On Monday, GE Healthcare and Thermo Fisher Scientific announced that they had entered into an agreement, which would allow GE to acquire Thermo Fisher’s HyClone cell culture media and sera, gene modulation and magnetic beads businesses. The acquisition will cost GE approximately $1.06 billion and is anticipated to close in early 2014. The combined revenue of the three acquired businesses was approximately $250 million in 2013.
Benefits for GE Healthcare
With the acquisition, GE Healthcare adds significantly to their strategy of providing “end-to-end” technologies for cell biology research, Cell Therapy applications and biopharmaceutical manufacturing. I had the chance to talk with Dr. Nigel Darby, Vice President BioProcess, GE Healthcare Life Sciences, and he shared with me how GE plans to leverage the acquisition to enhance the customer experience and provide start to finish technologies for biopharmaceutical manufacturing.
With Thermo Fisher’s Hyclone, GE adds a company, which has a successful cell culture product portfolio and also has a history of collaborating with customers to create custom media formulations. GE plans to utilize this experience and history of collaboration to expand the existing portfolio and employ a customer driven innovation approach that has been successful for them in other product areas. “In our chromatography business, we worked with customers to develop custom solutions to meet their specific requirements, these custom solutions often served as the basis for developing new standard products where product development could be driven by customer needs,” said Darby.
There will be some product overlap between this acquisition and GE’s 2011 acquisition of PAA laboratories, a European based media and serum supplier. However, one primary advantage is an expanded manufacturing footprint. This allows GE to increase product supply security by providing manufacturing facilities in the US (Hyclone), Asia (Singapore, Hyclone) and Europe (PAA). “The acquisition of Hyclone provides us with a complimentary manufacturing footprint by providing manufacturing sites in three different continents and also enables local supply of products,” said Darby.
Now, how does a company like GE integrate this new acquisition and leverage the different technical groups within GE to deliver an enhanced customer experience through start to finish technologies? One example Dr. Darby shared was the idea of creating an “off the shelf” optimized monoclonal antibody production platform by utilizing the expertise of media development, bioprocessing and downstream purification to work together on processes such as, improving a product’s purity profile, optimizing productivity, or streamlining downstream purification. This kind of optimized off the shelf process could be of particular value to smaller companies and in emerging markets where there might not be the human or capital resources for development and optimization of a manufacturing process. Such an approach would lessen capital investment and could reduce the barrier to entry into the market. Another example Dr. Darby shared was the idea of combining GE’s and customers’ expertise around their processes to provide integrated solutions and either improve specific aspects of the process or optimize the entire process. Outsourcing this kind of optimization project can save time and internal resources.
Benefits for Thermo Fisher Scientific
Selling these businesses moves Thermo Fisher closer to expediting European approval of its pending $13.6 billion Life Technologies acquisition announced last April. European regulators raised concerns that if the Life Technologies acquisition received approval without the divesting of certain businesses, Thermo Fisher would hold too large a portion of the cell culture market. While the U.S. Federal Trade Commission approval is still pending, according to Thermo Fisher’s press release on GE’s acquisition, they are not expecting any additional divestures will be necessary to receive U.S. approval.
Thermo Fisher Scientific has identified several benefits for the acquisition of Life Technologies including the ability to provide complimentary product offerings to their existing product portfolio, particularly in emerging markets. In addition, Life Technologies’ ecommerce platform will be coupled with Thermo Fisher’s existing sales channels to create a powerful commercial infrastructure. The acquisition also creates shareholder value.
One can only see this acquisition as a win for both GE Healthcare and Thermo Fisher Scientific with the expansion of their existing product portfolios and technologies. This acquisition places GE Healthcare in a unique position of being able to provide products for each key biomanufacturing process. While the idea of a product portfolio to address most biopharmaceutical customer needs from start to finish may be a goal of some companies, only a few in the industry have the necessary infrastructure and capital to attempt it. Another company with these resources would be Thermo Fisher with the Life Technologies acquisition.