Good morning, ladies and gentlemen, and welcome to today's conference call and webcast to discuss Thermo Fisher Scientific's acquisition of PPB. I would like to introduce our moderator for the call, Mr. Rafael Tejada, Vice President, Investor Relations. Mr. Tejada, You may begin the call.
Thank you and good morning everyone. Welcome to our conference call to discuss Thermo Fisher's acquisition of PPD, which we announced earlier today. On the call with me today is Mark Casper, our Chairman, President and Chief Executive Officer and Stephen Williamson, our Senior Vice President and Chief Financial Officer. You'll find a brief presentation deck In the Investors section of our website thermofisher.com under the section titled Webcasts and Presentations, We'll walk through that deck on the call this morning and after prepared comments, we'll open it up for Q and A. Please note this call is being webcast live And will be archived under the Investors section of our website thermofisher.com under the heading Before we get started, let me briefly cover our Safe Harbor language, which you can see on Slide 2.
Various remarks that we may make about Thermo Fisher's future expectations, plans and prospects, including with respect PPD and the proposed acquisition constitute forward looking statements that involve a number of risks and uncertainties. Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, Including risks and uncertainties relating to the proposed transaction, its timing, benefits and impacts, As well as those factors discussed in Thermo Fisher and PPD's most recent annual reports and current reports, which are on filed with the SEC and available on our respective websites. While we may elect to update forward looking statements At some point in the future, we specifically disclaim any obligation to do so, even if our estimates change. Therefore, you should not rely on these forward looking statements as representing our views as of any date subsequent to today. Also during the call, we will be referring to certain financial measures not prepared in accordance with Generally Accepted Accounting Principles or GAAP.
We believe that the use of non GAAP measures helps investors to gain a better understanding of our core operating results and future prospects consistent with how management measures and forecast the company's performance, especially when comparing such results to previous periods or forecasts. With that, turning to Slide 3 of the presentation, I'll now hand over the call to Mark.
Thanks, Raf. Good morning and thanks for joining us today. This is truly an exciting day for Thermo Fisher Scientific. I'm very pleased to announce our agreement to acquire PPD for $17,400,000,000 plus the assumption of $3,500,000,000 of net debt. This transaction is another great example of how we create value for our customers and our shareholders through our proven capital deployment approach.
In terms of the highlights of the transaction, as many of you know, pharma and biotech is our largest and fastest growing end market And the capabilities PPD will bring to Thermo Fisher are a natural extension of our value proposition for these customers. Our pharma and biotech customers will benefit from an expanded portfolio that will help them with their drug development process. From a financial perspective, the transaction is compelling and will be immediately and significantly accretive to adjusted earnings per share with an excellent return profile and is expected to close by year end. Many of you know us very well, Well, let me remind you of our selection criteria for M and A. 1st, a transaction needs to be clearly valued by our customers.
2nd, The deal has to enhance the company strategically. And 3rd, it needs to create shareholder value. The acquisition of PPD meets these criteria extremely well, as you can see on the summary of the strategic rationale outlined on the next page, Slide Tor, the clinical research services industry is an attractive high growth industry and this acquisition establishes us as a global leader. PPD has invested significantly in its capabilities to establish its leading position and is a natural extension for Thermo Fisher as it will strengthen our offering to pharma and biotech customers, our largest and fastest growing end market. As you know, Thermo Fisher is a trusted partner to pharma and biotech customers, and this transaction will bring meaningful benefits to our customers.
We have strong relationships with those customers and a deep understanding of their needs and emerging trends. By adding these highly complementary services to our portfolio, We will be able to further advance our strategic partnership as our customers work to bring a scientific idea to an improved medicine. Longer term, the combination's extensive capabilities for the company and our Expertise in serving these customers will enable new solutions that will open up opportunities for us to help our pharma and biotech customers reduce the time and cost of the drug development process. Finally, this transaction will create shareholder value given the natural fit of PPD with Thermo Fisher synergies that we'll be able to generate. Turning to Slide 5.
For those of you who may be less familiar with the space, Clinical research organizations manage the clinical trial process by providing key services and expertise during the various clinical phases of drug development in order to bring safe and effective medicines to the patients that need them. In Phase 1 to Phase 3, clinical research organizations bring expertise to various aspects of a clinical trial, including study design, trial management, patient recruitment, investigator training and clinical lab services. These studies ultimately help customers determine whether an investigational medicine is safe and effective and ready for submission to regulators for approval. Then once a medicine is approved, clinical research organizations conduct post clinical studies to look at the effects of an approved medicine over time and to ensure Ongoing safety and efficacy along with regulatory support for additional indications. So clinical research organizations play an important and valuable role for both pharma and biotech customers, efficiently managing a very complex process.
Turning to Slide 6. Clinical research organizations participate in a $50,000,000,000 global industry, which is growing strong mid single digits. This market growth is driven by several key factors. 1st, tailwinds are driven from the strong pace of PPV. 2nd, the pharmaceutical customers are consolidating their work with fewer trusted partners.
That's clearly one of the takeaways from COVID was to reassess the strength of your partner network. 3rd, a higher percentage of these trials are coming from biotech customers, which rely on clinical research organizations to a larger extent than pharma given limited internal capabilities. And finally, clinical trials are increasing in complexity, requiring more specialized capabilities, which clinical research organizations provide. All of this sets up very positive market growth dynamics for clinical research services, and PPD is a global leader in this industry. Some quick highlights of the business are outlined on Slide 7.
I'm very impressed with what the PPD team has built and is a leading global player, providing services to both emerging biotech customers and to all of the top pharma customers around the world. Generating $4,700,000,000 in fiscal year 2020 in terms of revenue with a 15% adjusted Operating margin, PPD offers customers both clinical development and laboratory services. In clinical development, PPD offers full service clinical trials management services, which include trial feasibility, investigator recruitment, clinical trial monitoring, project management and biostatistical services. This segment makes up 81% of their total revenue. The Laboratory Services segment offers highly specialized lab capabilities to support clinical trials.
PPD has an Reputation for quality and innovation. It's also worth adding that PPD has established an impressive network of capabilities around the world. This has allowed us to build a strong global business with 165 facilities in almost 50 countries in which they operate. And like us, the PPD team is intensely focused on customer needs. In the last 5 years alone, their team has supported more than 400 drug approvals.
I'm looking forward to joining PPD's CEO, David Simmons to connect virtually with all of the PPD colleagues very soon. And I certainly can't wait to welcome more than 26,000 talented Services Industry and PPD's leading capabilities, let's turn to a Thermo Fisher lens for context. As you know, Thermo Fisher is a leading supplier to the high growth pharma and biotech industry, supporting research and development, clinical trials and production. And today, it represents about 40% of our revenue. We performed very well in serving these customers, meaningfully gaining share and averaging 10% organic growth over the past decade.
PPD will increase our position further in serving these customers. Turning to Slide 9, let me tell you why we and our Customers will be excited by the combination. As I mentioned earlier, the transaction will enable us to support our customers' journey from a scientific idea to a medicine in new and exciting ways. We already provide our customers with leading support, researching new ideas to enable scientific and then ultimately the development and manufacturing of drug products. PPD will expand our capabilities for the phase in between, assessing safety, efficacy and healthcare outcomes for those potential medicines by providing clinical trial management throughout the drug development process.
This will further enhance our value proposition to pharma and biotech customers, providing them with a comprehensive offering and expertise across their business and allowing them to more efficiently access these services, all of which are key enablers of their innovation, productivity and ultimately their success throughout the drug development process. By joining Thermo Fisher, PPD will have additional access to key decision makers and will benefit from our trusted partner status with our Pharma and Biotech customers. And longer term, we will plan to continue investing In and connecting these capabilities to further help our customers accelerate their innovation and drive their productivity. Together, we're creating a world class offering of highly complementary products and services throughout the drug development and production lifecycle that's underpinned by industry leading resources, expertise and access. So there's really a lot to be excited about here.
Let me now turn it over to Stephen to take you through the opportunity this creates from a financial perspective.
Thanks, Mark. Turning to Slide 10. We have a definitive agreement to acquire PPD for $47.50 per share in cash, which represents a total cash consideration of $17,400,000,000 and we will assume approximately $3,500,000,000 of net debt. The price represents a premium of approximately 24% to the unaffected closing price of PPD's common stock on the NASDAQ as of Tuesday, April 13. The transaction is expected to be immediately and significantly accretive to adjusted EPS, adding $1.40 in the 1st 12 months following close and quickly ramping to over $2 per share.
We expect to generate significant synergies in this transaction, achieving $125,000,000 of total synergies by year 3 following the close. To break that down, we expect $75,000,000 In cost synergies, we expect about $50,000,000 of adjusted operating income benefit from revenue related synergies. Cost of the diesel come from eliminating redundant public company costs and the deployment of our PPI business system to drive productivity and sourcing benefits. As I'm sure you are aware, we have a long track record of efficiently and effectively integrating businesses, capturing cost synergies at the same time as accelerating the business' top line. We will follow that proven PPI business system playbook with this transaction.
In terms of revenue synergies, As Mark outlined in his remarks, the combination of Thermo Fisher's resources and capabilities as a leading supplier to the pharma and biotech industry We'll provide PPD with access to our deep industry relationships, including key decision makers across our customers to increase opportunities for PPD and Thermo Fisher with both new and existing customers. We expect this to result in $150,000,000 in revenue synergies They will contribute $50,000,000 in adjusted operating income benefit by year 3 following the close, with many more opportunities to Generates additional benefits for customers for many years to come. Through the use of our proven PPI business system, we'll be able to As to PPD's already strong growth profile, such that the deal will be accretive to Thermo Fisher's long term organic growth profile. Similar to past transactions, we'll have the ability to drive attractive tax efficiencies as we integrate PPD into our operations. We expect to bring their effective tax rate in line with ours at a close.
So in summary for this slide, PPD is very financially compelling. We have a proven track record for successful M and A. This transaction is great for our customers, We'll deliver attractive financial benefits and will create further value for our shareholders. Moving on to Slide 11, I'd now like to review some of the Key transaction details. In terms of financing, to complement cash on hand, we have a bridge facility in place for a portion of the purchase price.
We intend to fund the acquisition with a mix of new debt and available cash. From a leverage standpoint, assuming no Further capital deployment in 2021, we expect a pro form a leverage ratio of below 3x total debt combined adjusted EBITDA at the closing date. A very strong balance sheet underpinned by strong cash generation will allow for rapid repayment of debt, So the balance sheet remains in great shape. On the path to completion, there are no additional shareholder votes required for this transaction. In addition to the unanimous approval of the PPD Board, we've already obtained approval from PPD shareholders, with shareholders owning in Aggregate approximately 60% of the outstanding shares of common stock of PPD delivering approval by written consent.
The transaction is subject to customary closing conditions, including the receipt of applicable regulatory approvals. We expect the transaction to close by the end of 2021, at which point PPD will become part of Thermo Fisher's Laboratory Products and Services segment. Meeting up to close, we'll be preparing for the integration of PPD into our company, following our proven integration planning strategy to facilitate a smooth and seamless transition. So moving to Slide 12, I'd like to conclude by echoing Mark's excitement about And the benefits we expect to deliver. This acquisition is classic Thermo Fisher.
PPD is a great business in a growing industry. And our PPI business system improvement growth strategy, together with PPD, will continue to outpace market growth. With that, I'll turn the call back over to Raff for Q and A.
Thanks, Stephen. Some of you may not have been able to See the slides, we are emailing and posting them shortly. And as a reminder for everyone, Thermo Fisher will release its financial results For the Q1 2021 before the market opens on Thursday, April 29, 2021 PPB. We're ready to open it up for questions.
Thank PPD. If you have additional questions, please return to the queue. The first question comes from Jack Meehan of Nephron Research. Your line is open.
Good morning and congratulations on the deal to both teams. Good morning. Yes, good morning. Mark, in the past you said you weren't interested in entering the CRO space. The world's obviously changed a lot in the last year.
Can you walk us through your thinking around why Now is the right time?
Yes, Jack, great question. And when I think about the Clinical Research Industry, obviously an industry that plays a very important role in serving the pharma and biotech customer base, high impact, good growth characteristics. And over time, A couple of things have changed that make it just an incredibly compelling combination and move for Thermo Fisher Scientific. The first thing is, as our portfolio of capabilities has expanded over the last decade, our customers Really have incredibly deep relationships with us. And if I think even me personally, just say now the executive teams are talking about what's on their minds, They're telling us what the emerging trends are, and they want to have fewer trusted partners That delivered day in and day out.
And this is an important activity to develop a medicine and very clear that Our customers are excited about our ability to do more for them. So that's kind of what's changed over time. And I'm not surprised that in 2016 or 'seventeen or 'eighteen where they have Less of an interest. The world is very different 5 years later about how our customers perceive us based on that track record of really delivering day in and day out for more than a decade in serving them. The second thing that's happened and it's COVID related, customers are rethinking Who let them down and who did a good job in supporting them on the important work they're doing.
And that's for every industry. And if you go through the pharma and Outek, if I synthesize that, they're looking for the companies that really stepped up and could navigate all of the complexities that COVID brought And Thermo Fisher Scientific did an incredibly strong job in supporting all aspects of the important work they're doing, everything from keeping their facilities open to making sure that they're developing cutting edge medicines. And if you look at PPD's performance during the course of COVID, they did a really exceptional job of ensuring that Clinical trials continued on and that combination is super compelling in a world where customers want to make sure that they're consolidating their activities With fewer and trusted suppliers.
Great, and I agree. 2nd, how do you feel about your ability to Scale PPD, the company has a big backlog of work with blue chip clients, but there's also a lot of competition for top town in the market. What ways do you think Thermo Fisher can help accelerate PPD's burn rate?
Jack, thanks for the question. So it's exciting. The business has A strong backlog of work ahead of it that bodes well for quite some time in terms of activity and growth, and PPD has built an exceptional team. And when you think about what we're doing here is we're taking this business, we're making it part of Thermo Fisher Scientific, But for day in and day out, it's going to be exactly the same for the colleagues, no distraction. And over time, we're going to bring more capabilities to help our colleagues be even more competitive in Serving the customers, PPD has done a nice job of scaling the organization.
Obviously, Thermo Fisher also has a lot of experience about scaling from a talent perspective. If you think about We added roughly 10,000 people last year during the pandemic to respond to the pandemic, and we have great talent capabilities as and that's the combined company should do a great job of continuing to grow a very strong talent base. Thank you, Mark. Thanks, Jack.
Your next question comes from Derik De Bruin with Bank of America. Your line is open.
Hi, good morning and congratulations on the transaction. So a couple of questions. I think the first one is, We basically got to the same math on the accretion. I just think, Stephen, a couple of questions. The $1.40 that you're looking at.
It's like what are you making in terms of assumptions on the underlying Thermo EPS? I mean, dollars were you created off of what? And obviously there's some questions on the tax rate. I mean there's a number of proposals going around. What are you doing?
What are you making for? What are you looking at in terms of assumptions on So those are the basic questions that I'll start with.
Yes. So Derek, assuming that this closes at the end of the year, So it's basically accretion in 2022 from 2021. So it's from for this business, it's 0 in the coming year and And the $1.40 $0.22 is how we're thinking about the accretion. In terms of tax, we've got proven methodology To bring in acquisitions and take advantage of power structure, the attributes of the acquired company With Dennis in all our acquisitions, and we expect it to be at or below the company tax rate at close. We factored in once we were thinking We are factoring in various possibilities around tax reform in the U.
S. And just and we're constantly looking at changes in tax Legislation that could happen around the world, and we've got a very talented team that's got us to put us in a very competitive position with our Tax and cash position, and we expect to maintain that competitive position going forward as things change in landscape around tax legislation across the world.
Great. Appreciate that. I want to I appreciate that it's $1.40 accretive off of this year because it was 0. I think the question being is like obviously as the COVID revenues start to roll off and you start to see The impact of the margin from some of those higher margin products coming off, I think it's more of a question on looking at what the base is and thinking about 2022 and just through your thoughts on that one. So I think that's really the core of that.
Are you and thinking of it that way. Can you share any sort of light on how to think about this from the COVID margins coming off and recovered business coming off and just thinking about it in terms From that perspective?
So I think you asked me this question on the first January.
It's the number one question I'm getting Mark, I'm only doing what I'm at.
I'm not complaining. I told you it was a valid question.
I said it's not
a different one, but nothing invalid. The way that I think about it is, we're excited about the prospects for 2021. And if you think about how we did in 2020, we came out with guidance that thought about a very exciting year And we also are very excited about the long term future. If you as I said in the past, if you think about In March of 2020, a little over a year ago, would have you thought Thermo Fisher would have delivered more than 25% organic growth, that kind of growth earnings and all those things, I think most people would say, no, that's not a likely scenario. We did an exceptional job and this management team We'll do an exceptional job of creating shareholder value, managing through all of the future opportunities we have, and I couldn't be more excited about our prospects.
And it's nice to say a great strategic acquisition that's going to be really appreciated by our customers, differentiate the company strategically, That's going to add another $1.40 to our earnings in 2022. That's pretty cool. So thank you, Derek.
Derek, thank you.
Your next question comes from Doug Schenkel of Cowen. Your line is open.
Hey, good morning, guys. Let me just throw out my 3 questions and I'll get back and listen. I believe cost synergies only represent around 5% of PPD OpEx. This is Lower than what we've seen from you, yet generally speaking in the past on deals. Can you elaborate on why you're not assuming more meaningful cost synergies with PPD given the customer and geographic overlap.
So that's one. The second one is, this seemingly puts you in a position where you are going to Competing with existing customers, can you quantify that dynamic and outline how you're going to manage that? And then third, you indicated you expect the deal to close PPD. Given the lack of overlap in your businesses, that seems like you're contemplating a somewhat lengthy regulatory review. Can you just talk about that?
Thank you.
Thanks, Doug. Good morning. So in terms of the three topics, on the cost synergy side here, This is a very complementary business. This is there are some very obvious cost synergies that come out, which is there's obviously the overlapping public And there are tremendous benefits from the PPI business system about driving efficiencies within the business and having I had the chance to really delve into the business in detail. There are things that we will bring that will make the business more Efficient and that's on sourcing, that's on how the business is run.
But when you think about it, this is a people business, right? And it's not about The reduction of jobs is actually about creating accelerated growth. And the synergies here on the revenue side are very substantial in by year 3, But they grow very meaningfully from there. So actually, that translates into a very high growth business long term. So I feel good about the synergies.
And I want all of our colleagues to be to just be excited about what the future holds and not to be distracted by a big number, but rather to I get what we're doing and for me it's business as usual. In terms of competing with customers, it's our job To make sure that we're supporting our customers that compete with PPD, it's a very small proportion of our revenue. But we'll go out and we'll earn that business and we'll make it very rational for those customers to want to continue to Work with us closely, grow the relationship. And what I can say from my experience of 4 years ago, when we added to our pharma PPB. And I got that exact same question.
And I fast forward to the other CDMO Industry participants, they're doing meaningful more work with us today than they were then. Why is that? Because we've done a great job supporting them through the process. We've gone out, we said we want to earn new business every day and we'll do that here as well. So that's our job.
And then towards the end of the year, When we think about the process, we feel like that is a there's a number of jurisdictions that we have to file in and We think using simplicity by year end is a good assumption and there are scenarios obviously that could come in earlier than that. And in the normal course, As we go through that process, we'll give you update if there's any change in timing. But I think from a modeling standpoint, if you assume twelvethirty one, That's probably the simplest way of doing it and we'll refine that over time.
Your next question comes from Tycho Peterson of JPMorgan. Your line is open.
Hey, thanks and congrats on the deal. Mark, if I go back to the Patheon deal, one of the big points there was you had minimal customer overlap. Obviously, that's not PPD, but I'm just curious, can you just talk to customer overlap with Thermo today? And then can you provide a little bit more color on the $50,000,000 of revenue synergies, where you see that kind of come?
Yes. So in terms of when you say the customer overlap, do you mean competitor of PPD or do you mean customer base, I want to make sure I understand it, Tycho.
Yes, customer base.
So the customer base, yes. So you have Yes. Same thing in our pharma services businesses. There's a tremendous overlap. And Thermo Fisher serves every single Biotech and Pharmaceutical Company in some fashion.
So it's a question of what's the strength of those relationships that you can build upon. And the combination here It's super exciting because based on the trusted partnership status that Thermo Fisher has earned over many years and the very strong relationships that PPD brings as well, That's going to create really new opportunities. And interestingly enough, over time, I think the capabilities are actually going to allow us to have offerings That shortened the time to bring medicines to market and reduce the cost and that's really phenomenal for society from the first standpoint and then certainly for the customer base And for us as well. So that's the customer angle on it. And what was the second question again, Tycho?
The revenue synergies, the $50,000,000 where do you see that really coming from?
Yes. So from the revenue synergies, Part of it comes from the expanding the existing share of wallet at Existing customers and improving the win rate for the PPD business, so leveraging those relationships. If I look back on some of the historical transactions that we've done, we've been to accelerate the growth of the businesses we've acquired pretty dramatically. And so we're excited about that opportunity to be able for this business be able to continue to grow above market rate. So that's one main category.
I think there are some other ones along the same spirit, but if you think about China, where PPD has a nice position in serving the multinationals. We do that as well, but we have an exquisitely large position in serving the innovative Chinese companies as they have aspirations to bring medicine outside of China. And I think that's actually a really interesting growth opportunity as well. So that would be another type of example that you would see from a revenue synergy perspective.
Okay. And then the second question on going back to the scalability dynamic, the Street has PPD growing about 8% once the COVID tailwinds fade. I'm just curious, Do you see a path to bring that into double digits or even mid teens growth? And I know you've always said you don't enter markets if you can't be number 1 or 2. So how do you think about the path to get there?
And I think we're all going to get questions as to whether you have interest in preclinical as well. So I'm curious if you could touch on that too.
Sure. So in terms of The growth rate, our view is that PPD should be a sustainable High single digit growth business is how we think about it. And then obviously, our aspirations don't stop there, but that's I think it's good from a planning perspective. And in terms of expansion of the Served offering even further than where PPD was. We're excited about the transaction today.
So we're excited about the clinical services offering and capabilities they have, we think that's the logical addition and right now that's all we're focused on. Thanks, Tycho.
Okay. Thank you.
Your next question comes from Dan Brennan of UBS. Your line is open. Great. Thank you.
Thanks for the questions and congrats on the deal. I guess first question would
just be on retention. Just can you
walk us through PPD's management and what's the plan there? And then related to that, Obviously, the CRA industry is very tight. There's a lot of movement. And I'm just wondering what your policies are kind of what your plans We've gained PPD CRAs during the process of innovating the deal.
Yes. So Dan, Thanks for the question. So we're going to have this business run by the great team that exists at PPD, right? And I know that David Simmons' plan is to help with the transition and We're going to work through all of the details of the rest of that, but this is a high performing team that's done a really nice job of building the business. And we're going to have quite a number of executives from PPD Joining Thermo Fisher Scientific, and we're super excited about that.
And if you look at our history, right, our senior executive team has come from the businesses required, right, whether Fisher Scientific, Life Technologies, Pacheon, Thermo Electron, all of the different major components of the company, that's where the senior executives have come from and We can't wait to welcome that team and all of the colleagues. So one of the things is that's different about Maybe this type of transaction for the colleagues that are delivering the work day in and day out at PPD, job is going to be exactly as it is today, right, post close. There's not an integration with job changes. They just do great job serving customers. Over time, Together, we'll be able to have even more compelling offering for the customers and that's a super cool opportunity for all of us to participating and Using the vernacular that PPD used about bending the time and cost curves for bringing out medicines and the combined company is so uniquely positioned to do that.
I think it's phenomenal from a clear perspective for all involved. So hopefully, Dan, that gives you a good perspective on it.
Great, Mark. And then, miss, you've already touched upon a few times, was hoping maybe just get one more comment on it. In terms of the pull from your customers wanting to deal with like one vendor We heard you talk about that in the past, post patheon, but we haven't really heard about it as much. And a lot of tools Some people say that customers just want to divest the breed products and there's less about bundling. Could you just elaborate a little bit on how much of this deal is really the Now when customers are really asking for this versus Thermo Fisher is really pushing this idea.
Thank you.
So The way that I think about our business, right, is the individual Pieces of the business, the individual business units, if you will. When a customer is choosing, I'm going to buy This instrument versus that instrument, this pharma services capabilities versus company X's pharma service capabilities, We have to be a rational choice that irrespective of everything else Thermo Fisher does, that that's a logical decision. And being part of Thermo Fisher actually makes it even better. So that's the philosophy. So then you get down to the practical side and you look at our individual business lines, all of our major business lines are going faster than the competition.
They are all gaining market share, Right. And you see that across the portfolio, right. So there's one, what's the philosophy? But it's not about bundling, Right. It's about trusted status of doing a great job when something doesn't go right that the first Saying that the Thermo Fisher executive representative, whomever says, how can I help you to solve it, right?
There's a mindset about customer success that is so incredibly deeply ingrained in this company, that's what actually creates the aura that I want to do more business with you. And therefore, customers are choosing to do more business. And they inform us about where they're going and what they want to do and why. And As I said earlier, this is really a unique time for us to expand our capabilities.
Great. Thanks, Mark. And Joe, Jeff?
Exactly. This might be the year for them to get to 500.
Your next question comes from Vijay Kumar of Evercore. Your line is open.
Hey, guys. Thanks for taking my question. A couple of quick financial questions here. One off, was this a competitive process, Mark? And on the debt, it looks like Maybe above $5,000,000,000 ish of the financing is going to be debt.
Are those assumptions correct? I'm curious On the comparative process?
Yes. So in terms of the process For this transaction, that's all going to come out I think in documentation shortly. I actually don't know the exact time So more will come out on that when the various documents are filed. This is was a Super friendly transaction where 2 companies saw the strategic logic and are excited that this is good for our customers, It's good for our colleagues, and it's good for our respective shareholders. So it's really quite compelling.
And Stephen, do you want to talk about the financing?
Yes. So on the debt, To cover the $17,400,000,000 cash purchase price, it's a slightly higher level of debt than you articulated there. It depends on the level of cash generation during the year. Just a quick reminder, since the end of the year, we did Pay down $2,600,000,000 of debt in early January that was announced at the end of last year. And we've done some M With Maser and a couple of other deals and then did $2,000,000,000 of buybacks in Q1.
So slightly higher level of debt than you articulated there, but we're in good in terms of the debt financing, as we think about plans for that going forward.
That's helpful. And just on the revenue synergies, I think I saw the $150,000,000 of revenues translate into $50,000,000 of operating profits. That's in the low 30s operating margins. Curious if there's some mix change going on because I think PPD is running in the mid- to high teens range.
It's a combination of synergies across PPD itself as well as across Thermo Fisher. So it's kind of the synergies in both areas as we think about the revenue opportunities here.
I see. Thank you guys. Congrats.
Thanks, Vijay. Thanks, Vijay.
Operator, we have now for one more question.
Your final question comes from Dan Arias of Stifel. Your line is open.
Yes, good morning guys. Thank you and congrats. Mark, to the point that you made, I think before Tycho's question and just thinking about driving value in the combination and reaching your targets, Can you maybe just touch on where you've kind of gotten the best education on how to integrate a CDMO, CRO business Based on the Patheon experience and whether maybe there's sort of anything that you would say that getting up the learning curve Has allowed for recognition maybe faster than the timeline that you had the first time around or is it kind of take it as it goes?
Yes. So our Pharma Services business has obviously performed meaningfully better than the strong expectations that we outlined in 2017. And in fact, we've been able to continue to Expand our share and expand our capabilities over the last 4 years. And that's all driven by the phenomenal colleagues that Joined us and complemented the existing team at Thermo Fisher back then in 2017. So I think the first lesson learned is one that we've been for many years, which is we couldn't be more excited for the colleagues from PPD to join us for the expertise that they bring, for their passion about The work they're doing and their customer success and that over time will open up new capabilities for the combined company to help So that's how we think about it.
And don't distract our teams, let them do their job, do a great job with Happy customers want to do more work with companies and we create that success cycle, which we will, That will open up new opportunities for Thermo Fisher. So it's really in a way quite straightforward and we're excited about taking a very strong performing business, Growing it at a high rate, doing a great job for our customers and along the way creating very meaningful shareholder value. And I believe Fundamentally, it will open up even more opportunities for the company long term as well. So thank you for the question. So let me turn here to wrapping up the call.
I want to thank everyone. As I think you got a sense, we Admire PPD's leading capabilities and its mission driven culture for quite some time, and we really look forward to welcoming their talented team to Thermo Fisher upon the close of the transaction. Like us, PPD prides itself on deep industry relationships and its reputation for quality and service. And together, We'll enhance our offering, we'll create important benefits for our customers and we'll deliver further value for our shareholders. With that, I'm looking forward to speaking to many of you again at our earnings call, which is on April 29.
Thanks, everyone.
This concludes today's conference call. Thank you for your participation. You may now disconnect.