Thermo-Fisher Merger is Big Business as Usual

Does the economic “sweet spot” of the emerging New Biology Economy lie in integration? That is, for a life-sciences tools company to be successful -- and not irrelevant -- in serving the on-the-cutting-edge life sciences, laboratory and healthcare markets, does it need to not only provide beige-box machines, as well as services and consumables, but also be able to create “solutions” that cross all competitive boundaries – as well as managing computing, facilitating automated sample prep, data analysis, and creating simpler, and cheaper automation?

Likely so, at least in a broad sense of the market, and Monday's announcement of the intended $11 billion marriage of Thermo Electron and Fisher Scientific seems to illustrate this. Subject to regulatory and shareholder approval, the two firms will become Thermo Fisher Scientific, based in Waltham, Mass., under the leadership of Marijn Dekkers, Thermo's president and chief executive. It will be a giant in the field.

The new entity will blend Thermo's high end instrumentation, notably its mass specs, with Fisher's enormous reach in the lab market.

In a presentation Monday, the companies projected a complete presence in today's paradigm of biomarker research (sample prep, analysis, interpretation) with instruments and reagents and consumables.

But, really this is a data point in an industry that is apparently ready for a roll-up, a consolidation in search of economic efficiencies – and not one about quickening the process of the commercialization of life-sciences innovation or enabling regulatory understanding to speed the eventual approval of emerging biomarkers. Those are all challenges that will likely be generational in scope.

Thermo Fisher Scientific will be a substantial competitor with a broad reach but will not have an easy path against the other molecular biology tool companies that we consider to be the New Biology Economy players -- muscular competitors like General Electric, Roche, Agilent Technologies and Applied Biosystems at the top tier, then a next tier of companies -- Beckman Coulter, Bio-Rad Labs, PerkinElmer – followed by reagent players including Invitrogen, Qiagen, and Sigma-Aldrich as well as instrument makers like Waters Corp.

And, that is leaving out companies like Quest, LabCorp and LabOne, who could be the real integrators of the future, or relatively small innovators like Affymetrix and Caliper, or pharma giants Pfizer, Sanofi, Glaxo, J&J, Merck, AstraZeneca, Novartis, Bristol Myers Squibb, Wyeth, Abbott or Lily, or biotechs like Amgen or Genentech. Not to mention Siemens and Philips, or even Gen-Probe.

These competitors are making multiple plays into the fuzzy future that is the new biology economy – the market that is evolving from the advances made from the sequencing of the human genome and the emerging fields of proteomics and metabolomics all rolled under the umbrella term of systems biology, or integrated biology.

Consider the financial question of reducing the cost of sequencing a whole genome, which as of August 2005 was estimated at $2.2 million, but needs to be lowered to around $1,000 in order to have a significant impact on healthcare. Will this new company have any impact on that? Not likely, but when that goal is reached, it is likely to be there with “solutions” to take advantage of it.

Likely, there will be other rollups, and smaller innovators too. This bears watching and we look forward to doing just that.