The operator introduces the conference call for Danaher Corporation's Fourth Quarter 2023 Earnings Results and hands over to John Bedford, Vice President of Investor Relations. He introduces the executives present and mentions that all necessary information is available on the company's website. The call will be archived and a replay will be available. The presentation will cover significant factors that impacted performance and the supplemental materials will provide additional details. All financial metrics mentioned are from continuing operations and are for the fourth quarter of 2023. Year-over-year changes will also be discussed.

The company may discuss products and devices with pending regulatory approvals or limited availability during the call. Forward-looking statements will be made, but they are subject to risks and uncertainties. The call will be led by Rainer Blair, who reflects on the company's strong performance and progress in enhancing their portfolio and accelerating their strategy in 2023. The successful spin-off of Veralto in September has transformed the company into a focused Life Sciences and Diagnostics Innovator, increasing their exposure to end markets with strong growth drivers.

In 2023, Danaher acquired Abcam and expects to see faster growth, higher margins, and stronger free cash flow. Despite pandemic challenges, the company maintained growth and invested in productivity initiatives. Sales were at $23.9 billion, with a 10% decline in core revenue and a 9.5% COVID-19 revenue headwind. The company's adjusted operating profit margin was 28.7%, with adjusted diluted net earnings per common share of $7.58. Danaher also generated $5.1 billion in free cash flow, marking the 32nd consecutive year of a free cash flow to net income conversion ratio of over 100%. The company continued to invest in innovation, with the release of Cytiva's Xcellerex X-platform bioreactor.

Danaher's Life Sciences and Diagnostics businesses are introducing new products to accelerate drug discovery and improve patient diagnosis. In the fourth quarter, the company's sales were $6.4 billion, with a decline in core revenue due to the impact of COVID-19. Developed markets saw a low double-digit decline, while high growth markets declined high single digits. The company's gross profit margin was 59%, and adjusted operating margin was down 420 basis points. Biotechnology segment reported a 21% decline in revenue, with bioprocessing and discovery and medical seeing high declines.

In the bioprocessing business, there was a decline in revenue but a modest improvement in orders in the fourth quarter. The market in North America and Europe is stable, but China is experiencing weak demand. For the full-year 2024, there is an expected decline in revenue in the first half, followed by gradual growth. Despite short-term challenges, the long-term growth trajectory for biologic medicines remains strong. Cytiva has been investing in innovation to provide new solutions for customers, such as the recently launched Cytiva protein select technology.

Danaher's new technology simplifies the purification process for recombinant proteins, which is beneficial for the more than 1,800 proteins currently in development. In the Life Sciences segment, revenue declined slightly due to decreased investment from pharma and biopharma customers, but the acquisition of Abcam expands their presence in the proteomics market. The genomics consumables business was flat, with strong demand for certain products offset by declines in others. IDT's new facility in Iowa allows them to offer a complete CRISPR workflow for cell and gene therapy customers. This expansion of capabilities supports IDT's goal of improving patient lives through faster development of life-changing therapeutics.

The company's reported and core revenue both declined by 8.5%, but their clinical diagnostics businesses showed high single-digit core revenue growth. Beckman Coulter Diagnostics had the strongest performance, with over 10% core revenue growth driven by new product innovation and improved commercial execution. In molecular diagnostics, Cepheid saw low teens core revenue growth in non-respiratory business and strong revenue in respiratory business due to high prevalence of respiratory viruses. The company expects annual respiratory revenue to be $1.5 billion, higher than their initial assumption of $1.2 billion, due to higher volumes and a greater mix of their 4-in-1 tests. The success of Cepheid is attributed to the value their Gene-Xpert provides customers at the point-of-care.

Cepheid's 4-in-1 test has become the standard for clinicians due to its fast and accurate diagnosis of four respiratory illnesses. With a large customer base and a growing adoption of their molecular diagnostic test menu, Cepheid is well-positioned to continue gaining market share. In the first quarter of 2024, they expect a decline in core revenue but anticipate a return to growth in the second half of the year. For the full year, they expect a slight decline in core revenue but an improvement in adjusted operating profit margin. Despite challenges, Danaher has strengthened its portfolio through M&A and cost structure improvements, and is exiting the pandemic as a stronger company.

Rainer Blair, CEO of Danaher, discusses the company's recent developments and financial performance. He mentions the establishment of their dental, environmental, and applied solutions segments as standalone public companies, and the acquisitions of Factiva, Aldevron, and Abcam. He also highlights the significant growth and margin improvements, as well as strong free cash flow generation. The company's future looks bright, thanks to their talented team, differentiated portfolio, and Danaher Business System. The company's outlook for bioprocessing is strong, with a focus on China and the rest of the world. Blair also discusses the current inventory levels of their customers and how it may affect their guidance.

For the full year of 2024, the company expects overall revenue to be down low single digits. The Biotechnology segment will be down low to mid-single digits, while Life Sciences will be down low single digits and Diagnostics will be up low single digits. The company anticipates a slow start in the first half of the year, with growth picking up in the second half. They expect bioprocessing to be down in the first half but return to growth in the second half, and for Life Sciences to also see a slow start but improve in the second half. Pharma and biotech demand is expected to remain stable but at lower levels, while academic and applied markets are expected to hold up comparatively better.

The paragraph discusses the expected performance of China in the Life Sciences industry, specifically in bioprocessing. The company expects weaker performance in China due to slower macro conditions and changes in the subsidized loan program. Additionally, they anticipate consistent growth in developed markets and a decline in respiratory revenue. The CFO provides some specific numbers for China and mentions that the destocking process will likely be completed in the first half of the year. The company is optimistic about the second half of the year for bioprocessing.

The speaker is discussing the company's guide for the year, which calls for a slight improvement in book-to-bill ratio. They expect a modest improvement in the first half of the year, with no significant inflection point. The backlog is currently at a normal level, and they anticipate a gradual increase in book-to-bill ratio throughout the year.

The company is not assuming book-to-bills will go above one in any given quarter. They expect to get past inventory destocking in the first half and see a slight improvement in the second half. The second half ramp in bioprocess is estimated to be a $250 million year-over-year increase on a $6.5 billion business. The Q1 guidance for biotech and bioprocess to be down in the low 20s is based on easier comps and a no-fee cancellation policy that has stopped for Danaher. The company saw sequential order improvements in Q4 for bioprocess.

The company's base business core growth in Q1 last year was up low single-digits, and in the first half of 2023 it was down low to mid-single-digits. In the second half, it was down mid-teens or high-teens. There is a normal seasonal step down from Q4 to Q1, and the company is actively trying to destock and get through this period. Customer activity levels and drug volumes are still intact, and last year the company saw double-digit growth in base diagnostics.

In a recent earnings call, Cepheid CEO Rainer Blair discussed the company's performance and addressed concerns about slowing diagnostics sales. He stated that the activity level for bioprocessing remains strong, with a long-term growth rate of 10%. This has helped draw down inventories, particularly in Western Europe and North America. However, diagnostics sales have been affected by a difficult comparison to the previous year. Overall, the company has managed to improve its cost structure, leading to a 50 basis point increase in guidance.

The speaker is discussing the company's cost reductions and how they have impacted margins. He mentions that in 2023, the company had an adjusted operating margin of 28.5% and it is expected to increase by 50 bps in the current year. The cost reductions mainly came from reducing headcount and right-sizing the cost structure in response to lower volumes in certain businesses. This resulted in a $350 million benefit, which would have been 150 basis points on its own, but was offset by lower volumes in other areas. The speaker expects these cost savings to be sustainable going forward.

The speaker discusses the company's expectations for growth in China, stating that they believe it will be an attractive market in the long-term due to the Chinese government's prioritization of healthcare. However, they are forecasting a decline in the market in the short-term due to challenging macro conditions, but are not factoring in any potential stimulus from the government. They expect to see an improvement in the second half of the year due to the reversal of tough comparisons.

The company expects a tough start to the year with activity levels remaining the same as in the second half of 2023. However, they anticipate a gradual improvement in the second half of the year. The company believes that the demand for innovative drugs in China will continue and the investment will remain intact. In response to a question, the company clarified that their backlog will continue to deplete throughout the year, but it will still be at a normal level. They also mentioned that their book-to-bill ratio will get close to one in the second half of the year, leading to a high single-digit growth rate.

The speaker is discussing the book-to-bill ratio and growth rate for the company. They expect gradual improvements in the ratio and a modest increase in the second half of the year. The visibility is improving and they anticipate being past the inventory destocking. The guide does not include a step up or inflection in bioprocessing, but if there is one, they will update the guide. The second half is expected to have a tight single-digit growth rate due to better customer visibility and favorable comps.

The speaker clarifies that the $250 million mentioned earlier is for the second half of the year. They then discuss the outlook for the Life Sciences segment, specifically in the pharma and biotech industries. The speaker notes that there has been a normalization in demand and expects this trend to continue in 2024. They also mention that the first quarter may see a similar decline in the Life Sciences segment. However, they caution that their company may not be a good indicator for the overall industry as they only make up 10% of the market.

The speaker mentions that there will be a normalization of activity in the first quarter or first half of the year, but it will take some time. They believe that the lower activity level is stabilizing. The next question is about bioprocessing and if there are any signs of improvement from customers. The speaker says that six months ago, there were no indications of improvement, but now they are starting to see some green shoots and pull-forwards from customers. However, they still do not expect a significant improvement in the first half of the year. They have been tracking inventory and have a better understanding of its status.

The company is feeling more confident about the year ahead due to positive customer conversations and improving order patterns. They expect the de-stocking to be largely behind them in the first half of the year and anticipate a broad-based improvement in order patterns in the second half. They are cautiously optimistic about a high single-digit or better exit rate at the end of the year.

The speaker is asking about the pace of recovery in bioprocessing and how it will affect Danaher's inventory levels. The speaker notes that while Danaher is actively managing customer inventory levels, other companies may have a different experience due to the breadth of their portfolio and geographic mix. The speaker also mentions that each modality within bioprocessing may have a different recovery time and that Danaher may not see a V-shaped recovery.

The speaker explains that while a V-shaped recovery is possible, they do not have enough confidence to predict it. They expect to end the year with high single-digit growth, but this could change if a recovery happens earlier. They plan to update investors if they see a significant change. In terms of instrumentation growth, they expect it to be down low single-digits for the year, with a slow improvement in the second half. This is due to tough comparisons in the first half of the year.

The China loan program contributed to high growth in the first half of last year, but the current activity levels will result in a softer first half. Pharma and biopharma are decreasing their investment, but China is expected to improve in the second half. Life science is stabilizing and is expected to gradually improve in the second half. The DBS implementation for Abcam is progressing and capital deployment will continue after the Veralto spin.

The speaker concludes the question-and-answer session and hands the call back to John Bedford for any final remarks. John thanks everyone and mentions that they are available for follow-ups. The operator then ends the call.

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