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Thermo Fisher Acquires GlaxoSmithKline’s Drug Production Site


In an effort to expand its pharmaceutical services footprint internationally, Thermo Fisher Scientific Inc. TMO signed a definitive agreement with GlaxoSmithKline plc GSK to acquire a drug substance manufacturing site in Cork, Ireland.

The deal has been inked at a value of 90 million euros and is expected to close by the end of 2019, subject to the fulfillment of customary closing conditions.

The site will enable Thermo Fisher to meet customer demand for the commercial production of complex active pharmaceutical ingredients (APIs).

Acquisition in Detail

The Cork manufacturing site is known for producing highly specialized APIs, which are used for the treatment of diseases like pediatric cancer, depression and Parkinson’s. Thermo Fisher informed that the site is equipped with a number of facilities, which will enable process development, scale-up and physical characterization of APIs.

Post the acquisition, Thermo Fisher will continue to manufacture APIs for GlaxoSmithKline under a multi-year supply agreement and it intends to use the site for developing and producing complex APIs for other customers as well.

Undoubtedly, this transaction aligns with Thermo Fisher’s strategy of enhancing the capabilities of its Pharma Services through the right balance of capital investments as well as mergers and acquisitions.

On completion of the deal, the site will be incorporated with the Laboratory Products and Services segment of Thermo Fisher’s Pharma Services business.

Market Prospects

Per Mordor Intelligence, the global API market was valued at $165.74 billion in 2018. This is projected to reach $236.7 billion by 2024, witnessing a CAGR of 6.1%. Hence this acquisition is well-timed for Thermo Fisher.

Recent Investments

Of late, Thermo Fisher has been making a few investments, which are expected to boost its Pharma Services business.

Recently, Thermo Fisher closed the acquisition of Brammer Bio, which will reinforce the company’s Contract Development and Manufacturing Organization (CDMO) capabilities.

In March 2019, Thermo Fisher announced a $150-million investment to expand its sterile fill-finish sites in Italy and North Carolina. These projects are aligned with the company’s strategy of deploying CapEx in its Pharma Services business.

Price Performance

Over the past year, Thermo Fisher’s stock has outperformed the industry it belongs to. The stock rallied 24.2% against the industry’s decline of 1.9%.

Zacks Rank and Stocks to Consider

Thermo Fisher currently carries a Zacks Rank #3. (Hold). Two better-ranked stocks in the broader medical space are Masimo Corporation (MASI) and CONMED (CNMD), each currently carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Masimo’s long-term earnings growth rate is projected at 16.1%

CONMED’s long-term earnings growth rate is expected at 13.3%.

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