"Addicted" mergers and acquisitions can not extricate themselves, the global life sciences giant cultivation technique!

There is a saying in the industry, "The more upstream you go, the safer
the water seller is.
" ”

Following the "fever" of biological drugs and CXOs, the "water sellers" behind them, the upstream life science industry, have become the relay of the next round of the market, and have attracted much attention
under the "cold winter".

Since 2020, 16 A-share upstream companies have been listed, more than twice
the cumulative number in the past 18 years.
The average amount of capital raised in 2021 is 2.
046 billion yuan, which is the most active period
of capital in recent years.

▲The number of A-share IPOs and the average amount raised by life science upstream enterprises in recent years As of September 2022, from China Merchants Securities

Global competition, cruel and fair
.
In this key area closest to science and farthest from the downstream, the localization rate is still stretched, and international giants such as Danaher and Thermo Fisher have dominated the market for many years, and it is difficult for latecomers to look back
.
To fall behind is to learn
.
After dismantling the development path of the global TOP enterprises, we found that although there are thousands of ways to start a business, almost every growth is inseparable from mergers and acquisitions, which is the core path
.
According to incomplete statistics, in the past 30 years, there have been thousands of mergers and acquisitions in the global life sciences field, both successful and unsuccessful, and mergers and acquisitions have become the basic business strategy
of the life sciences industry.
In the future, Chinese life science companies will go global, in addition to polishing their own research and development skills, mergers and acquisitions must also be one of the
must-haves.
Then, it is necessary to
study the preferences of global TOP companies and the way of M&A integration.

Continued life sciences mergers and acquisitions

The life sciences industry is special, with many subdivisions and no low
barriers.

Take the bioreactor in the production of biological drugs as an example: the bioreactor is a multidisciplinary high-tech product that integrates machinery, fluids, control, biology and so on, and requires years of technical accumulation to develop finished products, and such products are countless
in the field of life sciences.

Therefore, except for the impact of major events such as mergers and acquisitions or epidemics, it can hardly cause too many waves in the rankings
.

▲Global life sciences business TOP 5 enterprises

(1) Exchange rate: 1 euro = 1.
0477 US dollars
.

(2) The division and definition of life science business of each enterprise is different, and the above proportion is calculated according to the annual report of each enterprise, and is for reference
only.

Among the global life sciences giants, the business composition is diverse, if only the statistics of the life sciences business, in 2021, from the perspective of revenue:

Thermo Fisher is the first with a life sciences business with revenues of approximately $21.
7 billion, topping the list for the ninth consecutive year
.

Danaher second, life sciences is a major business, 2021 revenue of about $14.
96 billion, a growth rate of 41%.

Agilent's third, 79% of its business is in the life sciences sector, with revenue of approximately $5.
02 billion in 2021, +17%
year-on-year.

85% of Sartorius' business is in the life sciences sector, with revenues of $3.
45 billion, driving overall high growth
.

For the above industry giants, the ranking is closely related to the ability of mergers and acquisitions
.

According to M&A data included in Bloomberg, Thermo Fisher has made the highest number of acquisitions among comparable companies, with M&A spending accounting for 18%
of revenue in the past decade.
The myth
of ten times the stock price was created.

Danaher is also a well-known "M&A king" in the industry, and has carried out more than 400 mergers and acquisitions
since its establishment more than 30 years ago.
The market capitalization has increased by more than 7 times in the
past decade.

Agilent was initially spun off from Hewlett-Packard, starting as a semiconductor business, and through nearly 30 mergers and acquisitions, it was reborn as a life sciences company
.
Over the past decade, stocks have risen nearly 500%.

Sartorius originated in 1870 in Germany a precision instrument workshop, more than 150 years, from a small balance product to complete the transformation of the leading group of life sciences, unlike the frequent sales of peers, Sartorius in the past 20 years only about 10 mergers and acquisitions, but has achieved great success, the market value has increased by more than
30 times in ten years.

In contrast, the S&P 500 rose more than 200% over the same period, while the price of gold rose by only 19%.

It can be seen that mergers and acquisitions are not only an effective way for life science companies to maintain their industry position, but also a powerful lever to leverage the growth of stock prices and market value, so that life science giants can indulge in this path and enjoy it
.

Last year, Thermo Fisher acquired CRO giant PPD for $17.
4 billion, sounding the clarion call
for large-scale mergers and acquisitions after the epidemic.
On the other hand, as the "low-hanging fruit" of the biopharmaceutical sector is basically harvested and will increasingly rely on high-value solutions provided by the upstream, M&A is bound to continue to be active
in the coming years.

▲In the past 20 years, the price-to-sales ratio of major companies in the field of life sciences has been compared with the standard price-to-sales ratio of 500, from Industrial Securities

M&A, integration, spin-offs, and subverting the track step by step

The strong mergers and acquisitions of life science companies have not only made the capital market realize the huge potential of this field, but also clearly have the ability to disrupt the track and market integration
.

Although the motivation of corporate mergers and acquisitions is diverse, no matter what the considerations, mergers and acquisitions are carried out around the core of "the company's own development", and the process can be roughly divided into three links:

M&A: Seize new market heights, acquire advanced technologies, and extend your own business lines
.

Integration: Promote internal integration, lock in the direction
of development according to market demand.

Split: Focus on the longboard, maintain proper scale, and split at the right time to maintain flexibility
.

M&A: Directly hit the leading enterprises in the field of segmentation

As a leading enterprise, walking in the forefront of technology is a necessary law, and mergers and acquisitions are a weapon to seize the high ground of new markets
.
Global giants have always been generous, from 0 to 1 to a new field, full of uncertainty, mergers and acquisitions of leading companies will obviously improve the success rate
.
In the case of Thermo Fisher, the predecessor of the company is Thermo Electron, founded in 1956, mainly developing instruments for monitoring environmental pollution, and on the way to becoming the global top 1 in life sciences, some mergers and acquisitions of subdivision leaders include:

In 2006, Thermo Electron merged with Fisher Scientific to form Thermo Fisher Scientific as head suppliers
of reagent consumables.

In 2011, it acquired Diane and became an industry leader in
chromatography.

In 2021, the acquisition of PPD, among the top 5 in the global CRO industry.
.
.

、

▲ Thermo Fisher stock price and important mergers and acquisitions, data sources: Wind, China Merchants Bank Research Institute

From the chart above, these acquisitions fully reflect its ability to capitalize, its ambition to enter new markets, and its forward-looking power for the global life sciences market, which is closely related
to Thermo Fisher's path to leadership.
"Big Brother" homework is basically clearly placed here, although the subdivision of the leader "expensive", or triggered many industry latecomers to follow the trend of learning
.

In July 2021, Perkin Elmer acquired BioLegend
, the world's leading brand of life sciences antibodies and reagents, for approximately $5.
25 billion.
It was PerkinElmer's biggest deal
ever.

In August, Sartorius announced the acquisition of a 100% stake in Albumedix, a global leader in recombinant human albumin products and technologies, for around £
415 million.

Integration: The puzzle to perfect the "one-stop" solution

Acquisitions can efficiently expand the product portfolio, and then how can good synergies be achieved within the company? This tends to follow industry trends and corporate strategies
.
There are many SKUs in the life sciences field, and it is difficult to expand the market as a product provider alone, so it is a trend
in the current market to integrate the proceeds of mergers and acquisitions and provide "one-stop" solutions.

For example, in 2013, Thermo Fisher Fisher acquired Life Technologies, the second largest company in gene sequencing market share, for $13.
6 billion, and then developed the life sciences business as an independent business focus, and since then, through a series of mergers and acquisitions to optimize the product portfolio, providing a full range of solutions for vaccines, monoclonal antibodies, CGT and other therapies, the proportion of revenue increased rapidly, in 2021, its life sciences business surpassed laboratory products and services to become the company's largest business (40%).
And the gap
between the second place is constantly widening.

Danaher is an excellent "empowering" integrator, and its industry-renowned DBS methodology (Danaher Business System) is committed to cultivating acquisition targets into the industry's top two ace players, achieving performance and valuation climbing
.

In September, Danaher integrated Cytiva, which was acquired in 2020 (formerly GE Healthcare Life Sciences) and Pall in 2015, into an $8.
5 billion biotechnology group dedicated to building a full-process service system
that serves the biomolecular development phase, clinical trial, and commercialization.
Danaher calls this a "zero headache" customer experience
.

▲Danaher DBS schematic diagram, from: company announcement

In recent decades, Sartorius has acquired companies that are also related to the industrial chain of life science tools such as disposable process bags, bioreactors, cell culture media, chromatography, and filtration systems
.
For example, in April 2020, the acquisition of part of Danaher's life sciences business was also supplementing the "puzzle" and moving towards
a full-process solution.

▲In the past 20 years, the proportion of Sartorius's bioengineering solutions business has been increasing, and it has now become the largest business from: China Merchants Securities

Spin-off: Focus on the longboard and maintain proper scale

After a large number of acquisitions, companies need to clarify their business layout and divest non-key businesses to pave the way
for subsequent growth.
This is most evident in Danaher, where the rise from a trust company to a top global provider of life sciences was inseparable from a decisive divestiture
of unrelated businesses.
The most recent divestiture occurred on September 15, when Danaher announced that it would spun off its Environment and Applied Solutions business unit into a separate public company, and Danaher President and CEO Rainer Blair said, "Danaher will become a leader more focused on science and technology, committed to innovation and having a profound impact on human health.
"

As a master of fine management, Danaher seems to know very well that "the point is over" - maintaining the right scale and spinning off the potential business to the public is not only conducive to consolidating the position of the life sciences field, but also broadening the financing channels for the next round of acquisitions, and this story runs through almost all of Danaher's growth stages
.

In 2016, it spun off Fortive, a diversified industrial growth company, followed by the acquisition of molecular diagnostics company Cepheid
for $4 billion in cash.

In 2019, Danaher spun off its dental business, Envista, before acquiring Cytiva
for $21.
4 billion.

▲The brand currently owned by Danaher Group is from: Danaher Guanwei

Chinese companies: on the right path to go far

China is making its mark
on the global life sciences stage.

According to Frost Sullivan's calculations, the total scale of China's life science support industry will reach about 50 billion yuan in 2020, and the market size
of about 80 billion yuan in 2024.

On the way from China to the world, there is no doubt that mergers and acquisitions are also one of the key ways for the rise of domestic production
.

In 2015, the state-owned Wanrun Co.
, Ltd.
debuted at the International Life Sciences M&A Arena and acquired the American reagent company MP Bioproducts
for 850 million yuan.

In 2021, Mindray Medical acquired HyTest, a world-renowned supplier of professional IVD raw materials, for 532 million euros, shaking the "lifeblood" of the industry and becoming one of the top two professional
raw material manufacturers.

In July, Sinopharm considered acquiring life science tool company BBI Life Sciences to enhance its DNA synthesis capabilities, which could be valued at more than $1 billion
, according to foreign media reports.

At the current stage, domestic enterprises are still in the early stage of growth, the development methods are diverse, and it is not uncommon to adopt product agency, investment and mergers and acquisitions, strategic cooperation and other ways to expand product channels
.

For example:

Sinopharm Chemical Reagent Co.
, Ltd.
and Titan Technology have chosen the agency road and introduced a number of overseas well-known enterprise agent products
.

Through flexible investment and M&A strategies, Donic Biologics has created a one-stop solution for biopharmaceuticals
.

The more windy it is, the more calm
you have to be.

The case of Thermo Fisher Fisher tells us that the "original intention" of mergers and acquisitions is to consolidate the position of the industry, and we must not pursue short-term capital appreciation and sacrifice the future
.
After all, only by walking on the right path can you reach the far away you want to go
.

Thermo Fisher Scientific's predecessor, Thermo Electron, is the world's No.
1 scientific instrument company; it became the top three after merging with Fisher Scientific in 2007.
In 2013, after the acquisition of Life Technologies, it returned to the first place and has maintained it to this day
.

▲ Thermo Fisher Fisher has changed its ranking in the past 20 years

In such a rare opportunity of the times, we expect that the domestic life science industry can change gorgeously, grow a professional brand with core competitiveness, and go to the world stage
.