for PE investment in CDMOs lie ahead, particularly as specialist funds replace generalist investors
