(Bloomberg) — Thermo Fisher Scientific Inc.’s $17.4 billion acquisition of PPD Inc., a provider of clinical and research services to the pharma and biotech industries, is “all about speed” in getting medicines to market.
That’s the message from Thermo Fisher Chief Executive Officer Marc Casper in outlining the company’s goals for the deal. Thermo Fisher will pay $47.50 a share for PPD, according to a statement Thursday, and will assume about $3.5 billion of net debt. The price represents a premium of about 24% to PPD’s closing price Tuesday, before reports of a possible deal.
Companies like PPD that offer clinical research services help run the crucial studies that get experimental drugs to market. Thermo Fisher has become a major player in the pandemic as a producer of diagnostic test kits for Covid-19 as well as laboratory equipment and supplies. The PPD deal allows the company to expand its suite of services to customers.
“It is a very natural extension for Thermo Fisher,” Casper said in an interview.
While Thermo Fisher is best known for its laboratory instruments and tests, it acquired Patheon NV in 2017 in an effort to expand its drug manufacturing capabilities. The PPD deal, Casper said, will allow the company to partner with drugmakers from the earliest stages of laboratory research into new drugs through clinical trials and drug manufacturing.
In the short term, Casper said the move would help the company gain market share and accelerate growth. Longer term, the merger could help shorten the development time of new drugs by streamlining the process, he said.
“There are a lot of handoffs in the current process,” he said. “There are opportunities to optimize the handoffs.”
If Thermo Fisher is handling both the late-stage clinical trial for a new drug and its production, it could more quickly ready factories to scale up as soon as there’s a sense of a medicine’s effectiveness. “It’s all about speed to market,” Casper said. “I think we could really accelerate the timeline.”
Shares of Thermo Fisher gained 3.6% to $495.43 at 11:28 a.m. in New York trading, while PPD rose 6.9% to $46.98.
Hotbed of Activity
The drug-testing field has become a hotbed of activity as companies worldwide seek to roll out new Covid-19 drugs and vaccines, even as they continue to develop new cancer therapies and other treatments. With Covid-19 case numbers remaining high worldwide, and rising concern about future pandemics, the value of CROs is growing.
PPD has worked with Gilead Sciences Inc. on studies of the Covid drug remdesivir and on research involving Roche Holding AG’s Actemra as an arthritis treatment, according to its website. PPD also offers laboratory services.
What Bloomberg Intelligence says:
“PPD is one of the largest contract research organizations, with scale in clinical, preclinical and central lab end-markets. The marriage of PPD with Thermo’s Patheon manufacturing unit would create a compelling end-to-end offering for biopharma customers, with compelling financial metrics.”
— Jonathan Palmer, health-care analyst
Click here to read the research
Meanwhile, health-care deal making overall has been on a tear, with companies announcing more than $160 billion of transactions this year, almost three times the volume in the same period of 2020. In February, Icon Plc agreed to acquire PRA Health Sciences Inc. in a contract-research deal valued at about $12 billion.
PPD was taken public by investors Carlyle Group Inc. and Hellman & Friedman in February 2020. The two private equity firms are still its largest shareholders, holding 38% and 16% of the stock respectively, according to data compiled by Bloomberg.
Barclays Capital and Morgan Stanley served as financial advisers to Thermo Fisher. JPMorgan Securities is the exclusive financial adviser for PPD, and Simpson Thacher is its legal adviser.
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