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Correspondent Gintautas Degutis talks to Greg Herreman, President Biosciences Division at Thermo Fisher Scientific Inc. U.S. company Thermo Fisher Scientific Inc., which acquired Lithuanian UAB Fermentas in 2010, projects Lithuanian capital city of Vilnius asaglobal centerofmolecular biology. Projects and people relocate to Thermo Fisher’s new regional headquarters in Vilnius, where new plans for the future are being developed.

The company’s executives do not reveal how much theyare actually going to invest in Lithuania; however, they claim Vilnius branch will help them reach a $20 billion annual income level by 2020. Last year, the company's revenue was $12 billion. Vilnius branch will have an important role to play: Thermo Fisher Scientific wants to develop its Lithuanian leg as a global hub of molecular biology and from there expand intoneighboring Latvia and Estonia.

- What is the purpose of your visit to Lithuania?

- In Lithuania, we have invested a considerable amount of money: $260 million for the acquisition of UAB Fermentas, as well as more than $13 million for the new office building in Vilnius. We want to make sure that all the work related to these investments is carried out properly. One can say that my purpose of coming here is to see how our overseas business is doing and how the invested money is spent.

In addition, we have moved a number of projects from other countries to Vilnius in recent years. In the United States and Europe we have had several smaller units, which were producing reagents for molecular biology. To be efficient, we decided to consolidate our research and development (R&D) and production activities here in Vilnius. Therefore, I wanted to see how things are going and how all the restructuring is moving.

I also met with representatives of our key partnersfrom Santariškių Clinics, Vilnius University, Kaunas University of Technology and the Lithuanian University of Health Sciences, as well as with the U.S. ambassador and the Prime Minister of Lithuania.

- And what is your personal impression of our new Prime Minister? Have you noticed any changes as compared to his predecessor, who was the head of the government during your acquisition deal with UAB Fermentas?

- From the outset, we have been confident about Lithuania’s economic stability.The governments, both past and present, have been supportive of our goals. We also see that the government is committed to long-term strategic goals. The prime minister has reassured us that the production of high value-added goods and services remains a national priority. All this creates a supportive investment environment.

For us, good relations with the government are very important. We want to maintain them, especially since we plan further expansion. We own approximately 6 acres (2.4 hectares) of additional land around our current building, so we have where to grow. During the meeting with the prime minister I mentioned three things: our satisfaction with the present cooperation, our intention to continue investing in Lithuania, and our hope that Lithuania will sustain its positive investment environment.

- Tell us more about your future plans in Lithuania.

- At present, the concrete development projects are still not available. We have just completed the construction of our new facility and have not even moved to the new premises. However, the company’s long-term strategy provides for expansion of our units in Lithuania and other emerging markets. We would like to concentrate our R&D activities and reagent production capacities in Vilnius. From here, our products are already exported worldwide.

We are very pleased with the investment in Lithuania, with the pace how this project develops, and with the activities of our Vilnius branch in general. Here we have a strong management team working with local professionals. Algimantas Markauskas this year was selected as the Best Business Leader in Lithuania. Both the company and the public value the work of our Vilnius branch and appreciate its potential.

- Does this mean that we can expect new investment and further consolidation of your representation in Vilnius?

- In fact, consolidation is not what matters most for us at the moment. What we needed to do is already done. And now we will focus on the consolidation of human resources, research investment, R&D and sales. We intend to strengthen our positions in the market, where historically our role has been limited.

- You have mentioned that you are satisfied with the Lithuanian biotechnology professionals. Are you not afraid that with your expansion the talent pool will soon be depleted? Thermo Fisher Scientific Inc. is not the only biotech company operating in Lithuania. Moreover, we live in a Europe where borders do not exist, and Lithuania already suffers from vast emigration.The number of young professionals that local universities produce is also quite limited.

- We have not faced the lack of talents yet. We work closely with Vilnius University. They supply us with promising young professionals.

We are also visiting schools. Together with Vilnius University we have developed a mobile laboratory which we take on a roadshow all over the country to demonstrate the students what we produce, thus trying to get them interested in life sciences.

In addition, our Vilnius branch managers are successful in sustaining human resources. The staff turnover in the company is very small. Our employees are not leaving us after being trained by our specialists; we have no problems with that. The issue of costs also matters a lot. One has to admit that labor costs in Lithuania are much lower than in Western Europe or the United States. Thus, we can have equally talented people and a superb business environment at a lower cost. We created 84 new jobs in Lithuania last year alone. Now Vilnius branch of Thermo Fisher Scientific employs over 440 people, of which almost 100 work at the Research and Development Center.

- It is reported that Thermo Fisher’s Lithuanian branch is becoming a center of excellence. What does this mean in practice?

- Our company has about 300 offices around the world. A small number of them we plan to turn into regional hubs, possessing the critical mass of knowledge and competence. For example, our Vilnius branch will focus on life sciences and the production of relevant reagents. In the future these regional hubs will serve as our expansion platforms, providing the necessary human resource and attracting the largest share of our investments.

Last year we opened two such centers of excellence:an analytical center in Boston (USA) and Life Sciences Centre in Vilnius, which deals with research and manufacturing of reagents. At present, Thermo Fisher possesses a total of 25 such centers of excellence.

- Recently there have been reports that Thermo Fisher Scientific Inc. is buying Life Technologies Corp. for more than $16 billion. Three years ago the company purchased UAB Fermentas in Lithuania. It seems that Thermo Fisher is pursuing an aggressive growth strategy through acquisitions. Why have you chosen this particular model?

- This is not quite true. We seek to combine organic growth with acquisitions. The company is growing at about 4-5% per year. However, the organic growth provides only 3-4%, the remaining is accumulated through acquisitions. Therefore, whenever an attractive investment opportunity crosses our path, we always consider the possibility to invest. The growth of the market in which we operate most recently has been rather slow, as our main customers – universities and medical institutions – are suffering from the belt-tightening policies applied by the governments. Our investments in Lithuania and elsewhere provided us with faster growth than normally on the market.

We also seek to strengthen our positions in the emerging markets, as they are growing much faster than in the U.S. or Western Europe, while the shareholders, as usual, expect higher returns. This is the reason why the head of the Vilnius branch Algis Markauskas has been appointed as our representative for the entire Baltic region.

- Does this mean that Vilnius will serve as a base for expansion into Latvia and Estonia?

- Yes, indeed. In the countries where we are going to strengthen our activities, we are planning to pool our sales and project management capabilities. We want to expand our client base in the neighboring countries and create a base of support that would provide services to our future clients.

I cannot provide you with exact numbersyet, as specific projects still have to be finalized. But, as mentioned earlier, we do have a longer term strategy of expansion. In 2012, we invested $400 million in research and development worldwide and plan to invest even more in the future. Our investment comes in separate stages.

For example, in Vilnius we invested $260 million in UAB Fermentas purchase and another $30 million in the construction of a new building. This was the first phase of investment. There will be the second and third stages too. However, specific plans or projectscannot be named yet.

Now we will focus on human resource investments,research and development, and sales.

Source: Verslo Zinios daily, 28 May 2013

Unofficial translation