(AOF) – Eurofins Scientific has signed an agreement to sell its digital analysis business (Digital Testing) to Stirling Square Capital Partners for an amount of 220 million euros, without debt or cash. This activity represents approximately 1% of the group’s turnover and employs more than 600 people. Eurofins’ Digital Testing business was established in 2015 and has grown significantly in size and profitability over the past few years.
This development was made possible by its organic growth, strategic investments and targeted acquisitions aimed at expanding its range of digital testing tools and services as well as its global reach.
Eurofins Digital Testing provides testing, quality assurance and technical analysis services for digital systems, devices and content as well as cybersecurity.
Dr Gilles Martin, CEO of Eurofins, said: “Over the past seven years, Eurofins Digital Testing has successfully grown to become a recognized leader in its field. To facilitate its future development, we have decided to transfer ownership of the business in Stirling Square. We wish the Eurofins Digital Testing team continued success.”
For Eurofins, the proceeds of the sale will support the group’s capital allocation priorities, including capital expenditures in laboratories, digitization and acquisitions aimed at strengthening its leadership in bioanalytical tests and in other fields of life sciences.
The completion of the transaction is subject to the approval of the competent authorities and is expected to occur before the end of 2022.
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Key points
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worldwide, created in 1987, in bio-analysis involved in biopharmacological services, food products, environmental tests, clinical diagnostics, tests for consumers and the offer of test technologies for manufacturers;
– International ramp-up of business, €6.7 billion, generated by Europe for 20% of sales and North America for 32%;
– Business model based on the networking of markets by “spoke” laboratories supplying simple tests and by “hub” competence centers, on innovation, on external growth and on the ownership of real estate assets;
– Capital controlled by the founding Martin family (33% of the capital and more than 50% of the voting rights), Gilles Martin being Chief Executive Officer;
– Financial solidity with stable net debt at €2.2 billion, i.e. a leverage effect of 1.2, free cash flow of €1 billion and €1.5 billion in cash.
Challenges
– Strategy based on three pillars: autonomy of operational entities –900 laboratories in 54 countries, innovation and penetration of the Asian market;
– Innovation strategy integrated into the business model: old and solid partnerships with research institutions, giving a competitive advantage / extension of BioPrint databases / LIMS technological support to the network of laboratories and support for start-ups (201 in twenty years) / reinforcement of cybersecurity;
– Environmental strategy aiming for carbon neutrality for 2025 via: the generalization of the measurement of emissions generated by each of the sites / the use of carbon credits, participation in the Livelihood Carbon fund / circular management;
– Strong scientific and strategic legitimacy and portfolio of + 300,000 analytical methods;
– Largely resilient activity (75% of revenues, excluding Covid) and high barriers to entry.
Challenges
– Activity marked by strong seasonality, with sluggish beginnings of the year and sensitivity to harsh climatic conditions;
– After the strong contribution of the Covid business (€1.4 billion in revenue in 2021), the expected ramp-up of the Asian markets, biopharmaceuticals, in vitro diagnostics, life sciences;
– Integration of the 38 acquisitions made in 2021 and the 8 made in January-February 2022;
– Targets, raised, including acquisitions: 2022: revenue of €6.5 billion and operating profit of €1.5 billion / 2023: revenue of €6.55 billion and operating profit of €1.58 €bn / 2024: revenue of €7.25bn) and operating profit of €1.75bn;
– Suspension of the dividend.
An inevitable race for new blockbusters
The patent for Merck’s star product, the cancer drug Keytruda, which accounts for more than 35% of its sales, expires in 2028. Despite the loss, since 2019, of the patents for its three star products (Avastin, Herceptine, Rituxan) Roche was able to renew its portfolio by bringing new molecules to market. However, the discovery and launch of new drugs are increasingly expensive. AstraZeneca spends about $6 billion a year on R&D in a pharmaceutical industry where the life of a patent only lasts ten to fifteen years. This leads laboratories to withdraw from certain activities. Thus J&J, Pfizer, GSK and, no doubt, Novartis soon prefer to refocus on specialty drugs and abandon any ancillary activity.