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Thermo Expanding Specialty Dx Business with $3.5 Billion Phadia Acquisition

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Thermo Fisher Scientific announced this morning that it has signed a definitive agreement to acquire to acquire allergy and autoimmunity diagnostics firm Phadia from private equity firm Cinven for €2.47 billion ($3.5 billion).

The acquisition will significantly expand Thermo Fisher's specialty diagnostics business from current annual revenues of around $1.4 billion to roughly $1.9 billion, Thermo Fisher President and CEO Marc Casper said during a conference call Thursday morning. Uppsala, Sweden-based Phadia had 2010 sales of approximately €367 million, driven by its ImmunoCAP brand of testing products for allergies and its EliA platform for autoimmunity testing.

Thermo Fisher's current diagnostics portfolio focuses on three key areas including tissue-based cancer diagnostics, microbiology technologies for detecting pathogens in food and infectious diseases, and specialty assays, such as drugs of abuse testing and its biomarker business.

"Phadia is a strong fit strategically with our existing specialty diagnostic platform, significantly increasing our penetration of a high-growth market," Casper said.

"From a market perspective, Phadia has significant growth opportunities in the large, under-penetrated US market, and can leverage our strong presence in emerging geographies to further accelerate growth," he added in a statement. "This transaction is another great example of our acquisition strategy to strengthen our position in growing markets, expand our customer offerings and create value for our shareholders."

Phadia generates around three quarters of its total revenues outside of the US, primarily in Europe and Japan, and it has had a three-year compounded annual growth rate of 10 percent. According to Casper, the US allergy testing market is valued at around $500 million, with only around 20 percent of that market utilizing blood-based tests rather than skin-prick testing. He noted that Phadia's business has been growing at around 20 percent in the US over the past three years.

Phadia's tests are based on immunoassay technology and additional assays could be placed on Phadia's current platforms, Casper said during the call. He added that Thermo Fisher's biomarker business, over time, "will explore opportunities to leverage that large installed base."

Phadia currently has more than 5,000 systems installed in more than 3,000 labs worldwide, according to Thermo Fisher.

Thermo Fisher expects to close the deal in the fourth quarter this year and anticipates the acquisition to be immediately accretive to its adjusted earnings per share by $.26 to $.30 in 2012. The deal also is expected to generate $35 million in cost and revenue synergies in 2014, with $10 million generated next year.

Thermo Fisher is funding the acquisition with approximately $500 million in cash on hand and around $3 billion in debt financing from Barclay's Capital. Phadia has a little more than $1 billion in debt, which will be paid down upon close, Thermo Fisher CFO Pete Wilver said on the call. That debt is built in to the total consideration for the deal.

Phadia, which has around 1,500 employees worldwide, will become part of Thermo's specialty diagnostics business within its Analytical Technologies segment.

Thermo Fisher was reported yesterday to be one of the leading bidders for Gen-Probe. According to The Wall Street Journal, which also said that Thermo was a likely buyer for Phadia, the other bidders are Life Technologies and Novartis.

The Phadia deal comes on the heels of Thermo Fisher completing its $2.1 billion acquisition of Dionex and its announcement that its has acquired Sterilin, a provider of single-use plastic products, for an undisclosed amount.

In early Thursday trade on the New York Stock Exchange, shares of Thermo Fisher were up 4 percent at $65.17.