Evolution M&A Analysis: Thermo Fisher to Acquire Affymetrix for $1.3 billion

Thermo Fisher Scientific (NYSE:TMO) have announced an agreement to acquire Affymetrix (NASDAQ:AFFX) for approximately $1.3 billion, or $14.00 per share, in cash. The acquisition was unanimously approved by the boards of directors for both Thermo Fisher and Affymetrix, with Thermo Fisher CEO & President Marc N. Casper noting that the acquisition “will strengthen [Thermo’s] leadership in biosciences” and create new market opportunities for the Company’s genetic analysis portfolio.

Casper further noted that “Affymetrix’s antibody portfolio will significantly expand our offering in the fast-growing flow cytometry market. In genetic analysis, Affymetrix’s technologies are highly complementary and present new opportunities for us in targeted clinical and applied markets.”

Frank Witney, president and chief executive officer of Affymetrix, shares Casper’s enthusiasm, noting that “We are excited about the opportunity to combine our portfolios and strengthen our position in high-growth markets such as single-cell biology, reproductive health and AgBio. We look forward to working closely with the Thermo Fisher team to ensure a smooth transition and integration.”

Dr. Frank Rinaldi, Director of Market Intelligence & Innovation at Evolution Bioscience, has adopted a more grounded approach to evaluating the acquisition, noting that “The question of whether or not this is a good acquisition for Thermo is one that only time will answer. The share price is often a barometer of initial market reaction, and stock trading has been favourable.” TMO’s stock was up 0.34% at close of trading on the NYSE.

This is the second company that Affymetrix CEO Frank Whitney has sold to Thermo Fisher Scientific, with the previous being Dionex Corporation in 2010. In recent years, Affymetrix modified their business strategy to create a more revenue-stream diversified company by focusing offerings and services into emerging sectors such as translational medicine, molecular diagnostics and applied sciences, such as AgBio. According to Dr. Rinaldi, “the need to do this was based on the fact that its GeneChip expression platform was, and is, continuing to face intense competition from other array players as well as the impact of NGS, a trend which has resulted in YOY revenue decline from their peak figures reported in 2008.”

The strategy has been successful to a certain extent, Affymetrix’s Genetic and Clinical analysis Business unit now constitutes 41% of its revenue and the business unit growth for the first three quarters of 2015 is around 10%. However, from the top line revenue perspective the continued erosion of the GeneChip platform, which now constitutes 17% of revenue down from 21%, is likely to result in overall growth of 3%.

From a market/product perspective, the acquisition positions Thermo Fisher as a player in the microarray sector. Dr. Rinaldi predicts that “if Thermo can accelerate the growth in the Genetic Analysis and Clinical Application unit via its greater marketing resources, and stem the erosion of GeneChip by strategic bundling with its extensive range of up and downstream offerings, the acquisition will be highly successful. Affymetrix, as part of its differentiation strategy has developed some notable offerings: Axiom, OncoScan, and Procarta Plex products are outstanding tools for the market. It will be interesting to watch how they progress under Thermo’s stewardship.”

A fundamental question is how Thermo plan to incorporate eBioscience, which was acquired by Affymetrix in 2012, as well as the company’s flow cytometry offerings. Dr. Rinaldi expects that Affymetrix “will be a valuable addition to support the development of Thermos’s excellent Attune platform. Thermo’s ultimate goal of breaking BD’s dominance in the sector will be no easy task, and the more Thermo can offer this customer the greater the opportunity to secure an increased share of the market.”

“In summary only time will tell if this is a good acquisition for Thermo’s stakeholders, as defined by its shareholders and customers,” concludes Dr. Rinaldi. “However, there is significant synergy and attractive offerings to suggest it is.”

Follow Evolution Global Talent Attraction on Twitter, Facebook and LinkedIN to keep up-to-date with news and trends from the biotechnology, biosciences, medical device, IT and Intellectual Property industries. Read Thermo Fisher Scientific’s full press release regarding the Affymetrix acquisition here.