Life sciences giant eyeing purchase of CRO
Thermo to Buy PPD
Thermo Fisher Scientific Inc. of Waltham, Massachusetts, is finalizing a deal to buy PPD, a contract research organization (CRO), based in Wilmington, North Carolina, in a $17.4 billion cash-and-debt deal. Under terms of the deal, Thermo Fisher will pay $47.50 per share of PPD stock in cash. That represents a 24% premium to the closing price of PPD stock on Tuesday. In addition, Thermo Fisher will take on $3.5 billion in net debt.
The two companies could finalize a deal as soon as this week. Thermo Fisher’s market value is reported to be $187 billion, while PPD’s is about $13.6 billion. This purchase would be the latest example of a merger or acquisition among companies that run clinical trials and provide other services for pharmaceutical companies.
PPD, a CRO, also provides laboratory services. PPD reported $4.7 billion in revenue last year, a 16% increase. Its net income tripled to just above $160 million.
The contract-research industry has expanded in recent years as pharmaceutical companies pour money into developing new cancer and other treatments. While CROs were hurt as pharmaceutical trials were disrupted in the early days of the pandemic, activity has been returning, augmented by pharma- and government-funded studies testing COVID-19 drugs and vaccines. Analysts have said that the industry is on track to benefit further from a heightened interest in treatments and preventive measures for any future pandemics.
Thermo, of Waltham, Mass., sells lab equipment, chemicals and tests, among other life-sciences services and products. It had $32 billion in sales last year, a 26% increase. The shares have risen significantly over the past several years and are up nearly 50% in the past 12 months alone. Through its Patheon business, acquired in 2017, Thermo already provides services including clinical-trial logistics, and buying PPD would augment that.
Thermo has been actively seeking acquisitions. In March 2020 it agreed to buy molecular-diagnostics company Qiagen NV for about $10.1 billion. Thermo then increased the bid but in August ended the agreement after failing to get shareholder approval. Thermo currently has in excess of $10 billion in cash.
In February, Icon PLC stated its intention to buy rival PRA Health Sciences Inc. for $12 billion. In March, Laboratory Corp. of America Holdings said that it hired bankers to review the company's structure. Analysts expect that it might could explore a separation of its drug-development unit Covance.
FactSet related that two private-equity firms are significant owners of PPD: Hellman & Friedman LLC owns 38% of the company, while Carlyle Group Inc. holds 16%. The two companies agreed to take PPD private in 2011 before it returned to the public markets in a February 2020 IPO.
PPD’s shares took a sharp dive in the early days of the pandemic along with much of the market, but they have since rebounded and were trading at about $39 apiece Wednesday afternoon, up from around $30 a share at their debut. The stock rose more than 13% after The Wall Street Journal reported on the possibility of a deal. On the stock market Thursday, Thermo stock rose 3.4% to 494.38. PPD stock jumped 6.5% to 45.80.