Catalent will pay $1.2 billion for Paragon Bioservices.

Gene therapy is a hot segment of the pharmaceutical market, and most pharma companies are looking to establish some sort of presence in the field. Catalent, Inc. has decided to buy a position, recently announcing that it has signed a definitive agreement with Paragon Bioservices, Inc. to purchase the company, which develops and manufactures viral vectors for gene therapies, for $1.2 billion.

Catalent already has strong positions in advanced delivery technologies and development solutions for drugs, biologics and consumer health products. The acquisition of Paragon will add capabilities in gene therapy manufacturing and accelerate the company’s long-term growth, according to Catalent’s Chair and CEO John Chiminski. He believes Paragon’s capabilities will fundamentally enhance Catalent’s biologics business and end-to-end integrated biopharmaceutical solutions offering.

Paragon has specialized expertise in adeno-associated virus (AAV) vectors, the most commonly used delivery system for gene therapy, along with capabilities for the GMP production of plasmids and lentiviral vectors. Paragon also supports projects involving next-generation vaccines, oncology immunotherapies (oncolytic viruses and CAR-T cell therapies), therapeutic proteins and other complex biologics.

For Paragon, becoming part of a leading drug development and manufacturing service provider will enable the company to reach greater development goals and expand its capabilities and platform, according to President and CEO Pet Buzy.

Catalent will fund the all-cash deal with proceeds from a $650 million incremental term loan under its existing senior secured credit facilities and the issuance of $650 million of a new series of convertible preferred stock to funds affiliated with Leonard Green & Partners, L.P. Some of this money will also be used to cover the costs of capital expansion projects currently underway at Paragon. The deal is expected to close in the second quarter of 2019. At that time, Paragon will become part of Catalent but remain under Buzy’s leadership.