Carlyle provided consistent support to Qualicaps’ management team to improve the company’s business and expand globally, transforming a group of regional manufacturing plants into a global healthcare product provider.

About Qualicaps and the Transaction
In October 2005, Carlyle acquired 100% stake in Qualicaps Group (formerly known as Shionogi Qualicaps) from Shionogi & Co. Ltd., and exited the investment through a sale to Mitsubishi Chemical Holdings Corporation in March 2013.

Founded in 1965, Qualicaps is a manufacturer of hard capsules - hard gelatin capsules (“HGC”) and plant origin hard capsules (“HPMC”) - mainly used in the pharmaceutical industries around the world. While HGC capsule is the company’s core product, HPMC capsule has become an increasingly important business and a growth driver for the company. Qualicaps has long maintained a leading position primarily in the pharmaceutical hard capsule business segment, and is the largest pharmaceutical capsule manufacturer in Japan.

Key Value Creation Metrics

  • Increased sales and EBITDA by 50% and 120% respectively
  • Achieved a turnaround of its US operation, which had been in red for decades
  • Increased employment from around 600 to 1,000
  • Quadrupled HPMC capsules’ sales worldwide

Major Value Creation Initiatives

U.S. Operation’s Turnaround
Qualicaps’ U.S. operation faced great challenges and was unprofitable for decades. With Carlyle’s support, the company strengthened the leadership of its manufacturing quality team, advocated best practice sharing and committed resources to enhance product quality and productivity, which resulted in a successful turnaround of the underperforming US plant. Since then, the US operation has become an important part of the company’s production facilities, offering greater access to the world’s largest pharmaceutical companies in the US. During Carlyle’s ownership period, Qualicaps’ market share in the US increased from 8% to 25%.

Improving HPMC Capsules’ Sales
Qualicaps is the only commercially viable provider of high-quality HPMC pharmaceutical capsules, exhibiting significant upside potential in its business. As a long-term partner with strong confidence in Qualicaps’ prospects, Carlyle provided expertise and resources to support the growth of the HPMC capsules business. In addition to consolidating sales activities across different regions, Qualicaps rebuilt the global joint sales team efforts, implemented global marketing strategy to improve product/price mix, pricing strategies and global key customer relationships. The company expanded its global production capacity with dual sourcing capability, which is becoming increasingly important amid growing demand from global pharmaceutical customers. As a result, Qualicaps recorded a strong growth in its HPMC capsules business, which has become a key growth driver for the company.

Expanding Global Business Footprint, Including Roll-up M&A Activities
With Carlyle’s support, including follow-on capital injection, Qualicaps rapidly expanded its global business footprint. To strengthen its in-house capsule manufacturing capabilities, Qualicaps acquired Technophar, a Canadian company specialized in the design, development and manufacture of capsule manufacturing equipment. With Technophar’s newly introduced machine, Qualicaps boosted the production of high-quality HPMC capsules. The company also acquired a capsule manufacturing factory in Romania to increase the production capacity in Europe on a lower cost basis.

Establishing Global Management Infrastructure Supported by One Carlyle Approach
When Carlyle first invested in Qualicaps, the company only operated three regional factories in Japan, the US and Spain without any global corporate function. Carlyle believed there was a meaningful opportunity to help the company build a global management infrastructure and improve corporate governance. With the support of Carlyle’s US Buyout Healthcare team and Operating Executive Tom Rabaut, Qualicaps established a global management platform. The company transformed its strategic direction with the appointment of a new global CEO and CFO, and focused on consistent key performance indicators when evaluating its financial performance across the regions.