Dive Brief:
- Thermo Fisher Scientific plans to buy PPD for $17.4 billion to bolster its clinical research service offerings to pharmaceutical and biotech companies.
- The deal values PPD at $47.50 a share, or about 24% over the target company's closing price on April 13 — the day before The Wall Street Journal reported word of the planned acquisition. Thermo Fisher will also assume about $3.5 billion of PPD's debt.
- Enough PPD shareholders have already approved the deal to clear the way for the acquisition, Thermo Fisher said Thursday. The companies expect the transaction to close by the end of 2021.
Dive Insight:
Thermo Fisher, in announcing the acquisition, highlighted PPD's drug development platform and strengths in laboratory services and patient recruitment.
Daniel Arias, an analyst at Stifel, wrote PPD is a "good strategic fit" for Thermo Fisher given the increasing demand for services provided by contract research organizations.
Thermo Fisher expects the deal to immediately boost adjusted earnings per share, and estimates it will result in about $125 million worth of savings by the third year. PPD brought in $4.7 billion in revenue in 2020, and has more than 26,000 employees in 47 countries. Thermo Fisher, meanwhile had $32 billion in revenue last year and employs more than 80,000 people.
The announcement comes months after a failed attempt by Thermo Fisher to acquire molecular diagnostics company Qiagen. Thermo Fisher initially offered $11.5 billion for the company and then raised its bid, but was still unable to persuade Qiagen stockholders to tender their shares.
In a note to clients, Arias wrote that the integration of Patheon — a contract developer and manufacturer that Thermo Fisher bought for $7 billion in 2017 — should serve as a model for the latest acquisition.
The Patheon acquisition helped grow Thermo Fisher's development services and expertise in biologics manufacturing. Thermo Fisher also expanded in 2019 through the $1.7 billion purchase of Brammer Bio, a contract manufacturer specialized in viral vectors.
The PPD purchase is the latest in a wave of mergers and acquisitions targeting the contract research and manufacturing fields. INC Research and InVentiv Health, LabCorp and Covance, and IMS Health and Quintiles are some of the high-profile tie-ups in recent years. And just a couple months ago, Icon said it would buy PRA Health Sciences for about $12 billion in cash and stock to add to its drugmaker services business.
Thermo Fisher expects its client relationships to open new doors to PPD's pharmaceutical services, helping the combined company win a bigger slice of the $50 billion clinical research market.
The combined company will be better able to help customers reduce the time and cost involved in developing new therapies, Thermo Fisher said.
