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Thermo Fisher Buying Pharma Contract Development and Manufacturing Firm Patheon for $7.2B

NEW YORK (GenomeWeb) – Thermo Fisher Scientific said today it is acquiring contract development and manufacturing organization (CDMO) Patheon for roughly $7.2 billion.

Durham, North Carolina-based Patheon offers drug development and delivery solutions to pharmaceutical and biopharmaceutical firms. The purchase provides Thermo Fisher with access to the $40 billion CDMO market, the company said.

Thermo Fisher is planning a tender offer to acquire all issued and outstanding shares of Patheon for $35 per share in cash. The $7.2 billion purchase price includes the assumption of roughly $2.0 billion in debt.

Patheon, which has some 9,000 employees and facilities across North America and Europe and generated approximately $1.9 billion in revenue in 2016, will become part of Thermo Fisher's Laboratory Products and Services segment.

Thermo Fisher said it expects the deal to increase its adjusted earnings per share by $0.30 in the first full year after close, and that it expects to realize total synergies of approximately $120 million by the third year following the close, which will consist of approximately $90 million of cost synergies and approximately $30 million of adjusted operating income benefit from revenue-related synergies.

Tim Evans, a senior analyst with Wells Fargo, said in a note to investors that though there isn't a direct overlap with Thermo Fisher's current operations, the firm's bioproduction unit already supplies drug firms. He added that both firms "embrace a one-stop shop mentality, giving the deal some cultural logic. … the pharma end market has been [Thermo Fisher's] best growing end market for five years running, so it makes sense the company would want to invest more aggressively in that end market."

The firms expect to close the deal by the end of this year.