Dive Brief:
- Thermo Fisher Scientific plans to acquire Qiagen in a deal valued at $11.5 billion, the companies announced early Tuesday, putting a seal on will-they-won't-they M&A rumors first publicized last November.
- Easily the largest deal the medtech industry has seen in 2020, the Waltham, Massachusetts-based life sciences giant is offering 39 euros (approximately $43) per Qiagen share, representing a 23% premium. The approximately $11.5 billion price tag includes assumption of about $1.4 billion of net debt. The deal is expected to be finalized in the first half of 2021.
- By bringing Qiagen's products in house, Thermo Fisher hopes to gain a stronger foothold in molecular diagnostics and infectious disease and is aiming for cost savings totaling $200 million by the third year after close.
Dive Insight:
Qiagen acknowledged in mid-November several non-binding indications of interest from potential buyers, shortly after a Bloomberg report rumoring a Thermo Fisher-Qiagen tie-up caused a surge in the latter's share price. Siemens Healthineers, Danaher and other industry behemoths were speculated by Wall Street and media as possible players that could pursue talks with the Dutch test maker.
But by the end of December, Qiagen announced it had ended its review of potential deals and planned to remain independent, calling various alternatives "not compelling," leading to a cessation in discussions "so that full management focus can be on executing the stand-alone plan." That decision sent Qiagen's stock down more than 27%.
Among those in-house tasks was finding a new chief executive officer, after its leader of roughly 27 years stepped down in October amid weak financial results and certain plans to restructure.
Qiagen brought in just over $1.5 billion in 2019 revenues. The company averaged 3.4% organic revenue growth across the last decade, according to analysis by Cowen. Thermo Fisher made over $25 billion in revenue last year.
Thermo Fisher CEO Marc Casper said Tuesday his company's scale in ecommerce and emerging markets will be the boost Qiagen needs, amid some Wall Street chatter about Qiagen under-delivering in recent years.
Stifel analysts called the deal reasonably priced, adding that while it's "not transformational, the combination of the two portfolios make good sense."
"Key questions for us will be the extent to which [Thermo Fisher] management looks to [further Qiagen's] push into some of the riskier product development areas in infectious disease (not looking like at a bad idea at the moment), the appetite for assay development on behalf of [Illumina], and the potential need for divestitures," the analysts wrote.
Bank of America Merrill Lynch analyst Derik de Bruin called out the two companies' domination of the sample prep market as a potential regulatory hangup on a Tuesday investor call. He estimated Thermo Fisher currently has 60% of the market and Qiagen has 20%.
Casper said Thermo Fisher has high confidence in its ability to complete the deal.
Qiagen is currently navigating its response to COVID-19. A company spokesperson told MedTech Dive in an email Monday the company is working on emergency regulatory submissions as quickly as possible and testing patient samples from Europe and China.
"It is too early to comment on financial impacts, but we are adjusting our production to meet the increased demand in Viral RNA testing kits and automation as well as producing the new QIAstat-Dx cartridges," a spokesperson said.
On Tuesday's call, Thermo Fisher execs said they modeled potential tailwinds and headwinds from coronavirus into their 2020 financial evaluation of Qiagen. China accounts for about 11% of Thermo Fisher's business and 8% for Qiagen.
Shares in Qiagen were up 15% in late morning trading.
