UPDATED: Another big CRO deal has landed as Thermo Fisher acquires PPD for $17.4B
Consolidation among big CRO players is continuing to churn.
Following a Wednesday afternoon report from the Wall Street Journal saying a deal was close, Thermo Fisher has announced plans to acquire PPD for $17.4 billion. WSJ had reported that the parties could wrap up an agreement as soon as this week. It’s the second CRO M&A deal in as many months, following the Icon-PRA Health Sciences deal in late February.
Thursday morning, Thermo Fisher announced the transaction would account for $17.4 billion in cash plus an assumption of about $3.5 billion in net debt. That total represents a per share price of $47.50, good for a 24% premium on PPD’s closing price from Tuesday afternoon.
In a statement, Thermo Fisher CEO Marc Casper said:
Pharma and Biotech is our largest and fastest growing end market, and our customers value us as a strategic partner and an industry leader. The acquisition of PPD is a natural extension for Thermo Fisher and will enable us to provide these customers with important clinical research services and partner with them in new and exciting ways as they move a scientific idea to an approved medicine quickly, reliably and cost effectively. Longer term, we plan to continue to invest in and connect the capabilities across the combined company to further help our customers accelerate innovation and drive productivity, while driving further value for our shareholders.
In the wake of WSJ’s report, PPD $PPD shares rose 12% before the market closed Wednesday afternoon, and it was up another 3% after hours. Thermo Fisher’s stock $TMO had largely been down for the day and closed down 1.4%.
As part of the merger there were lots of cost “synergies” that Thermo Fisher plans to realize — likely resulting in significant cuts over the next three years. Thermo Fisher said it plans to save $75 million over that time period from cuts. They also expect an additional $50 million in “revenue-related synergies.”
Thermo Fisher is hardly new to these types of deals, coming a long way from its start as an R&D instruments and materials company selling things like lab equipment. Back in 2017, Thermo Fisher bought Patheon — a major contract manufacturer — to start providing clinical trial services and logistics.
Then last month, the company dropped $600 million to shore up its manufacturing supply chain in the wake of a sharp rise in Covid-19 work. Funds were directed toward its short-term Covid-19 projects and more than double its capacity for the future.
Though taken private about a decade ago, PPD went public again in February 2020 in a $1.62 billion IPO that at the time was the largest of the year. The company had been looking to capitalize not only on an increase in outsourcing and R&D spending, but growth in the biotech sector as a whole.
Most of the IPO funds went toward redeeming bonds, which were issued in a recapitalization project engineered by its biggest private equity backers in 2017, its S-1 said. In addition to its role as a CRO, PPD also offers laboratory services.
Contract research M&A had seen significant moves several years ago, but largely cooled off in the years leading up to the pandemic. That all changed in February with the Icon-PRA deal, a merger that combined the 5th- and 6th-largest CROs by 2020 revenue to create the 2nd-biggest CRO. The cash and stock deal totaled roughly $12 billion.