Thermo Fisher has flourished amid the pandemic, but can it keep the ball rolling when Covid-19 comes to a close?
Amid a gangbusters 12 months for contract manufacturers, Thermo Fisher Scientific saw a massive revenue bump in Q1 — and that’s without considering its $17.4 billion buyout of contract researcher PPD. But Covid-19 won’t last forever, and analysts wonder when and if Thermo Fisher will come back to earth.
On an earnings call with analysts Thursday, CEO Marc Casper pointed to a string of recent investments — the PPD acquisition obviously the largest — as a sign that Thermo is leveraging its gushing cash flow to put itself in a position to succeed even once the pandemic comes to an end. The company posted 59% revenue growth on the quarter to $9.91 billion.
The CDMO has been best known for its Covid-19 diagnostics — and that segment of its business grew about 69% from the same time period last year — but its life sciences unit is where the firm has made the most progress. That unit reported revenue growth of 137% in Q1 to $4.2 billion.
But with such rapid growth, can Thermo Fisher sustain it? Casper told analysts:
When I think about post pandemic … one of the things we said back a year ago is that we’d manage the company in such a way in that we’d exit the pandemic with a meaningfully stronger industry leadership then when we went in and obviously we went in with a very strong position. And if i think about the actions we’ve taken, we’ve accelerated our investments in operating expenses, R&D, and (capital expenditures) to be a faster growing company organically exiting the pandemic.
Two weeks ago, Thermo Fisher announced it would acquire PPD for $17.4 billion in cash plus an assumption of about $3.5 billion in net debt. In February, it acquired molecular diagnostic company Mesa Biotech and its easy, affordable PCR testing platform for flu, respiratory syncytial virus (RSV) and Strep A.
In January, Thermo Fisher acquired European viral vector manufacturer Henogen SA from Novasep for $878.2 million.
The company has made “significant investments” in pharma services and bioproduction services, Casper said, and that capacity will eventually be able to shift away to non-Covid-19
“We didn’t necessarily say ‘let’s put a load of money where the pandemic is, but rather where’s the best opportunities to make a difference for your customers long term,” Casper said. “And so the first thing we expected … whatever the timeline of the pandemic, is that we will be a faster growing company at that same point.”
On top of its far-looking investments, Thermo Fisher has also made short-term moves to shore up supply in the face of Covid-19. In March, the company dropped $600 million into its supply chain to handle short-term Covid-19 projects and more than double its capacity for the future. Thermo Fisher also announced a drastic increase in production of AstraZeneca’s Covid-19 vaccine at its Belgium plant in February.
In addition to its established and refreshed base of PCR instruments, Thermo Fisher’s lab plastics business has expanded its capacity to help alleviate supply chain issues. Through the pandemic, the company says it’s been able to demonstrate its ability to scale up its mRNA vaccine manufacturing. Soon, that same technology will be used to create vaccines for other viruses, Casper said.