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Thermo Fisher Adds to Specialty-Dx Business with $3.5B Phadia Buy

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Thermo Fisher Scientific plans to acquire allergy- and autoimmunity-diagnostics company Phadia from private equity firm Cinven for €2.47 billion ($3.5 billion), Thermo said this week.

The acquisition, expected to close in the fourth quarter, will expand Thermo Fisher's specialty-diagnostic business. During a conference call discussing the deal, CEO Marc Casper said the buy would increase the division's annual revenues to roughly $1.9 billion from around $1.4 million.

Uppsala, Sweden-based Phadia generated €367 million in revenue last year driven mostly by sales of its ImmunoCAP allergy-testing products and its EliA autoimmunity-testing platform. Once integrated, Phadia, which employs around 1,500 people worldwide, will become part of Thermo's specialty diagnostics business within its Analytical Technologies segment.

ImmunoCAP's immunoassays are designed to detect a patient's IgE response against a panel of common allergen components. EliA, meantime, is used to detect IgG, IgA, and IgM autoantibody isotypes linked to autoimmune diseases such as rheumatoid arthritis, connective tissue diseases, and celiac disease.

Casper also noted that the purchase would allow Thermo Fisher to leverage Phadia's existing relationships with physicians to introduce its own "specialty biomarker assays and other clinical diagnostics to a broader customer base."

Thermo Fisher's current diagnostics portfolio focuses on three main areas: tissue-based cancer diagnostics, microbiology tests for detecting infectious diseases and food-borne pathogens, and specialty assays including drugs-of-abuse testing and biomarker-based tests.

"Phadia is a strong fit strategically with our existing specialty-diagnostic platform, significantly increasing our penetration of a high-growth market," Casper said during the call. In an accompanying statement, he said that "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."

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.

However, Phadia generates the vast majority of its total revenues — around 75 percent — outside of the US, primarily in Europe and Japan, and has a three-year compounded annual growth rate of 10 percent.

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

Thermo Fisher expects anticipates the acquisition to add between $.26 and $.30 to its adjusted earnings per share next year. The deal also is expected to generate $35 million in cost and revenue synergies in 2014, $10 million of which will be 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 repaid when the deal closes, Thermo Fisher CFO Pete Wilver said during the call. That debt is built into the deal's total cost.

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