Thermo Fisher Scientific Inc

Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2025 Third Quarter Conference Call. My name is Claire, and I will be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two on your telephone keypad. I would like to introduce our moderator for the call, Mr. Rafael Tejada, Vice President, Investor Relations. Mr. Tejada, you may begin the call.

Good morning, and thank you for joining us. On the call with me today is Mark Masper, our chairman, president, and chief executive officer, and Stephen Williamson, senior vice president and chief financial officer. Please note this call is being webcast live and will be archived on the investor section of our website, thermofisher.com. under the heading news, events and presentations until February 1st, 2026. A copy of the press release of our third quarter earnings is available in the investor section of our website under the heading financials. So before we begin, let me briefly cover our safe harbor statement. various remarks that we may make about the company's future expectations, plans, and prospects constitute forward-looking statements within the meaning of applicable securities laws. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's most recent reports on Form 10-K and Form 10-Q under the heading Risk Factors. These forward-looking statements are based on our current expectations and speak only as of the date they are made. While we may elect to update forward-looking statements at some point in the future, We specifically disclaim any obligation to do so, even in the event of new information, future developments, or otherwise. Also, during this call, we will be referring to certain financial measures not prepared in accordance with generally accepted accounting principles, or GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable gap measures is available in the press release of our third quarter 2025 earnings and also in the investor section of our website under the heading financials. So with that, I'll now turn the call over to Mark.

Thank you, Raf. Good morning, everyone, and thanks for joining us today for our third quarter call. As you saw in our press release, we delivered an outstanding quarter that included Excellent operational performance, reflecting our active management of the company. Strong execution from our team, whose ongoing focus meaningfully advanced a number of our customer relationships. And we made significant progress advancing our proven growth strategy, which continues to strengthen our foundation and build an even brighter future for our company. So first, let me recap the financials. Our revenue grew 5% in the quarter to $11.12 billion. Our adjusted operating income grew 9% to $2.59 billion. Adjusted operating margin expanded by 100 basis points to 23.3%. And we grew adjusted EPS by 10% to $5.79 per share. Our performance in the third quarter enables us to raise our full year guidance. Now turning to our end markets. In pharma and biotech, we delivered another quarter of mid single digit growth. Performance in the quarter was led by our bioproduction and analytical instruments businesses, as well as our research and safety market channel. Turning to academic and government, revenue declined in the low single digits representing a modest improvement versus last quarter. To provide some additional context, conditions in the U.S. and this end market were similar to Q2. In industrial and applied, revenue grew in the mid-single-digit store in the quarter, representing a nice sequential step-up. Performance in the quarter was led by our electron microscopy business, as well as our research and safety market channel. Finally, in diagnostics and healthcare, revenue growth improved over Q2, though it remained down low single digits for the quarter. largely due to conditions in China. Highlights in this quarter included strong growth in our transplant diagnostics and immunodiagnostics businesses. Wrapping up my comments on end markets, our team executed very well to capture the opportunities during the quarter. Let me turn to our growth strategy, which consists of three pillars. High-impact innovation, our trusted partner status with customers, and our unparalleled commercial engine. Starting with innovation, it was another excellent quarter for our company. Our new offerings demonstrate our continued leadership and further enable our customers to unlock scientific breakthroughs, advance precision medicine, and enhance productivity in their labs. In clinical next-gen sequencing, we continue to expand our offerings, strengthening our ability to help clinicians and researchers advance targeted care for patients. The Oncomine DX Express Test on our ion-torn GeneXus DX integrated sequencer received FDA approval as a companion diagnostic for a targeted therapy used to treat non-small cell lung cancer and for broader tumor profiling applications. We also introduced the Oncomine Comprehensive Assay Plus on the GeneXus system. providing clinical research labs with an all-in-one comprehensive genomic profiling solution that delivers next-day results. This capability provides clinical researchers with faster, more actionable insights to advance precision medicine. For proteomics, we launched the O-Link TARGET-48 Neurodegeneration Panel to advance research into conditions such as Alzheimer's, Parkinson's, and multiple sclerosis. The new panel helps address the need for reliable detection and measurement of biomarkers that can unlock insights into these and other complex neurological diseases, while also enabling researchers to monitor disease progression and therapeutic responses. In analytical instruments, we unveiled two new electron microscopes at the recent Microscopy and Microanalysis Conference. These include the thermoscientific TALOS-12 transmission electron microscope, This powerful new platform built on our popular Talos line and delivers exceptional image quality and ease of use for structural and cellular analysis and biological research, pathology, and drug development. We also introduced the thermoscientific SCIOS3 focused ion beam scanning electron microscope. Engineered with advanced automation precision and ease of use, this instrument accelerates material science research and supports the development of new materials used across clean energy, aerospace, and digital devices. In chromatography and mass spectrometry, we launched Chameleon 7.4, the first enterprise-ready compliance-focused software platform that unifies chromatography and mass spectrometry workflows. This system offers centralized, secure data management and remote access across labs, empowering regulated biopharma, clinical, and environmental labs to streamline workflows, improve their productivity, and accelerate scientific decision-making. This launch is a great enabler for both our mass spec and chromatography instruments. Let me give you a quick update on our trusted partner status and our unparalleled commercial engine. We have a unique relationship with our customers, one that has been earned over many years through a relentless focus on anticipating, understanding, and meeting their needs. Our trusted partner status provides us with unique insights to guide our strategy and continually strengthen our capabilities. At the same time, our industry-leading commercial engine enables us to deliver those capabilities at scale. I'll share a few highlights of the actions we've taken recently to deliver even greater value to our customers and position our company for the future. One example is our strategic collaboration with OpenAI. The collaboration is focused on two broad areas. The first opportunity is to embed these capabilities into our products and services to make an even bigger impact for our customers. And the second opportunity is to make Fenwell Fisher even more productive. As part of this collaboration, we are embedding OpenAI advanced technology into critical areas of our business, including product development, service delivery, customer engagement, and operations. Our initial focus is on clinical research, to help improve the speed and success of drug development, ultimately enabling customers to get medicines to patients faster and more cost effectively. We are deploying these capabilities to improve the cycle time of clinical trials. We'll also look to leverage OpenAI's capabilities to unlock value in our deep repository of data and experience to enable customers to focus on the most promising opportunities in their drug development pipelines. To enable the second focus area, we've launched ChatGPT Enterprise internally across the company to drive productivity, innovation, and ultimately smarter customer engagement. I'm really excited about the ways that while Fisher and OpenAI, two innovation leaders, will work together to make a real difference in advancing science and bringing new medicines to patients. Another good example of our trusted partner status this quarter was the recently announced strategic partnership with AstraZeneca BioVenture Hub in Gothenburg, Sweden. This partnership will leverage the combined expertise of Thermo Fisher and AstraZeneca to drive innovation and strengthen the life sciences ecosystem. A dedicated team from Thermo Fisher will co-locate with AstraZeneca scientists to work on collaborative R&T projects with initial focus on chromatography, molecular genomics, and proteomics. And it was also great to celebrate the grand opening of our Manufacturing Center of Excellence in Mebane, North Carolina this quarter. A high-volume, low-cost facility, this site was developed with support from the U.S. government and is capable of producing at least 40 million laboratory pipette tips per week to support life science research and diagnostic laboratories and adds to the U.S. national supply chain resilience. So wrapping up our growth strategy, this was an excellent quarter where our actions strengthened our industry leadership today and positions our company for an even brighter future. Moving on now to capital deployment, we also had a very active quarter, successfully executing our proven capital deployment strategy, which, as you know, is a combination of strategic M&A and returning capital to our shareholders. In September, we completed our acquisition of our filtration and separation business from Solventum, which is now part of our life sciences solution segment. As you know, this business expands our bioprocessing offering for pharma and biotech. as well as industrial filtration capabilities. The integration is progressing smoothly, and the early feedback from our customers has been incredibly positive. We also closed our acquisition of the Ridgefield, New Jersey, sterile full finish site from Sanofi, expanding our U.S. drug product manufacturing. This is an excellent addition to our industry-leading sterile full finish network within our pharma services business. At this site, we'll continue to manufacture a portfolio of Sanofi's therapies And we'll invest in additional production lines to meet the growing demand for U.S. manufacturing from our pharma and biotech customers as they reshore more activity to the U.S. Also in the quarter, we repurchase a billion dollars of our shares. This brings our total repurchases to $3 billion for the year. So overall, a very active quarter of capital deployment. We have a company culture based on continuous improvement through our PPI business system. which once again was a key enabler of outstanding execution. We made great progress in the quarter, leveraging PPI to manage our cost base and deliver very strong earnings growth. The PPI business system continues to drive great impact, and with the open AI collaboration, it will have even more impact going forward. The practical application of AI will enhance our colleagues' ability to find a better way, increasing our productivity and improving the customer experience. As I reflect on the quarter, I'm proud of what our teams accomplished and grateful for their contributions to our success. Let me now turn to our guidance. Given our strong performance in the quarter, we're raising both our revenue and earnings guidance for 2025. Stephen will take you through the details in his remarks. I'll cover the highlights. We're raising our revenue guidance to a new range of 44.1% billion to $44.5 billion, and raising our adjusted EPS guidance to a range of $22.60 to $22.86 per share. So to summarize our key takeaways from Q3, this was a terrific quarter. We delivered excellent operational execution, reflecting consistent and active management of the company and the power of the PPI business system which resulted in outstanding earnings growth. We continue to advance our growth and capital deployment strategies, and we're raising our full-year guidance and remain confident in our midterm and long-term outlook and the proven strength of our strategy to create meaningful value for our shareholders and continued success for our company. With that, I'll now hand the call over to our CFO, Steven Williamson.

Steven? Thanks, Mark, and good morning, everyone. I'll take you through an overview of our third quarter results for the total company, then provide color on our four business segments, and I'll conclude by providing our updated 2025 guidance. Before I get into the details of our financial performance, let me provide you with a high-level view of how the third quarter played out versus our expectations at the time of our last earnings call. In Q3, our team executed really well and delivered results significantly ahead of what we'd assumed at the midpoint of our prior guidance on both the top and bottom line. Q3 reported revenue was approximately $300 million ahead of what we'd included in the midpoints of the prior guide, driven by stronger FX tailwind, a benefit from our recent acquisitions, and a slight beat on organic revenue. The beat on the bottom line was even more significant. We delivered $0.30 of adjusted EPS ahead of what was included in the midpoint of our prior guide for Q3. $0.11 of that beat was from a lower impact of tariffs and related FX than had been assumed in the prior guide. $0.20 of the beat was from very strong operational performance, and this was partially upset by $0.01 of dilution from the recent acquisitions. So to summarize, in Q3, we once again delivered excellent operational performance. Let me now provide you with some additional details on Q3, starting with earnings per share. In the quarter, adjusted EPS grew 10% to $5.79. Gap EPS in the quarter was $4.27, in line with the prior year quarter. On the top line, Q3 reported revenue grew 5% year over year. That included 3% organic revenue growth, a 1% contribution from acquisitions, and a 1% tailwind from foreign exchange. Turning to our organic revenue performance by geography, in Q3, North America grew low single digits. Europe and Asia Pacific both grew mid-single digits, with China declining mid-single digits. With respect to our operational performance, we delivered $2.59 billion of adjusted operating income in the quarter, an increase of 9% year-over-year. An adjusted operating margin was 23.3%, 100 basis points higher than Q3 last year. The very strong earnings results reflect our active management of the business and the power of our PPI business system. Total company adjusted gross margin in the quarter was 41.9%, 10 basis points higher than Q3 last year. We delivered very strong productivity, which enabled us to fund strategic investments to further advance our industry leadership and offset the impact of tariffs and related FX and unfavorable mix. Moving on to the details of the P&L, adjusted S&A in the quarter was 15.5% of revenue. R&D expense was $346 million in Q3, reflecting our ongoing investments in high-impact innovation. R&D as a percent of our manufacturing revenue was 6.9% in the quarter. Looking at results below the line, our Q3 net interest expense was $113 million, As expected, the adjusted tax rate in Q3 was 11%, and average diluted shares were 378 million, approximately 5 million lower year over year, driven by share repurchases, net of option dilution. Turning to free cash flow on the balance sheet, year-to-date cash flow from operations was $4.4 billion, and free cash flow was $3.3 billion after investing $1 billion of net capital expenditures. Q3 was a very active quarter of capital deployments, We deployed approximately $4 billion of capital through the acquisition of our filtration and separation business from Silventum and the sterile fill finish site from Sanofi. In addition, we repurchased $1 billion of shares during the quarter and returned $160 million of capital through dividends. We ended the quarter with $3.5 billion in cash and short-term investments and $35.7 billion of total debt. Our leverage ratio at the end of the quarter was 3.2 times gross debt to adjusted EBITDA and 2.9 times on a net debt basis. Completing my comments on our total company performance, suggested ROIC was 11.3%, reflecting the strong returns on investment that we're generating across the company. That provides some color on our performance of our four business segments. In life sciences solutions, Q3 reported revenue in this segment increased 8% versus the prior year quarter, and organic revenue growth was 5%. Growth in this segment was led by a bioproduction business, which had another quarter of excellent growth. Q3 adjusted operating income for Lifesign Solutions increased 15%, and adjusted operating margin was 37.4%, up 200 basis points versus the prior year quarter. During Q3, we delivered very strong productivity and volume leverage, which is partially offset by unfavorable mix, strategic investment, and the impact of the acquisition of our filtration and separation business, which is included within this segment. In the analytical instrument segment, reported revenue increased 5% and organic revenue growth was 4%. Growth in the quarter was led by electron microscopy and chromatography and mass spectrometry businesses. In this segment, Q3 adjusted operating income decreased 5% and adjusted operating margin was 22.6%, down 230 basis points versus the year-ago quarter. But this was a sequential improvement from Q2 2025. The majority of the year-over-year margin change was driven by the impact of tariffs and related effects. Outside of that impact, strong productivity was partially offset by strategic investments and unfavorable mix. Since especially diagnostics in Q3, reported revenue grew 4% year-over-year, and organic revenue growth was 2%. In Q3, growth in this segment was led by transplant diagnostics and immunodiagnostics businesses. Q3 adjusted operating income for specialty diagnostics increased 10%, and adjusted operating margin was 27.4%, 150 basis points higher than Q3 2024. During the quarter, we delivered strong productivity and volume leverage. Finally, in the laboratory products and biopharma services segment, reported revenue increased 4%, and organic revenue growth was 3%. Growth in this segment was led by a research and safety market channel. The runoff of pandemic-related revenue had a 1% impact on the revenue growth in the segment in the quarter. Q3 adjusted operating income in the segment increased 12%, and adjusted operating margin was 14.5%, 100 basis points higher than Q3 2024. In the quarter, we delivered very strong productivity, which was partially offset by unfavorable mix and strategic investments. So turning to guidance as Mark outlined, we're raising our 2025 full-year guide on both the top and bottom line, reflecting our continued active management of the company. Let me provide you with the details. We're raising our revenue guidance to an expected range of $44.1 to $44.5 billion. Organic revenue growth at the midpoint of the guide continues to be 2% for the full year, and as a reminder, that includes a warm point of headwind from the run-up of pandemic-related revenues. We're increasing our outlook for adjusted operating margin in 2025 to a new range of 22.7% to 22.8%. And we're raising our adjusted EPS guidance to a new range of $22.60 to $22.86. The increase of the midpoint of the guidance range reflects $420 million higher revenue than the prior guide, driven by the benefit of our recent acquisitions and an increase in the tailwind from FX. From an earnings standpoint, The increase in the midpoint of the guide reflects 20 basis points of improved adjusted operating margin expansion and $0.20 of higher adjusted EPS. This change includes $0.05 of dilution from the recent acquisitions. We'll continue to actively manage the company and drive excellent operational performance, once again enabling us to increase our guidance for the year. I'll now move on to an update to some of the modeling elements for the full year. Our guidance now includes the impact of the recently closed acquisitions. These deals added $260 million to revenue to our prior full-year guide, $20 million for adjusted operating income, and as I mentioned earlier, $0.05 for adjusted EPS solution. In terms of tariffs, our guidance reflects the tariffs that are currently in place as of today. This includes the increase in tariff rates between the U.S. and Europe that occurred since the time of our last guidance. The changes in tariffs and trade policy once again caused intra quarter volatility in FX rates in Q3. As a result, FX in Q3 was $220 million revenue tailwind to our prior guide and a $0.10 adjusted EPS headwind. So for the full year, we now expect FX to be a year-over-year tailwind to revenue of $230 million and a headwind to adjusted operating income and adjusted EPS of $110 million and $0.37 respectively. Below the line, we now expect net interest expense to be approximately $440 million in 2025, and we continue to expect an adjusted tax rate of 10.5% for the full year. We expect between $1.4 and $1.7 billion of net capital expenditures and around $7 billion of free cash flow for the year. Then in terms of capital deployment, our guidance now assumes that we deploy $7.6 billion of capital in 2025, $4 billion on the recently closed acquisitions, $3 billion on already completed share buybacks, and $600 million of capital returned to shareholders through dividends. And finally, we estimate the full year average diluted share count will be approximately 378 million shares. So to conclude, we delivered an excellent Q3, and we're in a great position to deliver on our 2025 objectives. With that, I'll turn the call back over to Raph.

Thank you, Steve, then. So with that, let's get started for the Q&A portion of the call.

Thank you. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. In order to allow everyone in the queue an opportunity to address the Thermo Fisher management team, please limit your time on the call to one question and only one follow up. If you have any additional questions, please return to the queue. Our first question comes from Michael Riskin from Bank of America. Your line is now open, Michael. Please go ahead.

Great. Thanks for the question, and congrats on another strong print, guys. I'll start just on market conditions and what you're hearing and what your customers mark. I mean, a lot has changed since we last spoke on the TQ call, especially on pharma. There's been, you know, lot of progress and de-escalation on some of the mfn and tariff concerns with pharma so just wondering if anything's changed in your conversations with your major customers um over the last couple weeks and months um you know talk of reshoring longer term um just talk about how therma would benefit from that both from a facility build out perspective but also from patheon and some of the other pharma services and your fill finish capacity in the us um just sort of how that come up in conversations

Mike, thanks for the question. Very topical. So in terms of, you know, our dialogue with our pharma and biotech customers, as you know, we're very engaged, right, with this customer set, the senior executives. And if I say, what are they focused on? Probably the first thing, right? There's a lot of, you know, excitement around scientific breakthroughs. A lot of confidence actually in their pipelines. And they're partnering with us to help them drive their success. As we talk about the actual environment, right, which is, you know, a part of how they think about the world and the decisions they make, you know, there's a quiet confidence, actually, that they're going to be able to navigate the government policies effectively. And you're seeing that in some of the announcements that have been made on pricing, as well as on reshoring. more activity to the US in terms of not being exposed to potential tariffs. On that dynamic, what I would say is we're very engaged in helping those customers think about new sites, how to best equip them, and support our customers in that effort. And, you know, that will benefit, you know, our channel business, it'll benefit our bioproduction business, our analytical instruments businesses would all benefit from those new construction. And that's really a largely 27, 28 by the time ground is broken. Our new things for expansions within existing facilities, it could be a little bit faster than that. So that is something we're actively engaged in, but it takes some time to gestate. More rapidly than that, and in a way more cost effectively for our customers, is leveraging our pharma services network to be able to move more of their volume to the US. You know that we are the industry leader in drug products, sterile fill finish. We have very strong capabilities here. We've had very strong demand for those capabilities and our arrangement with Sanofi where we acquired one of their sites gives us another production node in the US that is you know, well-trained, great workforce, and the ability to expand that facility as well. So we're excited to be able to enable our customers, and Foreman Biotech has been a good environment for us. So thanks, Mike.

Okay, thanks. That's all really helpful. And then maybe on the academic and government front, I mean, I think you called out a little single-digit decline in the quarter. It seems like, you know, slight improvement from last quarter, but a lot of updates there as well. You know, it looks like we're on track for hopefully a flat NIH budget next year, which is encouraging. But on the other hand, you've got the government shutdown over the last couple of weeks now. So just give us an update on what you're hearing there. Is there any risk from a government shutdown starting to hurt some of that potential recovery in A&G and just how you think about that plan out?

Thanks. Yeah. So, Mike, when I think about academic and government in the quarter, the improvement was really slightly better in Europe. U.S. was very similar. China was very similar to what we experienced in Q2. And both of those markets have headwinds, obviously different drivers of those headwinds. And when I think about, so that government shutdown is kind of post-quarter. So I'll talk about that in a moment. But if I say what's going on in the environment, you know, in Q3 in the U.S., you know, customers actually feel better about the idea of a more stable funding environment obviously you know we'll have to get a budget in place and all those things but um i think there's more um consensus around relatively a flattish budget and i think that um will remove a headwind over time um as the market stabilizes you know once we get that funding in place so i actually say from that perspective a lot of conditions were um muted um you know i would say actually the the noise or the less noise in a way it feels a little bit better. On government shutdown, the way I would say is obviously post quarter, we're in the middle of it right now. I think it adds a little bit to customer hesitancy, right? It does add some uncertainty. And it obviously will delay some expenditures directly by the U.S. government as well on the things that they actually purchase. We put into our implied guidance range for the fourth quarter a reasonable set of outcomes based on the government shutdown, based on our own experience and how we think it's playing out and feel well-positioned to navigate that. So that's how we thought about it at this point in time.

Thank you, Mike. Thank you so much. Thanks.

Thank you. Our next question comes from Tycho Peterson from Jefferies. Tycho, your line is now open. Please go ahead.

Okay, thanks. Mark, I want to maybe unpack some of the analytical instrument strengths. We're certainly better than we've been modeling. You know, I appreciate your comments on academic and pharma, but maybe just a little bit more color. Is this mostly mass spec? Is it cryo-EM? Any, you know, particular segments that are emerging? And I guess importantly, how do you think about kind of momentum on analytical instruments in the year end? Any thoughts on budget flush and 26 at this point? Obviously, a little bit too early to see a real pickup from onshore and compound.

Yeah. So, Tycho, thank you for the question. So, the team's been doing a good job in our analytical insurance business. I'm proud of the efforts. The innovation that we've been talking about is really being incredibly well adopted, right? So, I say, what is one of the drivers? You know, a great launch is in both mass spec and cryo-electron microscopy, it makes a real difference. And many of you have heard me say over the years, irrespective of funding environments, because they ebb and flow over time, if you have relevant innovation and you think about what our customers are actually doing, they're doing their life's work with this innovation. And if they don't have the best tools, effectively, they're really wasting their time. And because of that, you see an incredibly resilient and entrepreneurial set of customers getting funding. So the team's done a good job on that respect, and I'm proud of the single-digit growth that we delivered in the quarter. When I think about what drove it, really electron microscopy and chromatography and mass spectrometry were the drivers. We still have headwinds in our chemical analysis business. It was a little better than the previous quarter, but still pressure in some of the industrial and environmental segments. So largely the two big businesses drove the strong performance. When I think about the momentum going into the fourth quarter, really the only thing that's different, we have a much stronger comparison in the fourth quarter. We had very strong high single-digit growth last year, so comparison's different. So that really will be the factor, but the underlying health of the business is quite good.

Great, and then follow up on on diagnostics. You know you did. You did flag China. Obviously this has been a pressure point for some of your peers in China. Diagnostics. Maybe just give us a sense of what's going on. You know on the ground there. What is what would especially necessity diagnostics have done X that China drag and then overall I guess just what are your assumptions around China for remainder of the year and early 26?

Yeah, so when I think about our specialty diagnostics business, you know we provide high value. medically relevant critical testing, right? And you think about that, you know, it's transplant diagnostics, it's immunodiagnostics, it's our protein diagnostics, which is our multiple myeloma business, which is part of our clinical diagnostics business, our biomarkers for sepsis. These are just critical, you know, capabilities and businesses that are, you know, a healthy long-term set of prospects. When I think about the environment in China, we have a much smaller presence than the market average for the diagnostic businesses in China in terms of what we do. So we saw very weak conditions based on the pricing and reimbursement environment. It's not different than what we expected and those pressures flow through, but it's a relatively modest portion of our business. we saw a little bit of improvement relative to the prior quarter in terms of what the growth rate was in the business. So I think we're well positioned there over time. And not much beyond that, I would say.

OK, thank you.

Thanks.

Thank you. Our next question comes from Jack Meehan from Nefron Research. Your line is now open. Please go ahead.

Thank you, and good morning. First question, Mark, just wanted to test your pulse. Last quarter, you gave some initial framing thoughts around 2026 and kind of progression around the 3% to 6% organic growth. I guess just based on everything you've seen and the dialogue that you've had with customers, it would just be great to get your latest thoughts on how you felt like you were tracking relative to that.

Yeah. You know, when I think about, you know, the progression and the mid-term outlook and the long-term outlook, we feel very good about that, right? So nothing has changed about our confidence the next couple of years. You know, three to six percent, you know, organic is the right level of assumptions and strong operating margin and operating income growth coming out of that. So that's consistent. When I think about the first few agreements on MFNs between the pharmaceutical companies and the government in the US, that's what we expected to happen. So that's a good thing, right? Which is we expected that companies or the vast majority of companies would navigate the environment successfully. You're seeing the early ones do that. And that gives us confidence that the market conditions will continue to progress. I think it's worth remembering that, you know, today, you know, we're basically at, you know, 2% organic and is about a full point of headwind from the COVID runoff, which doesn't, you know, which won't repeat next year. So we're kind of running at the 3% range. And over time, over this next couple of year period, the absence of negatives, meaning that academic and government won't decline as much, China at some point will stabilize, That in and of itself, without even improving the market conditions, ultimately gets higher in the range. And then ultimately, you know, continued share gain in market conditions will get us further and further in the range over time. So I feel very good about the position. I think for Stephen, it's worth commenting on a couple of things that have changed, which are so a little bit more color.

Yeah, yeah. So Jack, a couple of things to think about when you're doing the modeling for 26. So based on current FX rates, there'll be a tailwind to revenue of a couple hundred million dollars. Obviously, and obviously monitor how rates change between now and the end of the year. We'll give more detail in terms of the current view in early 26. And then in terms of the recent M&A, maybe worth actually taking a step back and giving a little bit more detail on kind of the implications for the current guide for 25 and some thoughts in terms of modeling for you going forward. So starting with the filtration and separation business, revenue for this business for the full year 2025, not just the period we own it, but as I think about the full calendar year, expected to be just under $750 million in scale, so a good-sized business. When I think about going forward, the revenue growth there will be likely around or above the average for the company going forward, so it's a good growing business. For the first 12 months of ownership, we continue to expect the transaction to be $0.06 dilutive. Just under half of that was occurring in 2025. And then we're bringing this company, you know, this business into the company as a low double-digit margin business, and that quickly gets up to mid-teens and above once the integration stand-up costs are behind us. At that point, strong top-line growth, including strong synergies, will be nicely accreted to both margins and earnings for the business. Then moving to the Sanofi site acquisition, this comes with, as Mark mentioned, an existing book of business from Sanofi, approximately $75 million. Over the next couple of years, we're investing in additional lines that will drive much stronger utilization of that site going forward. And as we go through the investment phase over the first 12 months of ownership, we expect the transaction to be diluted by about 5 cents. As we get into 27, the revenue and profitability builds nicely as the new lines start to generate revenue there. So hopefully that's some good color that will help you with some modeling here.

Yeah, that was all great. I wanted to follow up and talk about the clinical research business. Mark, just any additional color you can share on trends and new authorizations, how you feel like pharma customers are feeling about getting back to work on trials, and any just color around traction there would be great. Thanks.

Jack, thanks for the questions. They never stop working. the business has progressed really well. I'm very, very proud of how the team is executing. The years played out strongly. When I think about Q3, revenue growth stepped up. So we're growing in the quarter. Remember, we were just slightly positive in Q2. We're back to low single-digit growth. Authorization is incredibly strong. So well ahead of that. So that position is that step up that we're expecting over time is playing out nicely. We're also innovating in what we do in clinical research, right? And if you think about why that's relevant is because it is the lifeblood of the pharmaceutical and biotech industry is to be able to improve the speed and efficiency of the drug development process because that creates opportunities to improve the ROI on drug development, which creates a virtuous cycle of more investments by our customers. A couple examples in the clinical research business where one is actively being implemented. We talked about accelerated drug development about a year ago. We're winning significant business. It's resonating incredibly well because what it's allowing us to do is shave time and cost out for our customers and leveraging our capabilities of not only our CRO business, but also our pharma services business to help our customers bring exciting medicines to market. The OpenAI collaboration is what we're creating together and what's new, right, which is we're, you know, deploying artificial intelligence in a way to help improve the cycle time of our clinical trials. And we're co-creating new capabilities, right, in terms of, you know, effectively leveraging the large repository of data that we have to be able to add new value to our customers. So it's a super exciting time in our clinical research business, and the business is progressing nicely during the course of this year.

Yeah, it's interesting. Talk to you.

Thank you.

Thank you. Our next question comes from Dan Arias from Stifel. Your line is now open. Please go ahead.

Hey, good morning, guys. Thank you. Mark, maybe just following up on your biopharma comments, I'm just curious whether demand from small and emerging biotech is getting any better from where you said? I mean, obviously, the BTK index is doing better, but I'm wondering if spending is loosening up at all.

Yeah, so, Dan, in terms of biotech, actually, it was a strong quarter, right? When I look at what was going on sort of in the more detail, you know, we really saw very nice momentum in our clinical research business, Some of the early activities in pharma services, obviously in pharma services can be smaller dollars as you get going, but there was a really nice progression there, which I feel good about. So I think that is encouraging. I actually think some of the M&A transactions that were done by large pharma acquiring biotech also helps sort of the ecosystem more broadly. So if I say not only do the equities perform better, but I think also You're seeing deal activity, and that deal activity ultimately will help drive a reinvestment cycle or cycling in a new capital to the market over time. So I think Q3 was a nice progression from that perspective.

Yeah, okay, that's great. And then maybe just taking the other side of Tyco's China question as it relates to pricing and just the initiatives that they have going on over there to control price. you know, the diagnostics markets are evolving, obviously, but what are you seeing on the research and industrial side? Is that fluid in a way that you think introduces some additional risk, or do you kind of have your hands around the pricing dynamic such that you can think about it being stable into year end or into the beginning of 26? Thanks a bunch.

Yeah, Dan, thanks for the question. So maybe if I step back on China, right, you know, because we've been able to deliver stronger growth, around the world now for some period of time, China has become a smaller percentage of the company's total, still an important market, but smaller. When I look at what's gone on in China, you know, academic and government does benefit from some of the stimulus programs, but relatively pressured as the government has, you know, tried to manage its own economic challenges, which are meaningful. But what was encouraging, was that farm and biotech grew in the quarter modestly, but it was nice to see that happen. When I think about the quarter, you know, we declined in the mid single digits. That was an improvement versus Q2. Really the difference over those trends was we had that month of succession of trade activities back in the April timeframe. You know, that absence really allowed us to have a bit more moderate declines. I would expect China for this year full year to be down between mid and high single digits. The pricing dynamics, less government affected in the industrial sector, in pharma and biotech. They're more private enterprises or state-backed enterprises, but they don't have the same reimbursement dynamics that you would see in the diagnostics and healthcare markets. So that's a bit more manageable. Thanks for the questions.

Thank you. Our next question comes from Dan Brennan from T. Day Cohen. Your line is now open. Please go ahead.

Great. Thank you. Thanks for the questions. Congrats, Mark and Stephen. Maybe, Mark, just going back to the onshoring announcement, since there's been tremendous focus in the investor community, I had to think about that. You gave a lot of color already in response to some questions, but I was hoping you can elaborate a little bit on two parts. First is, you know, we all ultimately think, like, kind of capex and capacity volumes, drug volumes. So if drug volumes aren't necessarily changing, just trying to understand how to think about what will be incremental in the U.S. versus kind of that wasn't there before. So any way to help us think about that at this point? I know you talked about for the green field, that would come with time, maybe like 27 and beyond. Just trying to think about that. And then I know you did talk about maybe more near term, maybe some of the brown field, there could be some equipment uptake in 26. Any way to frame sizing magnitude or just any way to kind of contemplate what this could mean for Thermo Fisher.

Yeah. So Dan, thanks for the question. So when I think about what is the aggregate dynamic, let's talk about what the dollars are for us, but just what's going on, it is true incremental one-time demand, right? And what I mean by that is, you know, there's going to be new equipment, new initial stocking inventory, new labs, All these things. I mean, none of these things are material in itself, but, you know, you just go through that process of getting a facility online. You do qualification runs. There's just a bunch of activity that will generate demand over the next few years. But the volume in the industry hasn't changed, right? So it is real incremental in terms of that startup, but effectively it doesn't mean that your ongoing consumables business grows more quickly because you're producing the exact same amount of medicines around the world. You're just producing in different sites. So, you know, from that perspective, you know, it was kind of an unexpected positive over the next few years. We have a strong presence there. And interestingly enough, we have a much stronger presence today than when those facilities were built many years ago in Europe, right? Just if you think about how strong our production business is, how strong the capabilities we're bringing in from solventum infiltration, the product launches around Dynaspin, which is our bioreactor technology. These are great things that position us to actually have a higher share in the new facilities than the existing install base. So I feel very good about the prospects. And we do it site by site in terms of what the opportunity is. So I don't have a good number to say how big is it in total, but should be a tailwind a bit in bioproduction. What I would say is our bioproduction business is doing incredibly well, right? So when I was able to look at a few of the companies that I've reported, you know, very strong growth from Thermo Fisher, clearly faster than what the others have reported. Broad-based strength geographically across our different businesses there. Really, the team did an excellent job. Bookings, outpacing the strong... you know, teams growth and revenues really a team just doing great work. So it's an exciting business for us and one with great momentum in the market.

Terrific. And then just to follow maybe to Steve and just on the EPS impact and tariffs, could you just kind of level set? I know you gave the impact in the quarter and you said you marked the market, the European tariffs, but you had the 50 cents potential from China. I think you recaptured some of that. Could you just kind of bottom line, like how much ultimately kind of the tariff changes occurred and kind of what's, what's happening in 4Q. Thank you.

Yeah, so thanks, Dan. So when I think about the tariffs and kind of the actual experience in Q3 came in favorably to what we'd had in the prior guide. And I call that the 11 cent pickup, and that's a combination of tariffs and the related effects in terms of the changes in the kind of tariff and trade environment. Looking to Q4, given the tariffs increased from the time of the last guide, most materially between U.S. and Europe. Our initial view is that the assumptions we had around tariffs pretty much hold for Q4, so I'm not expecting a significant pickup in Q4. That's kind of how we've framed the guidance in terms of this update.

Great. Thanks, Adam.

Thank you. Our next question is from Andrew Cooper from Raymond James. Your line is open. Please go ahead.

Great thanks everybody for the time, maybe just first we'll have a little bit more color on the contract research side of the House and maybe in particular. How that accelerator bundled program has has gained traction and kind of layering that into the context of all the discussion that that's already occurred in terms of. On shoring how that changes the applicability to customers and how they look at you know that kind of wraparound 360 partnership verse CRO and CDMO kind of separately historically.

Yeah, so Andrew, thank you for the question. So when I think about Accelerator, we are one of the largest clinical research organizations. We are also one of the largest pharma services organizations that's developing medicines on the physical side from early development all the way through commercial scale production, both in drug substance and drug product and all the physical clinical trials activities around there. So we are touching these pipeline, these molecules in many different ways. And a hypothesis that we had at the time of deciding to acquire PPD back in 2021 was that there would be insights and capabilities that could streamline the way that companies develop medicines and how they produce them ultimately. We didn't bake that into our models, but we had a strong hypothesis. We spent a couple of years doing a significant number of co-creation with our customers to bring that to life. We launched the official capabilities a year ago and the adoption has been very strong. You see it very aggressively in biotech because effectively they outsource pretty much all of their work, right? So when they think about it, they are looking for a partner that can help them bring insights, not only in how to design and execute their trials, but on also, you know, how do you develop and produce the medicines? And it's been very compelling and, you know, it's built us a nice book of authorizations. That turns into revenue over time, right? It takes a while for these to flow through the pipeline. And in large pharma, there's been great interest in our leading, you know, clinical trials, the physical capabilities of logistics, packaging, distribution of experimental medicines. And what that has allowed us to do is continue to drive share, gain momentum, because again, there, the linkages with clinical research Shaves time and cost out of the process as well. So it's been, you know, it's early days, but they've been very positive.

That's helpful. Thank you. And then maybe just one kind of financial question. You know, 20 cent operational beaten 3Q. You had the FX and tariff tailwinds as well. But you're raising the range about $0.20 in the midpoint as well. Maybe what's going on to offset some of that operational attraction as we think about 4Q? Is it reinvestment? Is it a little bit of mix? Is there something different to think about knowing we have that $0.05 of dilution from the acquisitions you called out as well? Just would love a little bit of color on how to refute a 4Q.

Yeah, I understand we beat by $0.30 in Q3. As you mentioned, we have $0.05 of additional dilution from the acquisitions and Overall, 20 cent raise in the midpoint, given where we are in the year, how we're performing, what the end markets are like. I think this is an even stronger raise on the low end of our guide. I think that's a good position to be in as I think about going into the Q4 quarter. Operator, we have time for one more question. We're in a good position to finish the year. We're raising our guidance by 20 cents in the midpoint. We're significantly raising on the low end. I think that's a strong statement. Thanks, Andrew.

Okay, thank you. I'm ready for one more question.

Lovely. Our next question comes from Patrick Donnelly from Citi. Your line is open. Please go ahead.

Great. Thanks for taking the question, guys. Mark, maybe one for you on just the capital allocation side. You obviously continue to buy back stock, as you talked about. Can you just talk about the M&A appetite, what those discussions look like, any areas you're focused on? I know you guys always have a good pulse on that front, so just curious what the appetite there looks like in the conversation. And I just have a quick follow-up.

Yeah, so we have been active all year, right? We've deployed about $7.5 billion, $4 billion on M&A, $3.5 billion on return on capital through buybacks and dividends. We have a very busy pipeline. It's exciting. I like this environment because there are good companies that struggle in environments where it's all about execution. And so we're busy and we're looking at some interesting things. Obviously, those things will always fit well with our strategy. It's going to be whether we can generate you know, really good returns. And for those that we feel good about, you'll see us continue to be active. And there are many parts of the company, given how fragmented our industry is, to expand our offerings that would be highly valued for our customers. So we're going to execute well against what we've closed. And at the same point in time, continue to look for great opportunities to build more value.

Okay, that's helpful. And then as we look ahead, it seems like the exit rate for 4Q is somewhere at 2% or 3% organic. Obviously, talked a little bit about 26 last quarter. Is the view that growth just continues to accelerate throughout next year? It sounds like China is turning a corner to a degree. Pharma sounds a little bit better. I guess what segments are holding you back, if any, in terms of when you look at what's improving right now and again? as that acceleration happens next year, what are the key drivers and what are you looking for to still turn the corner? Thank you guys so much.

We are looking forward to our call at the beginning of the year to give you all the details. We'll benefit from, obviously, the perspective on how we exit the year. And our view is over the next couple of years, growth is going to build over time. And I'm very excited about exiting this year. with a couple percent organic and 3% when you have the non-repeats of the final bits of COVID runoff. So we enter the year at a good part, and we're going to execute really well and turn the revenue growth into excellent, excellent earnings growth, like we did in the quarter, and finish up on a great note in 25 and set ourselves up for a great 26 and beyond. So Patrick, thank you for the final question. Let me wrap up. Thanks, everyone, for joining us on the call today. We're very pleased to deliver another strong quarter. We're well positioned to deliver differentiated performance in 2025 and continue to create value for all of our stakeholders and build an even brighter future for our company. We look forward to updating you on the fourth quarter and the full year performance early in 2026. And as always, thank you for your support of Thermo Fisher Scientific. Thanks, everyone.

This concludes today's call. Thank you all for joining. You may now disconnect your lines.