The Cold Chain Packaging Opportunity in Pharmaceuticals
Many life sciences products, including pharmaceuticals, some medical devices, organs, and specimens, require temperature-controlled storage and distribution to ensure molecular stability, preservation, and extension of their useful life. Within pharmaceuticals, the largest categories are vaccines, diabetes treatments (insulin), and biologics – drugs made from living organisms – which include various oncology treatments, rheumatoid arthritis treatments, and others. The market for these categories of pharmaceuticals has been growing steadily in recent years.
Globally, there is significant investment underway in pharmaceutical cold chain distribution infrastructure. Temperature-controlled packaging itself makes up about one-third of the cold chain market at approximately $4.4 billion.1
1. Increasingly complex drug product biology
2. Globalization of clinical trials and post-trial distribution
Morrison notes that global clinical trial drug shipments require packaging to be globally harmonized. This is complex, given the vast differences in climate and infrastructure from country to country. “Pharmaceutical companies want to eliminate packaging risk from the success of the trial,” he says. “Packaging companies that can demonstrate their packaging solutions can excel across climates, and that possess end-to-end distribution, are well-positioned as partners in drug trials as well as for post-trial distribution.”
3. Regulation-based incentives
4. Growing interest in sustainability and ESG compliance
Possible Investment Avenues in Pharmaceutical Cold Chain
There are many facets to the cold supply chain and multiple companies with discrete service offerings. That diversity provides a wealth of investment opportunities. Companies are entering the pharmaceutical cold chain packaging space from adjacent industries and as start-ups, and are attacking the market from many different angles. These include single-use packaging; return, refurbishment, and reuse; geographic coverage strategies; and a focus on sustainability or account services.
“There are many different ways to position a company in the pharmaceutical cold chain packaging space. As such, the industry is attracting interest from industrial, healthcare, and service sector investors, and from buyers of all sizes and global reach,” notes Hepper. In particular, the passive side of temperature-controlled packaging (in which the packaging does not have an active energy source) is highly fragmented, creating substantial consolidation opportunity in and of itself. “There’s also the opportunity for providers of active packaging, which is more consolidated, to add on passive product lines,” adds Döring.
Cold Chain Technologies (CCT) is an excellent example of the activity in the sector. CCT is a leading provider of reusable and single-use passive thermal packaging solutions for shipping temperature-sensitive materials, principally serving the life sciences supply chain. Harris Williams advised CCT on its sale to Aurora Capital Partners in July 2019. Through a focus on advanced engineering and technical expertise, CCT continues to develop innovative and differentiated packaging solutions for incredibly demanding applications.
“Another interesting investment thesis is around horizontal integration,” says Hepper. “Pharmaceutical companies are increasingly looking for companies that can function as outsourced service providers, handling as much of their end-to-end cold chain needs as possible, from packaging components to distribution.” Hepper says this search for one-stop shopping has motivated companies to bring on tangential services and capabilities. He says that could include combining analytics and sensor technology with transportation capabilities, or pairing cold chain packaging with shipment tracking and predictive analytics.
Inmark is a leading packaging solutions company that is one of the few providers of both temperature-controlled specimen transport and pharmaceutical solutions. Founded in 1975 as a distributor of rigid container packaging, the company expanded into the design and distribution of life sciences packaging solutions for clinical specimen transport, temperature-controlled, used medical device, and dangerous goods applications. Today, Inmark’s business is more dominant in specimen transport, which requires ambient temperature control. However, its cold chain pharmaceuticals business is thriving: The company is adding services for life sciences companies, such as providing extensive workforce compliance training, the safe transport of used medical devices, regulation-compliant shipping documentation, and pick, pack, and ship services. “It’s a great example of a company that sits at the intersection of healthcare, services, logistics, and industrial sectors,” notes Morrison. Harris Williams advised Inmark on its sale of a majority interest to private equity firm Kelso & Company in December 2020.
“Packaging providers such as Cold Chain Technologies and Inmark hold valuable channel and customer relationships,” says Morrison. “They are well-suited to add capabilities such as analytics and sensor technologies, education, and other services and to be the go-to platforms for pharmaceutical customers.” Sensors that travel with cold shipments can monitor temperature information to detect spoilage, or even alert those along the supply chain when temperature control is at risk. This is highly attractive to pharmaceutical companies, which incur significant losses when a parcel or pallet of pharmaceuticals is ruined because of a break in the cold chain.
Analytics companies are launching technology platforms that combine predictive analytics, machine learning, and other capabilities such as weather modeling to help clients gain more control over their shipping as well as patient outcomes. For those temperature-controlled shipments going direct-to-home, a delayed or lost shipment could adversely impact clinical care.
Harris Williams recently advised Single Use Support GmbH (SUSupport) and SHS Gesellschaft für Beteiligungsmanagement mbH on their investment from Pall Corporation. “This transaction is a good example of horizontal expansion,” observes Döring. SUSupport provides a proprietary, technology-driven, single-use bag solution for bulk liquids in biopharma and regenerative medicine. With this move, Pall can leverage SUSupport’s RoSS platform to enhance its integrated solutions across the bioprocessing value chain.
Making a Cold Chain Packaging Play
There are many tailwinds driving growth in all aspects of the life sciences cold chain, and within pharmaceuticals in particular. The product is expensive, making spoilage a critical risk. Companies need partners they can count on throughout the cold chain, from bulk product shipment to local market and household delivery. Given these factors, temperature-controlled packaging suppliers that have demonstrated their performance and built strong channel relationships face a promising future.
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1. Pharmaceutical Commerce, UBS, Evaluate
Published March 2021