True CRDMO offering to drive differentiated growth for Thermo, analystTrue CRDMO offering to drive differentiated growth for Thermo, analyst

At CPHI in Milan, Italy last year, biopharma services firm Thermo Fisher showcased its Accelerator Drug Development program. The program intends to offer full and frictionless drug development from preclinical to commercialization by connecting the firm’s contract research organization (CRO) and its contract development and manufacturing organization (CDMO) units.

Thermo Fisher wouldn’t be the first third party drugmaker to push a service that brings both research and development together with manufacturing functions under a unified banner. But unlike the abundance of companies calling themselves “CRDMOs” (something this writer has argued is more a marketing ploy than a differentiated offering), Thermo has the credentials to offer something different in the space.

The life science services firm propelled itself into the CDMO space in 2017 through the addition of large contract manufacturer Patheon (and then doubled down in 2019 by buying Brammer Bio). Subsequently, the firm expanded into clinical research by buying PPD – one of the largest CROs – for $17.4 billion in 2021.

Both deals at the time were treated with some skepticism. “Pushback included lower margins and potential channel conflict,” Tycho Peterson, an analyst from Jefferies, wrote in a note. But the broadened service offering has helped Thermo avoid many of the headwinds that have financially hurt peers in both the CRO and CDMO space, including weaker funding, higher cancellations, and fewer authorizations.

And an expected formal launch of the Accelerator platform will allow Thermo to “continue to reap benefits of the combined one-stop-shop offering, which has potential to drive share gains towards the higher end of the historical range while also building credibility around the mid-term growth algo for the CDMO and CRO business.”

He continued: “In our view, the shift towards a more formalized offering is perhaps overlooked and a key driver of differentiated performance, especially as Thermo leverages the Fisher channel business (~$8 billion revenues) within the broader CRO/CDMO offering (~$15 billion total revenues) to increase wallet share.”

According to Peterson, a formal launch is expected at DCAT in March, following further details from management of how the offering will work, potentially in Thermo’s upcoming Q4 2024 financial call.

“Next quarter, I'm going to really spend some time talking about the magic that we're unlocking on the combination between our pharma services and our clinical research business, and how that really adds differentiated value for our customers in terms of performance,” Thermo CEO Marc Casper told investors in the firm’s Q3 call.

Thermo is scheduled to release its financial results for Q4 and the full year 2024 this Thursday, with a conference call the same day. If the company’s presentation at the recent JP Morgan is to go by, the firm is likely to have performed well in the CDMO and CRO space over the past 12 months and is set to capitalize on this momentum over the next few quarters.