CEO Marc Casper told yesterday’s JP Morgan Healthcare Investor Conference his company’s mammoth purchase of life science tools firm Life Technologies last February had raised cash through cost synergies.
Thermo Fisher also gained money to spend from integrating Life’s tools portfolio, broadening the company’s appeal to customers, especially large biopharma firms, he said.
The company freed up further capital from debt repayment and “tax planning initiatives,” Casper told investors.
Now Thermo Fisher plans to “aggressively invest in M&As,” said the CEO, citing the company’s track record of more than 75 acquisitions in the last 10 years.
This bias towards spending spare capital on acquisitions has not changed from the company’s usual philosophy, said Ross Muken, Senior MD of analysts Evercore ISI, “nor has the criteria for deals, with long term value creation as measured by return on capital investment outweighing earnings accretion.”
“M&A has to clearly strengthen the company strategically as well as be very logical [for stakeholders],” Casper told the conference.
He added that Thermo Fishers buys only companies it can grow “more quickly than they would have done as a stand-alone entity.
“Are we the right owner of a business? If we’re accelerating the top line growth of the things we acquire, we’re doing the right job by our shareholders.”
Casper also spoke of a series of product launches to come in 2015, including an RUO NXType sequencing kit which can sequence HLA Class I and II genes in three days.
Finally, emerging markets like China will play a big part in Thermo Fisher’s 2015 growth strategy, he said.
With annual business of $1.25bn, China is Thermo Fisher’s second largest country by revenue after the US, with 4,000 employees.
Although the Chinese government’s spending slowed last year, meaning Thermo Fisher’s growth in this market dropped from more than 20% to single digits, Casper viewed the company’s expanding share as a success in the region.
Thermo Fisher plans to leverage its China experience into neighbouring markets in Southeast Asia and Korea he said, expanding commercial reach as well as a direct presence.