Guest Column | April 8, 2022

Technical Due Diligence Considerations When Acquiring A Biopharma Manufacturing Facility

By Anthony Grenier

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My previous articles covered due diligence from the perspective of product acquisition. This article is again about mergers and acquisitions (M&A) and, more specifically, acquisitions of assets. This is not only assets like equipment owned by the seller and used at its contract manufacturing organization (CMO), but also brick-and-mortar assets and all the equipment and staff in them. As a consultant, I have been approached on several occasions to perform on-site technical due diligence for facilities clients were considering acquiring. In this article, I share the considerations you should keep in mind when acquiring a stand-alone biopharma manufacturing facility, using a real-life example from my experience.

I’ll be using this real-life example: I was once engaged by a client to perform technical due diligence on a North American facility manufacturing non-sterile topical products (liquids, semi-solids) in various packaging formats. The client had identified this facility as a potential site for its new product. Buying the entire company, along with its products, was not the client’s primary intent, but the available space for expansion and the qualified staff at the facility were the greatest assets of the seller.

Just as I do when I advise on the selection of CMOs for customers, I use the technical fit, capacity, and compliance as the primary selection criteria when performing a site acquisition due diligence. These three criteria capture the essence of the key considerations for the buyer to make a sound and valuable acquisition.

Technical Fit

The technical fit is about identifying the gaps between what expertise and experience you are seeking for your product and what the site to be acquired has. Keep in mind that not having a technical fit could be expensive and significantly detrimental to your overall project timeline down the road, so it is well worth doing a thorough assessment.

In my example, the technical fit was not obvious, because it was a site manufacturing non-sterile liquids and semi-solids, and the customer/buyer was planning to manufacture a sterile product. The buyer was essentially relying on the potential of the facility and staff to learn aseptic processes. Previously, the selling party had successfully introduced new technologies to the site, with engineering solutions developed in-house. The great majority of the staff had been with the company for the last 10 to 15 years.

So, in this case, the combination of the experience and resourcefulness of the staff was attractive to the buyer.

The introduction of sterile manufacturing in a non-sterile site is not uncommon, and I have seen other facilities use either indoor space in a large warehouse to build sterile modules and systems from scratch or construct a separate building with modular rooms they extend as they get more products coming in. Usually, they will have one common corridor and qualify only one room at the beginning and then qualify the others later. For this purpose – bringing a completely new expertise to the site – the most important factors are, of course, having sufficient space (indoor or outdoor) and hiring external expertise for civil engineering, building design, and staff training. The model works well, as I have witnessed several places go through the transformation successfully.

The takeaway is that, beyond having everything needed on paper, a site’s intrinsic value and the staff’s motivation to grow and learn can make a major difference in the acquisition.


Capacity is a prime consideration for companies willing to acquire a facility, as lack of capacity means investments are needed to expand. Too much capacity seems attractive if the facility can be filled with products or contract services; otherwise, fixed costs will keep adding up rapidly.

The key question is not only to what extent the building can support the buyer’s new product introductions but also how to make the most out of this available capacity so that the business remains profitable.

In diligences and sites visits I have performed in the past few years, sites that were to be acquired that had a lot of capacity (usually only 30% or less of the equipment capacity was used) have tried to enter the CDMO/CMO business to generate additional revenues and absorb some of the fixed costs.

I would warn any buyer to spend some time interviewing the seller about their experience with contract manufacturing opportunities and what their success rate was. If most of the opportunities were declined because of an obvious lack of technical fit (e.g., customer looking for a solid dosage form site while the expertise of the seller is liquids and semi-solids), that sounds like a valid reason. However, changing the mindset of a company from making only its own products to becoming a service company is not easy and, above all, it won’t happen overnight. When the entire site switches its vocation from, for example, a Big Pharma manufacturing site to a contract manufacturing site, it can work very well. The vast majority of CMOs are ex-Big Pharma sites that were divested and reoriented to manufacturing others’ products instead of their own. In such a case, the business is restructured, and the buyer will bring in some experienced staff to train the existing personnel in the transition period (for example, a quotation specialist, business development executives).

In my example, the switch was not radical at all; the seller was proposing that the buyer provide CMO services on the side in the underutilized facility, in parallel to running the buyer’s own products as a main source of revenue (usually the products are on the decline when the site is up for sale). In my interview with the executives of the selling party, I quickly realized the facility had been very selective in the type of projects it had undertaken, because of their fear that introducing new molecules and new products could impact their existing legacy products, which had been their money-making products. This was likely due to the following reasons:

  • There was a lack of containment capability to avoid cross contamination, either because of the design of the building or because they had been manufacturing drug products with the same two or three molecules over the past 10 years, or
  • There was a lack of interest in rearranging the site and deploying resources to accommodate customers’ products a few times a year. I think it really comes down to the mindset of being a service provider, which they lacked.

The conclusion, and my recommendation to the buyer, was that, in this case, the buyer shouldn’t expect any meaningful revenues from contract services at the facility they want to acquire unless some significant changes are made to develop new contract opportunities.

Companies must be careful in evaluating the capacity of the facility they want to acquire and anticipate the financial impact of not being able to fill the capacity in the short to medium term.


Compliance is the criteria that can’t be fixed rapidly if there is not already a good basis for it in the facility to be acquired. It is therefore of the utmost importance that companies make an in-depth assessment of the level of compliance of the facility for the intended markets to be served and any gaps assessed sooner rather than later.

Compliance is probably the easiest to cover, as it is about making sure the seller has an excellent track record with inspections by local and foreign agencies. In my example, the site was approved by several health agencies (EU, Health Canada, FDA) over many years. One form 483 was issued five years ago, but subsequent inspections were satisfactory. The seller must be fully transparent in sharing information about the outcomes of past visits. Of course, this is a high-level screening, and a true quality audit will have to be performed by the buyer prior to completing the acquisition of the building. Beyond the historic track record, it is important that you pay attention to the quality of the information shared by the seller and make sure all recent inspections reports are obtained.

Coming back to my example, the excellent compliance track record of the site was one of the greatest assets of the seller, on top of the staff, which was highly qualified on GMP systems and controls. Ultimately, the transaction was not completed, not because of the facility but because of the cost of maintaining existing products on the market and the fact that they would become less profitable over the remaining few years of their market exclusivity. So, overall, the business was not attractive, and the available space and qualified staff didn’t outweigh the fact that a lot of money would have to be injected without any expected returns for the buyer for a significant amount of time.

In my next article, I’ll share considerations you should keep in mind for multi-site acquisitions as part of a company acquisition when the seller is manufacturing all or part of its products in-house.

About The Author:

Anthony Grenier is an independent technology transfer and outsourcing consultant. A chemical engineer by training, he has completed over 60 technology transfers for both large, public multinational corporations and small specialty or virtual pharma companies spanning all major segments of the life sciences industry. He can be reached at or on LinkedIn.