Recently, Thermo Fisher Scientific (TMO) acquired the microbiology business Trek Diagnostic Systems from Magellan Biosciences. However, financial terms of the deal were not disclosed. Trek Diagnostic, with $34 million of revenues in 2010, provides microbiology solutions including blood culture, micro-organism identification and antibiotic susceptibility testing (AST) products.
The company believes that the acquisition complements its existing portfolio of microbiological testing technologies. Trek Diagnostic caters to pharmaceutical and clinical laboratory markets. It will be integrated with Thermo Fisher’s Analytical Technologies segment.
During the first quarter of 2011, Analytical Technologies recorded $1.18 billion in revenues, up 9% (organic growth of 5%) compared to the year-ago period. However, excluding the headwind related to Japan stimulus funding, organic growth during the quarter was 10% driven by robust performance of Clinical Diagnostics, specifically the Biomarkers business. Moreover, the Instruments business catering to industrial and applied markets delivered strong year-over-year growth during the last quarter.
A strong balance sheet enables Thermo Fisher to go for suitable acquisitions. Thermo Fisher exited the last reported quarter with $2.8 billion in cash and cash equivalents compared to $917.1 million at the end of December 2010. The increase in cash balance was primarily due to the funds raised to finance the Dionex acquisition and free cash flow, partially offset by share buybacks. To better focus on its core businesses, the company had sold Athena Diagnostics and Lancaster Laboratories resulting in total proceeds of $940 million.
Viewing the huge potential in the emerging markets, Thermo Fisher has been focusing on these regions and also recorded robust growth during the last quarter. Moreover, banking on PPI and PPI-Lean projects and cost control, operating margin has been following an improving trend. However, any kind of economic turbulence could negatively impact the company’s sales based on financial constraints and customers deferring their buying decisions.
We have a ‘Neutral’ recommendation for Thermo Fisher.
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