Thermo Fisher: ‘$700m COVID CapEx easily repurposed post-pandemic’

An additional $700 million capacity buildout to meet COVID-related demand will serve the longer-term non-pandemic-related biopharma market, says Thermo Fisher

An unprecedented third quarter saw Thermo Fisher report a 36% rise in revenues year-on-year to $8.52 billion across all its segments. Its Life Sciences Solutions Segment – which includes its biosciences and bioproduction business units – saw a 101% rise to $3.42 billion, while its Laboratory Products and Services Segment – which includes drug manufacturing – increased by 19% to $3.11 billion.

COVID-19 was cited as the primary contributor to the revenue rise in both of these divisions, as Thermo Fisher has seen a huge surge in demand for testing kits, instruments, sample preparation and reagents in its biosciences businesses, along with therapy and vaccine production supplies recognized in the bioproduction business, as industry steps up its efforts against the novel coronavirus.

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In response to this tailwind, CEO Marc Casper said his firm has “committed more than $700 million in CapEx to add global capacity to meet COVID-related demand” on a conference call discussing results. Net capital expenditures are now expected to be approximately $1.5 billion for 2020.

“We’re significantly adding capacity across our biosciences, bioproduction, and former services businesses, creating an infrastructure that will position us incredibly well for the future,” he said. “In our biosciences business, we’re significantly investing in our global capacity to increase the manufacturing of enzymes and nucleotides used in vaccines,” without giving specific details.

He noted the CapEx is on top of government-funded projects. This includes a US Biomedical Advanced Research and Development Authority (BARDA) investment to support an expansion of Thermo’s sterile injectables manufacturing capacity announced in May, and a partnership with the Economic Development Board of Singapore announced last week to expand its sterile fill and finish capacity by building its first facility there.

Post-pandemic

Though COVID-19 seems to be gong nowhere very fast, at some stage the development and investment in therapies, vaccines and diagnostics for the virus will subside.

As such, Casper was asked how its significant CapEx will fare once the pandemic abates, and whether there will be a risk of having too much capacity.

“Pretty much everything that you are seeing [from a CapEx point of view] we are going to repurpose longer term to other markets that are not pandemic-related,” he told investors. “Some of them are very easy to visualize…we have commitments for the expansions that we have done for vaccines and therapies, and we are also already getting commitments from customers – large customers that basically say when that demand is freed up, we want to put other products in that demand.”

As the therapies and vaccines related to pandemic unwind, Thermo Fisher will backfill the capacity “because it’s perfectly useable,” he continued.

“We are going to have a stronger manufacturing footprint, more cost-effective, more modern than we had going into [the pandemic]. We’ll meet the surge from COVID, and then we’ll go out and we’ll backfill that with other demand. So, I think the actions we are taking is setting us up for a bright future with growth.

“Opportunities that really were more conceptual pre-pandemic are now realities through the actions we are taking, and that’s why we are so excited for the long-term future that we have.”