Healthcare private equity: The CDMO and CRO exit queue is building

Private equity sponsors are entering a new phase in pharma services as 2020–2022 CDMO and CRO acquisitions move toward exit windows. This raises two questions: which value creation levers can still be proven under current ownership, and which should remain for the next investor.

The market backdrop for pharma services has shifted since the 2020–2022 acquisition boom. Higher interest rates have raised financing costs for capital-intensive CDMOs. Tighter venture capital funding has constrained biotech spending, weighing on demand for CROs with biotech exposure. High-profile biotech failures and tighter pharma budgets have added further pressure. 

For sponsors, these changes have made the path to realizing the original investment case more challenging.

Many sponsor-owned CDMOs and CROs are now four to six years into ownership. While holding periods have lengthened, a sizeable cohort is approaching the exit window.

For sponsors,…