IBO’s 2021 Company of the Year: Thermo Fisher Scientific

IBO’s company of the year for 2021 is Thermo Fisher Scientific. During 2021, Thermo Fisher balanced the demands of recent and pending major acquisitions (see IBO 4/16/21), the unpredictable COVID-19 marketplace, the roll out of multiple new products and a commitment to the fundamentals of its business strategy. IBO selects a company of the year based primarily on three criteria: financial performance, strategic and operational improvements and developments, and innovative product introductions.

Describing a unique challenge the company faced in 2021, Dan Shine, Senior Vice President and President, Analytical Instruments, for Thermo Fisher, told IBO, “The changing demands of the pandemic response globally continued to be the greatest challenge industrywide in 2021, including our significant scale-up of vaccine production.” The company mobilized its range of resources. “We addressed this by continuing to rely on our PPI business system and our mission-driven culture, which is what enables us to pivot quickly for customers, make strategic investments in new capacity, and have clear visibility into our supply chains and the global infrastructure so we can be dynamic in our response.”

Thermo Fisher Scientific Organic Revenue Growth

*Base business organic revenue growth

Financial Metrics

In 2021, Thermo Fisher’s performance exceled in key financial metrics: adjusted EBITDA rose 27.0% to nearly $13 billion; ROIC rose from 18.9% to 19.8%; adjusted gross margin increased 40 basis points to 51.6%; and free cash flow grew 3.2% to $7.0 billion. At the same time, the company was able to spend $2.5–$2.7 billion on net capital expenditures and $24 billion on M&A, as well as complete a share buyback and dividend increase.

The company’s revenue growth was broad based in a year when COVID still created market uncertainty. In 2021, Thermo Fisher posted revenues of $39,211 million, a 21.7% increase (see IBO 2/15/22). Excluding COVID-19-related sales, acquisitions and currency effects, revenue still grew double digits, jumping 14%. In addition, three of four segments reported double-digit organic revenue growth: Life Sciences Solutions sales increased 23%, Analytical Instrument revenue rose 17%, and sales for the Laboratory Products & Biopharma Services segment increased 15%. The company’s smallest division, Specialty Diagnostics, recorded a single-digit sales increase and a 5% rise in organic sales. The company also posted double-digit growth in all three major regions, North America, Europe and Asia Pacific and Rest of World.

The year also marked the expansion of Thermo Fisher into a new business area. At year end, the company closed its $17.4 billion purchase of PPD (see IBO 12/8/21), adding clinical research to its biopharma services business. But the company kept debt within the limits it had set. As of December 31, 2021, the company’s gross debt-to-adjusted EBITDA was 2.7x. In January 2022, Moody’s Investors Service updated the company’s senior unsecured long-terms rate from a Baa1 to an A3 rating citing the strong cash flow, sales growth and industry dominance.

Thermo Fisher Scientific Adjusted EBITDA

COVID-19 Response

COVID-19 was, of course, an important contributor to Thermo Fisher’s 2021 growth, adding over $9 billion in revenue. The size and nature of the company’s COVID-19 business—consisting of products for vaccine R&D and manufacturing as well diagnostic tests—indicated the company’s ability to successfully adjust to the demands of the pandemic. The company’s offerings also enabled it to address demand on multiple manufacturing fronts and across customer bases, as Thermo Fisher was able to provide both its own production services as well as solutions for its customers’ manufacturing needs.

Throughout the year Thermo Fisher also maintained a high-profile presence in COVID-19 testing market, continuing to deploy its diagnostic solutions by drawing on its long-time expertise in PCR and lab automation. In this way, the company was able to build upon established technologies in order to serve a brand new market as it had done in 2020. Among the product introductions were multiple new testing offerings, such as the Amplitude Solution for high-volume testing and the EUA flu–COVID-19 combo kits.

Building on Capabilities

Although 2021 was a major year for Thermo Fisher’s COVID-related business, this did not detract from the company’s broader perspective. “The investments we made in 2021 to support customer demand across our biosciences, bioproduction and pharma services businesses are fueling exciting opportunities for our pharma and biotech customers,” noted Mr. Shine. “During the pandemic, our ability to scale up to meet these customers’ needs under dynamic conditions further strengthened our relationships with them and elevated our trusted partner status.”

In this way, the company’s COVID-19 investments are designed to also generate future growth. “Underlying demand for our products and services remains strong, and, if or when needed, we can transition from COVID-related activity to other diagnostic and therapeutic areas as customer needs evolve,” remarked Mr. Shine. “Our 2021 results were strong, yet another year of excellent financial performance, and we are equally enthusiastic about our ability to execute successfully in 2022.”

No doubt the bounce back in laboratory and general economic activity in 2021, following the lockdowns of 2020, helped boost revenue growth. But the strength of Thermo Fisher’s results show it was able to successfully capitalize on this renewed demand and navigate supply chain and component shortage issues.

Biopharma Investments Pay Off

The success of the company’s strategy of focusing on the biopharma end-market was reinforced in 2021 as Thermo Fisher’s sales in the sector grew more than 25% to over $20 billion. Sales growth was also widespread, encompassing its bioscience, bioproduction and pharma services businesses. The growth of the biopharma business reinforced the opportunities created by offering products for drug discovery through manufacturing, which provide Thermo Fisher with scale in the biopharma end-market and a unique profile as a provider of both life science tools and contract manufacturing.

In regard to future market growth in the biopharma market, in 2021 Thermo Fisher expanded its footprint into newer markets, most notably cell and gene therapy, through product introductions, partnerships and facility expansions. Among the introductions were Gibco CTS OpTmizer Pro Serum Free Media, which the company called the first T cell medium designed specifically for allogeneic cell therapy workflows; the Gibco AAV-MAX Helper Free AAV Production System, a complete solution for AAV production; and the PCR-based Applied Biosystems resDNASEQ Quantitative Plasmid DNA-Kanamycin Resistance Gene Kit. Partnerships ranged from manufacturing-related agreements with China-based JW Therapeutics to one with the University of California, San Francisco. The company also invested to increase capacity in key product lines such as single-use technologies and cell culture media

Investments in Established Product Lines

Also in 2021, Thermo Fisher’s track record remained strong for its chromatography, mass spectrometry and electron microscopy franchises. This included major new product introductions for each technology area, such as the release of multiple new systems in its Orbitrap MS line and the launch of a number of electron microscopy upgrades and new systems. Likewise, the company’s bioscience R&D product lines, including its cell culture media, PCR instruments and NGS companion diagnostics development, maintained their momentum. Significant product introductions for high-profile brands included the Gibco Cell Therapy Systems (CTS) NK-Xpander Medium, a GMP-manufactured cell culture medium, and Thermo Scientific Orbitrap Exploris MX for workflows for development through QC. In addition, the company refreshed several of its most well-known product lines, such as the Niton XRF, NanoDrop spectrophotometer, KingFisher automated sample purification instrument, and QuantStudio PCR system, among others. These and other product introductions were a sign of Thermo Fisher’s ability in 2021 to innovate across applications and end-markets despite the demands of COVID-19 on its resources.


Asked how Thermo Fisher’s business strategy in 2021 sets the company up for success in 2022, Mr. Shine summarized 2021’s accomplishment. “In 2021, we continued our industry-leading role in enabling the societal response to the pandemic, mobilizing with speed at scale to enable more than 650 million PCR tests, and support the major vaccine and therapy projects worldwide. We generated more than $9 billion in COVID-related revenue, with $2 billion of that coming from vaccines and therapies.” As he told IBO, “Beyond our COVID-19 response, we continued to execute against our proven growth strategy of developing innovative new products, leveraging our scale in high-growth and emerging markets, and delivering a unique value proposition to our customers. We accelerated investments in commercial capabilities and R&D and allocated $2.5 billion in capital in 2021 to meet customer demand, including expansion of our sterile fill/finish network and adding bioproduction, enzymes, nucleotide, plasmids and lab products capacity.”

Thus, 2021 was especially significant for both current and future growth prospects for Thermo Fisher Scientific. “Our strong performance in 2021 allowed us to drive significant value for all stakeholders and strengthened our long-term competitive position,” said Mr. Shine. “We entered 2022 with great momentum and we are well-positioned for future growth.”

This article originally appeared in the March 1, 2022 issue of IBO, a subscription-based newsletter. For more information on subscribing, click here.