Thermo Fisher allots $125m to expand CDMO buy Brammer

The gene therapy space is growing at an annual rate higher than 25% says Thermo Fisher, which recently agreed to buy CDMO Brammer Bio for $1.7 billion.

Thermo Fisher announced last month the agreement to buy contract development and manufacturing organization (CDMO) for $1.7 billion (€1.5 billion), propelling the life sciences services firm into the gene therapy production space.

While the deal has not yet closed (expected by end of Q2 2019), Thermo Fisher said on its first quarter financials call (transcript here) it has increased its 2019 capital expenditure guidance to between $925 million and $975 million to accommodate an extra $125 million earmarked to expand Brammer Bio’s capabilities and take advantage of the high growth gene therapy market.

Thermo Fisher has allocated $125m in its 2019 CAPEX guidance for intended acquisition Brammer Bio. Image: iStock/bankrx

“Brammer Bio has a unique position supporting gene cell therapies because it has expertise in a number of different virus types. Their capabilities cover viral vectors used in a majority of gene therapy clinical trials. These therapies hold great promise for patients who are battling diseases like hemophilia, ALS and Parkinson’s. This is why the market is so exciting and growing at a rate of better than 25% annually,” Thermo Fisher’s CEO Marc Casper told investors.

“The gene therapy area is one that our customers broadly are very excited about, investing significantly and have been asking us for help. We already have a reasonable exposure with our biosciences and bioproduction business in serving that customer base.”

He added: “We looked at the landscape and Brammer as the industry leader and the very broad set of capabilities they have in viral vectors gave us the confidence and that’s the right platform to build off of.”

Customer mix

Brammer works with numerous biotech and biopharma firms, including Sangamo Therapeutics, which recently expanded its partnership with the CDMO to secure access to dedicated large-scale adeno-associated virus (AAV) manufacturing space.

The expansion in Brammer will feed the high demand for gene therapy production and diversify the CDMO’s customer mix, according to Casper.

“The interesting thing is because of the capacity expansion that we’re excited about and the customer relationships we have, that’s going to diversify that base of customers further over time,” he said.

“The pricing in the short term in this market is attractive because there’s a real shortage of capacity. Many contracts have reservation fees associated with it, and that helps with the industry economics. But as the industry scales, you get the economic benefits from the scale leverage. And therefore, as capacity comes online, the economics improve further because of scale.”

Guidance raised, no more M&A in 2019?

For the first quarter 2019, sales for the group grew 5% year-on-year to $6.1 billion, with the life sciences division pulling in $1.6 billion, a 7% increase.

The robust growth in the quarter along with the Brammer buy has driven the firm to raise its guidance for the full year, up from between $24.88 billion and $25.28 billion to between $25.17 billion to $25.47 billion.

CFO Stephen Williamson told stakeholder that “with the exception of the Anatomical Pathology business divestiture and the Brammer Bio acquisition, both of which are expected to close in Q2, our guidance does not include any future acquisitions or divestitures.”

Leave a Reply