Thermo Fisher to acquire Patheon for $7.2 billion

In an acquisition not expected to close until near year-end, Thermo Fisher is bidding to acquire the Durham, NC contract development and manufacturing organization (CDMO) for $5.2 billion, plus assumption of $2 billion of Patheon’s debt. The offer price represents a 35% premium over last week’s close of Patheon’s stock. Both companies stock rose on May 15, the day of the announcement, signaling a degree of stockholder acceptance. Nearly three-quarters of Patheon stock is held by JLL Partners, a private equity firm, and DSM, the Dutch chemicals conglomerate. (Interestingly, Patheon’s legal domicile is in the Netherlands, and as Thermo Fisher is a US company, the deal represents a reversal of the ‘tax inversion’ action of life sciences mergers of the past few years, where biopharma companies sought a lower corporate tax rate by acquiring a European company, then moving their HQ to the acquired company’s location.)

Thermo Fisher, which styles itself as “the world leader in serving science” started as the merger of Thermo Electorn and Fisher Scientific in 2006, and has been an active acquirer ever since. Last year, it acquired Affymetrix (genetic analysis), FEI Co. (microscopy) and Finesse Solutions (bioproduction technology). Its business units include Applied Biosystems, Invitrogen and Unity Lab Services—all involved in aspects of life sciences research. With Patheon, it adds API and finished pharmaceuticals production. Patheon’s $1.9-billion revenue in 2016 will bring the company’s total annual revenue to nearly $20 billion.

Back in November, Jim Mullen, Patheon CEO, told Pharmaceutical Commerce that the company’s longterm plan was to help consolidate the fragmented CMO space, which it measures at around $40 billion globally, and to provide a wider range of formulation and manufacturing services for both small-molecule and biologic production. "Thermo Fisher is the leading supplier to the biopharmaceutical industry, supporting research, clinical trials and production," according to a company statement. "It has become a trusted outsourcing partner by providing clinical trials logistics services over the past decade. Combining these capabilities with Patheon's CDMO services will allow Thermo Fisher to be a stronger partner for pharmaceutical and biotech customers. "