Biotech Values

[DewDiligence]

Barron’s says TMO is cheap, but caveat emptor:

http://online.barrons.com/news/articles/SB50001424127887323949604580122480638944038

Capital raised by biotech’s…exploded from $900 million in 2012 to $6.4 billion last year, and is on pace for another $5 billion to $6 billion this year… Much of that money has yet to be spent. That's excellent news for a host of companies that provide research for hire…or sell science gear, from beakers to gene sequencers. Among companies in this last group, Thermo Fisher Scientific is gaining market share, paying down debt, and cutting costs…

…Thermo Fisher Scientific is the product of a 2006 purchase of Fisher Scientific, a supplier of lab consumables, by smaller Thermo Electron, a device maker. The company has made more than 20 acquisitions since 2009, including a $15 billion buyout of DNA specialist Life Sciences, which closed in February [#msg-96746277]. Revenue is expected to total $16.9 billion this year, which makes Thermo more than twice as large as its nearest competitor, the life sciences and diagnostics wing of Danaher (DHR). [PKI, which I used to own, has the third-largest business of this kind.]

Although not in the same vein as VRX, TMO is a roll-up company, and hence it’s dangerous to rely on non-GAAP EPS metrics that exclude “restructuring” costs following acquisitions, as these costs are an inherent part of the business model.