What happened

Shares of Catalent (NYSE:CTLT) gained nearly 74% in the first six months of the year, according to data provided by S&P Global Market Intelligence. The company, which provides drug manufacturing services for pharmaceutical and biopharmaceutical customers, has wooed Wall Street with ambitious plans to further diversify revenue from its historical niche in softgel capsule products. 

It also helps that the stock crashed at the end of 2018. Although the recovery was swift, it occurred entirely in the new calendar year, which juiced the year-to-date returns. That said, investors also have good reason to be excited about a massive acquisition that positions the business to become an important player in gene therapy manufacturing.

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So what

While the softgel technologies segment maintained its status as the company's largest business segment in the fiscal third quarter of 2019 (the three-month period ended March), that could change in the near future. Earlier this year, Catalent pulled the trigger on a $1.2 billion acquisition of gene therapy manufacturer Paragon Bioservices, which is expected to generate $200 million in revenue in calendar-year 2019. For comparison, Catalent will report about $2.4 billion in revenue in fiscal 2019, excluding the acquisition.

The acquisition will allow the company to capitalize on the coming wave of viral vector-based biologic drugs and deepen the financial importance of biologics to the business. Consider that in the nine months ended March 2019, the company's biologics and specialty drug delivery segment grew revenue and EBITDA 27% and 38%, respectively, year over year. It was responsible for more than 100% of total revenue growth and 56% of total EBITDA growth in that span. 

Now what

The field of gene therapy is only beginning to find its commercial groove, but an under-the-radar, multibillion-dollar arms race for manufacturing assets shows that leading biopharma companies aren't taking the market opportunity lightly. Shareholders have to be excited that Catalent is joining the fray, especially considering Paragon Bioservices has long-term deals in place with Sarepta Therapeutics and other pioneers. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.