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Thermo Fisher (TMO) Completes Acquisition of Leading CRO
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Thermo Fisher Scientific Inc. (TMO - Free Report) recently completed its colossal $17.4-billion acquisition of PPD, Inc. Notably, PPD is a renowned global contract research organization (CRO) providing clinical research services to the biopharma and biotech industry.
PPD will be integrated into Thermo Fisher's Laboratory Products and Services segment.
Per Thermo Fisher’s management, the addition of PPD's leading clinical research services expands the company’s value proposition for its biotech and pharmaceutical customers, strengthening its work in bringing life-changing therapies to market that benefit patients worldwide.
Strategic Significance of the Deal
The combination will create one of the biggest drug-testing companies in the United States. The acquisition of PPD will expand Thermo Fishers’ global reach in the attractive, high-growth clinical research services industry.
PPD will bring a proven drug development platform, excellent patient recruitment capabilities, strong laboratory services and a complementary reputation for excellent quality and service, enhancing Thermo Fisher's offerings.
Financial Significance of the Buyout
The acquisition deal is estimated to contribute $1.50 to Thermo Fisher's adjusted earnings per share in 2022. The details regarding the impact of the transaction in 2021 will be provided during the company’s fourth-quarter earnings call in early 2022.
Image Source: Zacks Investment Research
By year three following the close, Thermo Fisher anticipates realizing total synergies of about $125 million, comprising about $75 million of cost synergies and about $50 million of adjusted operating income benefit from revenue-related synergies. PPD's net debt of approximately $3 billion will be assumed by Thermo Fisher as part of the deal. At the closing of the transaction, all assumed debt will be retired.
Industry Prospects
Per a report published in MarketsandMarkets, the contract research organization services market is expected to see a CAGR of 10.2% during 2021 to 2026. Factors such as rising investment in pharmaceutical R&D to drive CROs services market, a growing number of clinical trials, and the increasing prevalence of orphan and rare diseases are driving the market.
Given the substantial market prospects, Thermo Fisher’s latest buyout of PPD seems well-timed.
Notable Developments
In December 2021, Thermo Fisher introduced a significant expansion of the K-12 ReadyCheckGo COVID-19 testing solution in Texas in partnership with Color Health. The program, which was developed in agreement with the Texas Department of State Health Services, is open to all school districts in the state, with 32 districts currently onboarding the testing solution and more expected to join.
In November 2021, the company confirmed that the emerging B.1.1.529 or omicron variant had no impact on its polymerase chain reaction (PCR) TaqPath COVID-19 Combo Kit and TaqPath COVID-19 CE-IVD RT-PCR Kit, which test for SARS-CoV-2, thereby facilitating accurate test results. These tests enable early detection of cases that may include the omicron variant (identified as a "variant of concern" by the World Health Organization), which is crucial in tracking and understanding the novel variant's spread throughout South Africa and the world.
Share Price Performance
The stock has outperformed its industry over the past year. It has rallied 37.5% compared to the industry’s growth of 9%.
Zacks Rank and Key Picks
Currently, Thermo Fisher carries a Zacks Rank #2 (Buy).
Other top-ranked stocks in the broader medical space are Varex Imaging Corporation (VREX - Free Report) , AMN Healthcare Services, Inc. (AMN - Free Report) and West Pharmaceutical Services, Inc. (WST - Free Report) .
Varex, carrying a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 5%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 115.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Varex has outperformed the industry it belongs to in the past year. VREX has gained 73.1% versus the industry’s 2.2% fall.
AMN Healthcare, carrying a Zacks Rank #1, has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 19.5%, on average.
AMN Healthcare has outperformed its industry over the past year. AMN has gained 66% versus the 57.2% industry decline.
West Pharmaceutical, sporting a Zacks Rank #2, has a long-term earnings growth rate of 27.6%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 29.4%.
West Pharmaceutical has outperformed its industry over the past year. WST has rallied 62.9% versus the industry’s 15.3% rise.
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Thermo Fisher (TMO) Completes Acquisition of Leading CRO
Thermo Fisher Scientific Inc. (TMO - Free Report) recently completed its colossal $17.4-billion acquisition of PPD, Inc. Notably, PPD is a renowned global contract research organization (CRO) providing clinical research services to the biopharma and biotech industry.
PPD will be integrated into Thermo Fisher's Laboratory Products and Services segment.
Per Thermo Fisher’s management, the addition of PPD's leading clinical research services expands the company’s value proposition for its biotech and pharmaceutical customers, strengthening its work in bringing life-changing therapies to market that benefit patients worldwide.
Strategic Significance of the Deal
The combination will create one of the biggest drug-testing companies in the United States. The acquisition of PPD will expand Thermo Fishers’ global reach in the attractive, high-growth clinical research services industry.
PPD will bring a proven drug development platform, excellent patient recruitment capabilities, strong laboratory services and a complementary reputation for excellent quality and service, enhancing Thermo Fisher's offerings.
Financial Significance of the Buyout
The acquisition deal is estimated to contribute $1.50 to Thermo Fisher's adjusted earnings per share in 2022. The details regarding the impact of the transaction in 2021 will be provided during the company’s fourth-quarter earnings call in early 2022.
By year three following the close, Thermo Fisher anticipates realizing total synergies of about $125 million, comprising about $75 million of cost synergies and about $50 million of adjusted operating income benefit from revenue-related synergies. PPD's net debt of approximately $3 billion will be assumed by Thermo Fisher as part of the deal. At the closing of the transaction, all assumed debt will be retired.
Industry Prospects
Per a report published in MarketsandMarkets, the contract research organization services market is expected to see a CAGR of 10.2% during 2021 to 2026. Factors such as rising investment in pharmaceutical R&D to drive CROs services market, a growing number of clinical trials, and the increasing prevalence of orphan and rare diseases are driving the market.
Given the substantial market prospects, Thermo Fisher’s latest buyout of PPD seems well-timed.
Notable Developments
In December 2021, Thermo Fisher introduced a significant expansion of the K-12 ReadyCheckGo COVID-19 testing solution in Texas in partnership with Color Health. The program, which was developed in agreement with the Texas Department of State Health Services, is open to all school districts in the state, with 32 districts currently onboarding the testing solution and more expected to join.
In November 2021, the company confirmed that the emerging B.1.1.529 or omicron variant had no impact on its polymerase chain reaction (PCR) TaqPath COVID-19 Combo Kit and TaqPath COVID-19 CE-IVD RT-PCR Kit, which test for SARS-CoV-2, thereby facilitating accurate test results. These tests enable early detection of cases that may include the omicron variant (identified as a "variant of concern" by the World Health Organization), which is crucial in tracking and understanding the novel variant's spread throughout South Africa and the world.
Share Price Performance
The stock has outperformed its industry over the past year. It has rallied 37.5% compared to the industry’s growth of 9%.
Zacks Rank and Key Picks
Currently, Thermo Fisher carries a Zacks Rank #2 (Buy).
Other top-ranked stocks in the broader medical space are Varex Imaging Corporation (VREX - Free Report) , AMN Healthcare Services, Inc. (AMN - Free Report) and West Pharmaceutical Services, Inc. (WST - Free Report) .
Varex, carrying a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 5%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 115.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Varex has outperformed the industry it belongs to in the past year. VREX has gained 73.1% versus the industry’s 2.2% fall.
AMN Healthcare, carrying a Zacks Rank #1, has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 19.5%, on average.
AMN Healthcare has outperformed its industry over the past year. AMN has gained 66% versus the 57.2% industry decline.
West Pharmaceutical, sporting a Zacks Rank #2, has a long-term earnings growth rate of 27.6%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 29.4%.
West Pharmaceutical has outperformed its industry over the past year. WST has rallied 62.9% versus the industry’s 15.3% rise.