Tom Cowap offers four reasons to get excited about the UK’s privately owned pharma businesses
Alantra’s Pharma Fast 50 reports have thus far shown that the UK’s privately owned pharmaceuticals businesses are thriving, with the most successful companies accelerating their growth and attracting increasing investment.
Our research ranks the UK’s fastest-growing, privately owned pharmaceutical businesses by their revenue growth over the previous two years; it therefore provides a snapshot of the sector’s high-performing small- and medium-sized companies, which do not always receive the attention they deserve.
This year’s rankings were a sign such businesses continue to grow rapidly, despite barriers ranging from Brexit uncertainty to the threat posed by disruptive new technologies. Every single business delivered a compound annual growth rate of at least 10% – and to make the top 10 required a CAGR of no less than 32%.
Here are just four indicators underlining how well the best businesses in the sector are performing.
1. The bar to the Alantra Pharma Fast 50 continues to rise
Any privately owned pharma business in the UK hoping to make it into the Alantra Pharma Fast 50 2019 rankings would have had to achieve a CAGR of at least 10.4% over the previous two years. That was more than three times the minimum CAGR of 3.4% required to make the ranking in 2017, our inaugural ranking.
The bar has risen in each subsector of the industry. In pharma outsourcing, this year’s Pharma Fast 50 constituents achieved a CAGR of at least 14.5%, 2.7 times’ higher than 2017’s 5.3%; in the pharmacy chain sector, the minimum CAGR required this year was 11.2%, 3.3 times’ higher than 2017’s 3.4%; in development, wholesale and supply, the minimum has increased from 8.4% to 10.4%; and in consulting, it’s up from 4.3% to 10.5%.
2. Growth accelerating across the sector
This industry-wide success is reflected in the average rates of growth achieved by each subsector – which were in each case substantially up on 2017.
Pharma outsourcing led the pack in 2019, with Alantra Pharma Fast 50 constituents in this subsector having achieved an average CAGR of 35.9% over the past two years; that was 16.3 percentage points higher than the 19.6% average CAGR this sector recorded in 2017.
Pharmacy chains, meanwhile, posted an average CAGR of 17.7%, up 9.4 percentage points on two years ago; development, wholesale and supply businesses managed 23.6%, up 6.4 percentage points, and consulting businesses delivered 20.4%, 8.3 percentage points ahead of 2017.
3. Private equity targets the leaders
The quality of the UK pharma sector’s privately owned businesses is attracting continuing M&A interest, both from trade buyers – including international acquirers – and private equity investors. In all, at least nine members of the 2019 Alantra Pharma Fast 50 are backed by private equity funding, with investors’ appetite whetted by rapid growth rates, enticing ongoing potential and a relatively defensive Brexit insulated industry.
4. Consistent performers shine again and again
The consistent appearance of a number of businesses in Alantra’s annual rankings underlines that this sector’s impressive performance is no fluke or flash-in-the-pan. No fewer than ten companies have appeared in all three editions of the Alantra Pharma Fast 50. They include Qualasept Pharmaxo, which topped the ranking in 2019 with a CAGR of 77% – making it a hat trick of first places for the pharma outsourcing business after coming top in 2017 and 2018 too.
Tom Cowap is director at Alantra