Friday, March 2, 2012

Niche Pharmaceutical Logistics Providers Becoming Acquisition Targets

Niche logistics providers, particularly those within the pharmaceutical industry appear vulnerable as larger logistics providers such as DHL, UPS and FedEx look to expand their market share in this valuable and growing market. Transport Intelligence estimates the global pharmaceutical logistics market was valued at about $63bn in 2011 growing over 12% from 2010. Over the next few years, the market is expected to grow 7.6% annually to about $84bn in 2015.

Several months ago, World Courier, a provider of distribution services and temperature-controlled/time-sensitive transportation services for biotech companies, rebuffed UPS’ offer to acquire them. Since then, the company has put itself on the auction block and rumors are that FedEx may be a leading contender for the company.

Marken also provides logistics and transportation services for clinical supplies and samples management. The company has locations in over 20 countries with pharmaceutical depots dotted around the world. Of particular interest, Marken has been expanding their offerings into emerging markets such as China, South Africa and Brazil. The private equity company, Apax, acquired the company in 2009 but since then, Marken’s performance has steadily declined due to competition from other logistics groups and lower levels of research and development from large pharmaceutical groups. Apax has hired outside assistance to determine options for the company – restructuring, cash infusion or sale of the company. A decision has yet to be made. If it is put up for sale, it would make a nice acquisition for a major logistics provider looking to  expand further in the emerging markets.

Finally, rumors are now circling the beleaguered Celesio. Based in Germany, the company is in the midst of being overhauled due to increasing European regulations and competition. Twice in 2011 Celesio was forced to cut profit forecasts. As such, the company announced it will concentrate on its main business, that of focusing on drug wholesaling and pharmacies and sell its units Movianto and Pharmexx. Movianto operates in 13 European countries and provides such services as repackaging and relabeling; management of samples; promotional materials and clinical trials; direct-to-pharmacies; direct-to-patient; assistance with market entry/product launch into Europe; controlled drugs and contract logistics and transportation. According to Bloomberg News, Deutsche Post may be interested in acquiring the unit. Already one of the top global pharmaceutical logistics providers, Deutsche Post’s DHL unit would further consolidate its market share, particularly in Europe, if such an acquisition would take place.

The pharmaceutical logistics industry is a growing one. DHL, FedEx and UPS have noted the importance of this sector and have made investments in specialized warehousing/distribution services, containers and specific sector solutions. Niche players within the pharmaceutical logistics space are at risk as these larger logistics providers further expand their offerings and geographic reach in this growing industry.