The PharmSource Blog by Jim Miller

ThermoFisher recently lifted the veil of secrecy surrounding its Fisher Clinical Services business unit, at least a little bit. The company has traditionally not revealed much about its development services businesses, beyond alluding to their strong performance and strategic importance. The businesses include Fisher Clinical Services, which is generally thought to be the largest provider of clinical packaging services and Lancaster Laboratories, one of the top brand names in analytical services.

At a recent meeting for stock analysts that follow the company, company executives revealed some of its plans and expectations for FCS. Most importantly, they announced they are building a new clinical packaging facility in India, to be ready in 2008. The new facility reflects their expectation that 20-25% of clinical trial patients will be in India by 2010.

During the analyst meeting, ThermoFisher showed a slide indicating that services represented 9% of the $5.4 billion of revenues in its Laboratory Products and Services segment, or nearly $490 million. Execs didn't provide a more detailed breakdown, but we believe that most of that revenue came from Fisher Clinical Services and Lancaster Laboratories. Some would have also come from Acro Organics, ThermoFisher's customer chemical manufacturing business, and possibly some other service lines. Analysts were told that the services business is growing at a 15-20% annual rate, and is consuming most of the company's capital investment, especially for clinical packaging.

Company execs also said their preference is to focus on organic growth, although there is "some room for acquisitions." Management is not concerned about mergers in the pharmaceutical industry, noting that while there is some initial slowdown in two quarters.

The presentation to analysts confirmed many of our notions regarding the size and direction of Fisher Clinical Services, especially relating to size and rapid growth. The investment in India and the comment about packaging soaking up a significant amount of capital spending indicates that the company is committed strategically to the business. While many observers think of the clinical services as a strong private equity acquisition target thanks to its growth and market-leading position, this seems unlikely today.