Thermo Fisher To Acquire PPD
By Ed Miseta, Chief Editor, Clinical Leader
In an effort to create greater customer and shareholder value, Thermo Fisher Scientific has announced plans to acquire clinical research organization PPD for a cash purchase price of $17.4 billion. The purchase will also include the assumption of approximately $3.5 billion of net debt.
In an investor presentation shared by the company, Thermo Fisher notes the purchase will establish the company as a global leader in the attractive and fast-growing clinical research services industry. The company states its acquisition of PPD is a natural extension of its capabilities to meet the needs of pharma and biotech, the company’s fastest growing end market. The deal is expected to create meaningful benefits for Thermo Fisher’s clients.
The deal also makes Thermo Fisher a potential one-stop shop for clients, enabling them to move from a scientific idea through to clinical trials and eventually an approved medicine. The combination of the two companies is also expected to meaningfully reduce both the time and cost of bringing innovative new therapies to market.
A Growing Industry
Clinical research services continue to be a growing and profitable industry. The $50 billion global industry is growing by mid-single digits and that growth is not expected to slow. A report issued by research firm Industry Standard Research in 2020 showed pharma companies anticipating their spending on Phase 2 and Phase 3 trials to increase in the next four years across company sizes. Thermo Fisher’s presentation notes pharma customers, in order to drive efficiencies, are also looking to consolidate their work to fewer, more trusted partners.
An additional factor driving the growth in clinical research services is the increased percentage of clinical trials being generated by biotech firms. Those smaller companies rely on CROs to an even larger extent than pharma companies, and about half of their outsourcing goes to large CRO partners. At the same time, for years clinical trials have been increasing in complexity, which requires more specialized capabilities from partner organizations.
With the increase in new oncology treatments, personalized medicines, and cell and gene clinical trials, that complexity is not expected to decrease anytime soon.
A Formidable Partner
PPD is currently ranked as the sixth largest CRO in the industry, behind LabCorp/Covance, IQVIA, Syneos Health, Parexel International, and PRA Health Sciences. The North Carolina-based service provider with 26,000 employees posted revenue of $4.682 billion for 2020, an increase of 16.1% over the prior year. Drug Development, laboratory, and lifecycle management are the company’s three areas of focus, with clients in pharma, med device, government, and academia. Eighty-one percent of the company’s revenue comes from clinical development services while the other 19% is through laboratory services.
One factor that had to be of interest to Thermo Fisher is PPD’s international reach. Fifty-six percent of revenues are generated in North America with another 29% coming from EMEA and 11% from APAC. The company has a network of 165 facilities in almost 50 countries and conducts clinical trials in over 100 countries. PPD has supported over 400 drug approvals in the last five years and has worked with all Top 50 pharma companies and more than 300 biotech firms. The acquisition will certainly provide Thermo Fisher with an increasing presence in its largest and fastest-growing end market.
Complete The Value Chain
While the news seems good for the company and shareholders, what will it mean to Thermo Fisher’s customers? The company expects the benefits to be significant. One compelling argument would have to be Thermo Fisher’s ability to now support the journey of its customers from scientific idea through to a regulator-approved medicine.
First in the drug development sequence is the company’s ability to research new ideas to enable scientific discoveries. Thermo Fisher is able to support all aspects of life sciences research. Next is clinical trials, enabled by the PPD acquisition. The company will now be able to provide clinical trial management throughout the drug development process, including the ability to assess safety, efficacy, and healthcare outcomes of novel molecules. The company can also develop and manufacture drug products and support the scaling-up of manufacturing capabilities. Those capabilities were brought onboard in 2017 when Thermo Fisher acquired Patheon, a contract manufacturing organization.
The approval of the acquisition has been approved by PPD shareholders with 60% delivering their approval by written consent. The acquisition is expected to close by the end of 2021.