Thermo Fisher buys Qiagen after all

Despite insisting last year that it was no longer for sale, Qiagen falls to Thermo Fisher for $10bn.

At the end of last year Qiagen said it was no longer interested in a buyout, none of the offers it had received having been good enough. Thermo Fisher Scientific, always the favourite as potential buyer, must have sweetened its offer: today it said it was buying the Dutch diagnostics group for $11.5bn, including the assumption of $1.4bn of net debt.

Thermo Fisher will have to put some effort into straightening out the Qiagen business which had a catastrophic third quarter, culminating in the resignation of its chief executive. But Thermo Fisher made a success of its $14bn acquisition of Life Technologies in 2013, and might be able to repeat the trick.

Qiagen’s third quarter of 2019 was so bad that the company swung from a $45m net profit a year earlier, and $60m in the second quarter, to a $161m net loss. It was also forced to admit defeat over its next-generation sequencing tech, GeneReader, cancelling the programme (Storm-tossed Qiagen plots a course to higher growth, October 8, 2019). 

Infection and information 

Despite its various woes, Qiagen has a reasonable underlying business. Its sales are forecast to grow at 11% per year out to 2024, with its molecular diagnostics for infectious diseases doing particularly well. These detect viral or bacterial nucleic acids in blood or other samples – the company has developed a test kit for the new coronavirus that is being trialled in hospitals in China. 

Qiagen's forecast annual sales ($m)
Segment 2019 2020 2022 2024 CAGR
Applied testing 140 140 153 167 +4%
Academia 348 360 386 414 +4%
Pharmaceutical industry 302 306 332 354 +3%
Molecular diagnostics 737 817 1,009 1,222 +11%
Total company revenues 1,526 1,622 1,879 2,156 +7%
Source: EvaluateMedTech.

Thermo Fisher does have some infectious disease assays, but its microbiology testing segment is only forecast to grow at 2% per year, EvaluateMedTech data show. 

Thermo Fisher is “super excited” about getting its hands on Qiagen’s bioinformatics technology, executives said on a conference call today. This software could be applied to Thermo’s flagship IonTorrent next-generation sequencer line, analysing and interpreting the vast amounts of data these machines deliver, to help researchers and healthcare workers make decisions.

Some technology, however, might be too complementary. Another of Qiagen’s strengths is sample preparation, with a 60% market share, while Thermo Fisher has another 20%. With various regulatory bodies, including the US FTC and the UK’s Competition and Markets Authority, flexing their muscles recently this overlap could attract their attention. 

Thermo nuclear

The deal is comfortably the largest medtech acquisition announced so far this year, and this record could stand for some time, even if the rumoured purchase of Livanova by Medtronic comes off. Thermo Fisher is paying around 19 times Qiagen’s estimated 2021 Ebitda, and says that the move will be immediately accretive to its bottom line.

The transaction is funded with a combination of cash, new debt and bridge financing, and at €39 ($43) per share came in pretty much at the expected price (Who will buy Qiagen? November 20, 2019). When Qiagen said in November that it was fielding offers its shares were tracking at €37-39. The stock duly tanked when the group said it wanted to remain independent

As well as any benefits that might come from complementary technologies, Thermo expects to wring savings from the deal – $200m by the third year after the close, $150m of which will come from cost synergies; the rest will come in the form of adjusted operating income benefit from revenue synergies, the company says.

This might sound optimistic, but Thermo Fisher has met these kinds of expectations before. Both the Life acquisition and the $4.2bn purchase of the electron microscopy specialist FEI in 2016 hit their cost synergy targets. If the deal does not run into antitrust problems it could work nicely for Thermo.

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