GEN Exclusives

More »

GEN News Highlights

More »
Feb 4, 2014

Thermo Takes on a New Life

Thermo Takes on a New Life

Source: © Robert Mizerek - Fotolia.com

  • Thermo Fisher Scientific said today it closed on its acquisition of Life Technologies for $13.6 billion, plus assumption of the acquired company’s $1.5 billion in debt—a blockbuster deal that creates a powerhouse in biopharma lab instrumentation and supplies with revenues of $17 billion and 50,000 employees in 50 countries.

    That workforce is expected to shrink over three years, however, with Thermo restating last week it was committed to cutting a total $275 million in costs over that period. Thermo Fisher has said it will achieve most of that reduction, or $250 million, by combining global infrastructure with Life Tech, and the remaining $25 million by combining the companies’ commercial capabilities.

    “Our combined offering provides cutting-edge technologies, such as genomics and proteomics, to accelerate life sciences research and improve human health,” Marc N. Casper, Thermo’s president and CEO, said today in a statement. “Our complementary strengths in biosciences and bioprocessing will accelerate drug discovery, development, and production.”

    Speaking with analysts last week on the company’s quarterly earnings conference call, Casper said the combined company expects to achieve $100 million of the cost-cutting this year—slightly above the company’s original synergy guidance for 2014 of $85 million. Those synergies, when added to Life Tech's financial results, are expected by Thermo to expand its operating margin by 2.2% to 2.5 percentage points, Peter M. Wilver, CFO and svp, said on the conference call. In it, Thermo reported mostly strong fourth-quarter earnings, and projected even healthier 2014 results once the Life Tech deal was closed.

    As it told analysts last week, Thermo Fisher said the newly combined company will create a fourth operating unit—the life sciences solutions segment—for most Life Tech operations, as well as Thermo’s remaining biosciences businesses. One portion of biosciences, Thermo’s global chemicals business, will be shifted to the company’s laboratory products and services segment. Most of the remaining bioscience businesses will be shifted there from the company’s analytical technologies segment, which will be renamed analytical instruments.

    Analytical technologies enjoyed 6% growth in both total and non-acquisition-related “organic” revenue during the fourth quarter, and 3% growth in both categories of revenue for all of 2013. Last year’s growth reflected launches of several new products—such as the Orbitrap Fusion™ Tribrid™ liquid chromatography-mass spectrometry system rolled out in June, which combines the company's quadrupole, Orbitrap, and linear ion trap mass analyzers (“We're expecting it to become a $100 million product,” Casper said); version 7.2 of the Dionex™ Chromeleon™ chromatography data system software; and the iCAP 7000 Series Inductively Coupled Plasma Optical-Emission Spectrometry (ICP-OES) optical system for environmental markets.

    “In the quarter, we had very strong growth in our life sciences mass spec, bioprocess production, and chromatography businesses, which benefited from exceptional performance in Asia Pacific. This segment also benefited from the release of funds by select customers in a broad range of end markets for projects that had been delayed,” Wilver said.

    Last month, Thermo said it will sell to GE Healthcare three biosciences businesses—cell culture media and sera, gene modulation technologies, and magnetic beads—for a combined $1.06 billion. Thermo agreed to sell the businesses in November as a condition of winning European Commission approval for its Life Tech acquisition. GE has said it anticipates closing on its deal with Thermo in the “first part” of 2014, subject to regulatory approvals.

    Thermo’s specialty diagnostics segment is being expanded with the addition of two small specialty diagnostics businesses which up to now had been within Life Tech. While full-year 2013 results—a 14% jump in adjusted operating income and a 27.2% leap in adjusted operating margin—were buoyed by Thermo’s 2012 acquisition of One Lambda, total and organic revenue for the segment grew 5% during the fourth quarter.

    One reason why, Casper said, was strong demand for healthcare diagnostics in western Europe and particularly in Asia. Sales in China zoomed 20% during 2013, Casper said, prompting Thermo to invest there in R&D, manufacturing, and commercial capabilities, including an expansion of its China Innovation Center in June.

    Thermo’s other segment during 2013, laboratory products and services, saw both total and organic revenue rise 8% in the fourth quarter while adjusted operating income grew 9%, driven by growth in the company’s clinical trials logistics business and laboratory products business despite softness in demand among U.S. academic institutions and government agencies.

    Casper said demand by academic and government customer segment in Q4 saw a decline “in the low single digits” as with much of last year—appearing to reflect continuing tight spending, bookended by the March across-the-board federal budget cut or sequestration and the October federal government shutdown. For the full year, reported revenue grew 5% and organic revenue grew 4%, while adjusted operating income increased 6%.



Related content

Jobs

GEN Jobs powered by HireLifeScience.com connects you directly to employers in pharma, biotech, and the life sciences. View 40 to 50 fresh job postings daily or search for employment opportunities including those in R&D, clinical research, QA/QC, biomanufacturing, and regulatory affairs.
 Searching...
More »

GEN Poll

More » Poll Results »

Alzheimer's Therapies

Do you think an effective treatment for Alzheimer’s will be found within the next 10–15 years?