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Thermo CEO Sheds Light on Sales Strategy for Thermo Fisher; Plans to Refine Pharma Tactics

When Thermo Electron and Fisher Scientific close their merger later this year, Fisher's sales force will be able to teach their new colleagues at Thermo a thing or two about building customer relationships, especially at big pharma.

Three days after disclosing plans to merge their companies last Monday (see BioCommerce Week 5/10/2006), Thermo and Fisher's CEOs last week got down to the business of selling the deal to existing and potential investors.

Speaking at the Robert W. Baird Growth Stock Conference in Chicago, Thermo chief Marijn Dekkers, who will become CEO of the new company, and Fisher head Paul Montrone, who will step down but remain an advisor, offered some insight into the way Thermo Fisher Scientific plans to sell some of its products when the merger closes.

During a breakout session, Dekkers said Thermo will have to get accustomed to Fisher's method of selling through what he called a "routine standard contract basis." He said whereas Thermo has traditionally sold its products, especially big capital instruments, in a one-off fashion, Fisher, especially for mid-tier instruments and consumables, would set up dedicated and ongoing contracts.

Dekkers said this strategy "is where we will have to adjust the way we sell," and it "could be an upside" of the merger. "There will be a refinement in the selling methodology" wherein Fisher's sales force will sell Thermo products in this way.

Pharma "would like to be able to buy more things under contract. It would be more efficient [for them] … rather than having 200 scientists make 200 individual purchases."

He said selling in such a way will enable Thermo's sales reps to gain access higher up the administrative chain at its customers, especially big pharma, which would embrace the strategy. Pharma "would like to be able to buy more things under contract," Dekkers said. "It would be more efficient [for them] … rather than having 200 scientists make 200 individual purchases."

Dekkers stressed that such a strategy is inappropriate for big-ticket tools such as mass spectrometers, but will work for consumables and even mid-tier instruments such as centrifuges. He said it's these products "in the middle" that lend themselves well to sales "reevaluation."

During the conference session preceding the breakout discussion, Dekkers also shed some light on the $200 million in so-called "synergies" the companies expect. He said $150 million of that would come from cost savings, including consolidating administrative activities, "rationalizing" manufacturing operations, and using the combined company's mass to get better purchasing deals.

The remaining $50 million will come from revenue opportunities, especially cross-selling; expanded geographic reach; and the ability to penetrate new, though undisclosed, markets.

Dekkers said Thermo Fisher expects to see $75 million of that $200 million in 2007, during which time he said the company will generate between $9.2 billion and $9.3 billion in total revenue. He added that Thermo Fisher's long-term financial goals are to grow organic revenue between 6 percent and 8 percent annually.

He said 56 percent of the combined company's offerings will be consumables, 28 percent will be instruments, and 16 percent will be software and services. On the market side, Dekkers said 45 percent of Thermo Fisher's customer base will be in life sciences, 36 percent will be from industrial/environmental segments, and 19 percent will be in health care.

He said markets with "attractive growth opportunities" include drug discovery, proteomics research, pharmaceutical services, molecular diagnostics, immunohistochemistry, and environmental regulatory compliance.

— Kirell Lakhman ([email protected]

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