The operator introduces the Danaher Corporation's Third Quarter 2023 Earnings Results Conference Call and welcomes everyone. The call will be led by Rainer Blair, President and CEO, and Matt McGrew, EVP and CFO. The company's financial reports and other information are available on their website. The call will discuss factors that impacted year-over-year performance.

The paragraph discusses the upcoming call where the company will make forward-looking statements and provide updates on certain products and devices. It also mentions the inclusion of Veralto's results in the financial highlights for the third quarter, and the separate reporting of Veralto's third quarter results later in the week. The guidance for the company's continuing operations will exclude Veralto. The call will be turned over to Rainer, who will discuss the third quarter results, with Biotechnology performing as expected and higher testing revenues offsetting slightly lower demand in Life Sciences.

In the third quarter, Danaher's consistent execution and focus on DBS helped the company exceed expectations in a challenging operating environment. The successful spin-off of Veralto Corporation, a global leader in water and product quality, is a testament to the team's execution and teamwork. Danaher is now a more focused life sciences and diagnostic innovator with a strong portfolio, financial strength, and the Danaher Business System as a competitive advantage. The third quarter results also include Veralto's contributions.

Danaher's sales in the third quarter were $6.9 billion, with a core revenue decline of 11.5% due to the COVID-19 pandemic. Developed markets saw a low double-digit decline, while high growth markets were down high single digits, including a significant decline in China. The company's gross profit margin was 58.2%, but operating margin decreased by 540 basis points due to lower volume in the Biotechnology and Diagnostics segment and costs related to the separation of Veralto. Adjusted diluted net earnings per common share were $2.02, and the company generated $1.3 billion in free cash flow in the quarter. In the Biotechnology segment, core revenue declined by 21%, with bioprocessing revenue down over 20% and discovery and medical down mid-single digits. China saw a decline of approximately 45% due to weak funding and activity levels.

Despite the current market conditions impacting bioprocessing, the demand for biologic medicines continues to grow, with a projected average annual growth rate of 10%. This year has seen a record number of FDA approvals for biologics, reinforcing the potential for growth in the biologics market. Cytiva's recent launch of the NanoAssemblr, the industry's first end-to-end lipid nanoparticle formulation system, is an example of their commitment to innovation and supporting customers in their pursuit of breakthroughs. In the Life Sciences segment, reported revenue declined 1% and core revenue was down 2.5%, including a low single-digit decline in the base business, with mid-single digit declines in the instrument businesses, driven in part by a challenging funding environment in China.

In the Diagnostic segment, Danaher saw softness in pharma and biopharma customers outside of China, while demand remained stable in life science research and applied markets. The genomics consumables business declined, but growth in plasmids, proteins, and gene writing and editing solutions offset this. Danaher's Life Sciences businesses are delivering innovative solutions, such as the recently released CellXpress.ai, which automates cell culture processes and can reduce reliance on animal models. Danaher also announced its intention to acquire Abcam, a leading producer of protein consumables, to further its strategy of helping map complex diseases and accelerate drug discovery. The addition of Abcam is expected to be accretive on multiple levels.

In the third quarter, reported revenue and core revenue declined due to lower respiratory testing volumes at Cepheid. However, the clinical diagnostics businesses showed mid-single digit core revenue growth, led by Radiometer and Beckman Coulter Diagnostics. Beckman's strong performance is attributed to improved commercial execution and new product innovation. In molecular diagnostics, non-respiratory testing saw over 20% core revenue growth, with a particularly strong performance in Group A strep and sexual health. Cepheid's respiratory testing revenue exceeded expectations due to a higher prevalence of COVID-19 and a preference for their 4-in-1 test. As customers begin planning for the respiratory season, Cepheid expects $1.6 billion in respiratory testing revenue for the full year. This success is credited to the team's strategic placement of systems over the past few years.

In the third quarter, Danaher saw a significant increase in revenue and installed base due to the preference for their GeneXpert platform and molecular testing during the pandemic. They expect a decline in revenue in the fourth quarter and for the full year, but are confident in their ability to continue gaining market share. The company is now more focused on improving human health after the successful spinoff of Veralto.

Danaher is a company that focuses on solving health challenges and helping customers develop therapies. Their innovative approach and strong portfolio make them well-positioned for success. During the Q3 earnings call, they discussed the bioprocess segment, stating that orders have remained consistent with expectations but have not seen any significant improvement. They are currently at a low point and orders are not showing signs of an inflection point.

The speaker provides quantitative data on the company's book-to-bill ratio and orders, stating that they have been consistent for the past few quarters and are expected to remain the same in the fourth quarter. They also mention that orders have been down compared to the previous quarter and have been consistently down for the past three quarters. Looking ahead to 2024, they state that the second half of 2023 exceeded expectations, with strong performance in diagnostics and expected stability in bioprocessing. They believe that they have reached the bottom in bioprocessing for 2023.

Vijay Kumar asks about the outlook for bioprocessing, noting the 0.8x book-to-bill ratio and wondering if there will be growth next year. He asks about potential factors, such as restocking and the potential impact of China.

In the paragraph, Rainer Blair discusses the data for Q3 and how it was similar to Q2. He mentions working with customers to reduce tension and burn off inventory. He also states that it's hard to make generalizations about 2024 and they need to see Q4 data before making any predictions. Matt McGrew then talks about the stand-alone margins for Danaher and the cost actions they have taken, with $350 million being one-time costs.

In the third quarter, China accounted for 12% of total revenue after the removal of Veralto. Bioprocessing saw a 45% decrease due to a weak funding environment and excess capacity. Other factors, such as first core growth, FX, and cost headwinds, will also impact margins. The company will provide more details on these factors in January.

The Life Sciences sector underperformed due to weaker macro conditions and anti-corruption measures in the country. However, Diagnostics is back to normal and is expected to continue this trend in the future. The company's M&A strategy takes into account the end market, asset, and financial model, and they believe that valuations still need to adjust to the current higher interest rate environment.

Rainer Blair and Michael Ryskin discuss the weakness in the Life Science sector in the third quarter. The decline was primarily seen in the LS instruments, which make up less than 10% of Danaher's revenue. The decline was due to a slowdown in pharma and biotech, particularly in the U.S. and China. However, academic and life science research, as well as applied markets like food and environmental, remained resilient.

The company is seeing a decrease in their developed markets due to softness in the pharma and biotech industries. In China, there is a decrease in demand due to weaker macroeconomic conditions and anti-corruption measures. The company remains cautious about their life science tools and expects a decline in the fourth quarter. They will address their outlook for 2024 in January, but anticipate a weaker pharma and biopharma market. The analyst asks about the long-term outlook for China, and the company states that they cannot comment on 2024, but China has been a major source of growth for the company and they expect it to continue to contribute to overall growth in the future.

Rainer Blair of Biogen discusses the potential for growth in China's demand for biologic drugs in the mid to long term, despite a short-term reset due to pandemic-related spending and changes in funding sources. He also addresses the potential for GLP-1s and diabetes weight loss drugs to offset headwinds and the opportunity for mAbs in the Alzheimer's market.

Danaher expects their GLP-1 drugs to contribute to their growth, but not as significantly as the use of monoclonal antibodies in Alzheimer's drugs. The acquisition of Abcam will provide opportunities for cost reduction and entry into a growing protein consumables market. The specific details and impact on margins cannot be discussed until the acquisition is finalized.

The speaker discusses the impact of new detection technologies on protein detection, which is now moving from research to biopharma and potentially to the clinic. This aligns with the company's strategy of mapping complex diseases and accelerating drug discovery. The company is also acquiring a differentiated company with a strong brand and sustainable business model, which will be accretive to growth, earnings, and talent. The speaker also addresses questions about the impact of anti-corruption measures and volume-based procurement in China, stating that they are transitory effects and mainly affecting equipment tenders and installation.

The company has seen a decrease in growth due to the anti-corruption initiative in China, but they believe it will have a positive impact in the long term. They also expect a $50 million annual headwind from value-based procurement, mostly affecting Beckman Diagnostics. The company has increased their respiratory expectations for the year to $1.6 billion, but $1.2 billion is still the baseline for future years. This increase was due to an earlier start to the respiratory season.

The speaker is discussing their financial planning for the upcoming year, specifically in regards to January and February. They mention that in the past, they have seen around $1.2 billion during this time frame. They also mention that they typically base their planning on the last couple of years and try to mirror that. The call is now ending and the speakers will be available for further questions.

This summary was generated with AI and may contain some inaccuracies.