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Patheon opens way for Thermo Fisher to CDMO market
WALTHAM, Mass. & DURHAM, N.C.—Thermo Fisher Scientific Inc. announced recently along with global contract development and manufacturing organization (CDMO) Patheon N.V. that their respective boards of directors have approved Thermo Fisher’s plans to acquire Patheon. Thermo Fisher will commence a tender offer to acquire all of the issued and outstanding shares of Patheon for $35 per share in cash. The transaction represents a purchase price of approximately $7.2 billion, which includes the assumption of approximately $2 billion of net debt. When the deal is complete, Patheon will become part of Thermo Fisher’s Laboratory Products and Services Segment.
Thermo, of course, is best known for being a leader in scientific instrumentation and certainly is no stranger to acquiring other companies, but why a merger and acquisition (M&A) deal for a CDMO?
According to Marc N. Casper, president and CEO of Thermo Fisher Scientific, “Patheon’s development and manufacturing capabilities are an excellent complement to our industry-leading offering for the biopharma market. Our combined capabilities will enhance our unique value proposition for these customers, create significant value for our shareholders and further accelerate our company’s growth.”
Patheon provides comprehensive, integrated and customizable solutions as well as its expertise to help biopharmaceutical companies of all sizes satisfy complex development and manufacturing needs. It is a leader in the high-growth, $40- billion CDMO market, which the two companies note “is fueled by growing customer demand for end-to-end solutions, flexible and scalable capacity and regulatory expertise.” Patheon offers an extensive network of state-of-the-art facilities primarily in North America and Europe, and approximately 9,000 professionals worldwide. The company generated 2016 revenue of approximately $1.9 billion.
In early May, Patheon announced that it had completed an expansion project at its Greenville, N.C., manufacturing site. The company invested approximately $26 million to update one of its sterile Pharmaceutical Development Services (PDS) suites.
“Over the past several years, we have increased our capabilities to become a leading CDMO provider in a highly fragmented market,” said James C. Mullen, CEO of Patheon. “We are confident that our combined offerings and Thermo Fisher’s proven track record of disciplined M&A and successful integrations will take our business to the next level.”
Benefits of the transaction, Thermo says, include:
The transaction is expected to be completed by the end of 2017, subject to the satisfaction of customary closing conditions, including the receipt of applicable regulatory approvals, the adoption of certain resolutions relating to the transaction at an Extraordinary General Meeting of Patheon’s shareholders and completion of the tender offer.
A few days after the announcement of the M&A deal, Cantor Fitzgerald analyst Bryan Brokmeier gave Thermo a rating of “Overweight” in a note to investors and named a price target of $194 per share. He notes that Thermo has “significant opportunity for organic growth at the expense of weaker competitors” and pointed out that the company’s most significant market, biopharmaceuticals, is growing at a mid- to high-single-digit rate; he anticipates that gaining Patheon should strengthen its offerings in this area. His favorable attitude toward Thermo’s value and near-term success was further bolstered by the trend of mass spectrometry moving more and more into the clinic, which could act as a potential driver of growth for Thermo. As it happens, the company recently shared plans to launch an automated mass spectrometry-based clinical analyzer next year.