After Bagging Patheon for $7.2 Billion, This Could be Thermo Fisher Scientific's New Target

Published: Jun 16, 2017

After Bagging Patheon for $7.2 Billion, This Could be Thermo Fisher Scientific's New Target June 14, 2017
By Mark Terry, Breaking News Staff

On May 15, Thermo Fisher Scientific announced it was buying Patheon NV for $7.2 billion. Thermo Fisher likes to buy things, so investors and analysts are looking at what’s next. One potential target? PerkinElmer .

According to FactSet, during its history, Thermo Fisher had made almost 70 acquisitions. The Patheon acquisition was just the most recent. Patheon, located in Durham, NC, offers comprehensive, integrated and customizable solutions in addition to expertise to biopharma companies. The company has a broad network of facilities in North America and Europe, and employs about 9,000 people worldwide. In 2016, Patheon generated $1.9 billion in revenue and will become part of Thermo Fisher’s Laboratory Products and Services Segment.

“There is a limited number [of companies] that they can acquire that could move the needle because of their size,” said Bryan Brokmeier, of Cantor Fitzgerald, to TheStreet. “In order for anything to be meaningful, they would have to acquire a larger sized company.”

PerkinElmer, based in Waltham, Mass., offers a broad variety of products and services, including detection, imaging, laboratory services, and informatics solutions. The company’s current market cap is about $7.11 billion.

PerkinElmer recently acquired Tulip Diagnostics, which expands its presence in India.

“As one of India’s largest domestic in-vitro diagnostic providers, Tulip Diagnostics brings a strong product portfolio, channel access, and broad footprint to help accelerate PerkinElmer’s growth in India,” said Robert Friel, chief executive officer of PerkinElmer, in a statement. “As we continue to build out our Diagnostics business on a global scale, this acquisition further positions PerkinElmer for long-term growth in emerging market diagnostics, an attractive end market and key area of focus.”

Which isn’t to say that PerkinElmer is the only target investors are willing to float. Others include Bio-Techne (TECH), based in Minneapolis. Bio-Techne is a biotech holding company that provides products and services to research laboratories, including proteins, antibodies, and assay kits. And although it’s hard to say how much of a factor this is, but analysts note that Bio-Techne’s chief executive officer, Chuck Kummeth, previously worked at Thermo Fisher.

TheStreet writes, “With their recent intent to acquire Patheon, Thermo is continuing to grow as they inch through Fiscal 2017. Analyst Puneet Souda believes that Thermo ‘will continue to keep M&A in focus and execute its capital deployment strategy with 60% - 75% of capital deployed towards M&A and the rest 25% - 40% for share repurchases or dividends,’ according to a research report published by Souda.”

TheStreet also notes that although much of Thermo Fisher’s growth has been in biopharma, variety is its strength. On June 7, the company partnered with Biocrates Life Sciences to launch the first comprehensive metabolome analysis kit. This emphasizes opportunities in diagnostics.

Other potential areas of interest could be in the “tools” space. One company is Milford, Mass.-based Waters Corp (WAT) and another is Mettler-Toledo (MTD). They are currently the closest competitors for Thermo Fisher in this space. They are likely to be viewed as long-term targets, however, since Thermo Fisher is unlikely to go after companies with market caps close to $14 billion.

TheStreet writes, “As a multination corporation, Thermo Fisher has outsourced divisions of labor and production in the past. However, when exposed to fluctuations of exchange rates, this can adversely affect the company’s generation of cash flow. Still, the company is revered as the leader on the healthcare block, something that CEO Marc Casper wants analysts to keep in mind.”

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