The paragraph is an introduction to Thermo Fisher Scientific's 2025 First Quarter Conference Call. It begins with the operator welcoming participants and introducing Rafael Tejada, Vice President of Investor Relations, who starts the call. He mentions that Marc Casper, Chairman, President, and CEO, as well as Stephen Williamson, CFO, are present. The call is being webcast live and will be archived on the company's website. Tejada highlights that forward-looking statements may be made, referencing the company’s future expectations under the Safe Harbor provisions, and warns that actual results could differ due to various factors. He notes that non-GAAP financial reconciliations are available on their website. Lastly, Marc Casper thanks everyone and highlights that the quarter had strong performance.

The paragraph highlights the company's strong Q1 performance despite a challenging macroeconomic environment. With a focus on customer success and strategic growth, the company reported $10.36 billion in revenue and a 21.9% adjusted operating margin. Adjusted EPS increased by 1% to $5.15 per share, and performance exceeded expectations despite a shorter quarter. In the Pharma and Biotech sector, the company experienced low single-digit growth, despite headwinds from decreased vaccine and therapy-related revenue. However, revenue from the academic and government sectors declined slightly due to economic conditions in the U.S. and China.

The paragraph discusses the company's growth in the industrial, applied, diagnostics, and healthcare markets, achieving low single-digit growth and meeting financial commitments for the quarter. The company's growth strategy is centered on three pillars: high-impact innovation, being a trusted partner, and having a strong commercial engine. Highlighting the high-impact innovation pillar, the company introduced new products, including the Thermo Scientific Vulcan automated lab. This AI-enabled solution integrates robotics and electron microscopy to enhance semiconductor manufacturing by expediting workflows, reducing labor, and improving data consistency, thus boosting manufacturing yields and productivity.

The paragraph highlights Thermo Fisher Scientific's recent innovations and achievements. They introduced the Thermo Scientific Transcend, an advanced liquid chromatography platform, and Olink Reveal proteomics kits for precision medicine. The company is preparing for new launches in Q2 and is enhancing its commercial operations to boost customer productivity and innovation. In clinical research, they are improving real-world evidence capabilities, launching Avitas patient registries, and collaborating on projects like creating a 3D cell map through the Chan Zuckerberg Initiative. These efforts demonstrate Thermo Fisher's commitment to advancing science and improving treatment outcomes.

The paragraph discusses Thermo Fisher Scientific's strategic initiatives and performance highlights. The company attributes its success to its trusted partner status, industry-leading capabilities, and the PPI business system, which boosts productivity and customer allegiance. They are actively executing a capital deployment strategy that includes strategic acquisitions, such as the $4.1 billion agreement to acquire SOVENTUM's purification and filtration business, enhancing their bioproduction capabilities. The acquisition is expected to be completed by the end of 2025. Additionally, Thermo Fisher increased shareholder returns by repurchasing $1 billion in shares and increasing dividends by 10%. The company acknowledges the rapid pace of change since their previous guidance.

The paragraph discusses the macroeconomic changes impacting a company, specifically tariffs and U.S. policy changes, and how the company is adapting by managing its business to minimize negative impacts and leverage new opportunities. Although these changes create uncertainty, the company offers a revised guidance for the year, expecting revenue between $43.3 billion and $44.2 billion and adjusted EPS between $21.76 and $22.84. The company emphasizes its commitment to customers, employee motivation, and maintaining high performance standards to secure its competitive long-term position. Stephen Williamson highlights guiding principles for managing the company during such periods of change.

In this paragraph, the company discusses leveraging its PPI business system to manage the supply chain and costs amid tariffs, and how it is channeling commercial teams towards high-opportunity areas to boost market share. The company emphasizes its trusted partner status with customers and its investments in US manufacturing and R&D, amounting to about $2 billion, as it stands strong in the life sciences sector globally. It highlights strong customer lead generation scores and colleague retention rates. The company reports a strong quarterly performance based on its growth strategy and PPI businesses, claiming a competitive advantage through its customer success capabilities and positioning itself to navigate challenges and seize opportunities. The CFO, Stephen Williamson, is then set to present the financial overview and updated 2025 guidance.

In the first quarter, the company exceeded its financial expectations with excellent execution, delivering organic revenue growth of $100 million and an adjusted EPS that was $0.04 higher than anticipated. The strong performance was mainly due to operational success, partially offset by foreign exchange challenges. Adjusted EPS grew 1% to $5.15, while GAAP EPS increased by 15% to $3.98 compared to the previous year. Revenue was flat, comprising 1% organic growth, slight acquisition contributions, and a 1% foreign exchange headwind. The revenue faced a 3% combined impact from fewer selling days and reduced pandemic-related income. Geographically, North America remained flat, Europe and Asia Pacific saw low single-digit growth, while China experienced a mid-single-digit decline. The quarter saw an adjusted operating income of $2.27 billion, with an operating margin of 21.9%, slightly lower than last year, due to strategic investments and unfavorable exchange rates, despite strong productivity.

In the quarter, the company achieved a gross margin of 41.7%. Adjusted SG&A was 16.5% of revenue, while R&D expenses reached $342 million, accounting for 7.5% of manufacturing revenue. Net interest expense was $100 million, and the adjusted tax rate stood at 10%. The average diluted shares were 379 million, reduced by five million due to share repurchases. Free cash flow was $370 million after $350 million in capital expenditures, and the company returned $2.1 billion to shareholders through share buybacks and dividends. The company also announced plans to acquire Solventum's purification and filtration business for $4.1 billion. Ending the quarter with $5.9 billion in cash and $34.2 billion in total debt, the leverage ratio was 3.2 times pro forma adjusted EBITDA, or 2.6 times net debt. The adjusted ROI was 11.4%. The report also noted that two fewer selling days in Q1 affected revenue growth.

In the first quarter, the Life Science Solutions segment saw a 2% increase in reported and organic revenue, driven by the bioproduction business, though adjusted operating income decreased by 1% due to strategic investments and the Olink acquisition. The Analytical Instruments segment experienced a 2% rise in reported revenue, led by electron microscopy, with flat adjusted operating income and a slight decrease in margin due to strategic investments and foreign exchange. Specialty Diagnostics reported a 3% increase in revenue, driven by healthcare market channels and diagnostics businesses, with a 3% rise in adjusted operating income. In contrast, the Laboratory Products and Biopharma Services segment saw a 1% decline in revenue, largely due to a reduction in pandemic-related revenue, although this was partially offset by growth in Pharma Services.

In the paragraph, it is noted that the company's Q1 adjusted operating income decreased by 2%, and the adjusted operating margin remained flat at 13% compared to Q1 2024. Despite strong productivity, the results were impacted by an unfavorable mix and strategic investments. As a result, the company is updating its 2025 guidance to reflect ongoing business strength and the effects of recent macroeconomic changes. Adjusted EPS is lowered by one dollar at the midpoint from previous guidance, with $0.70 attributed to U.S.-China tariffs, expected to decrease next year due to mitigation efforts. Non-China tariffs are neutral for the 2025 EPS due to effective cost-offsetting measures, while U.S. policy changes have a $0.30 impact. Revenue remains unchanged, with pricing actions and favorable foreign exchange offsetting volume-related impacts, and organic revenue growth is projected at 2%. The guidance incorporates current tariff rates and assumes no changes in U.S. policy.

The paragraph discusses the impact of US-China tariffs on trade and the company's financial performance, forecasting a $400 million revenue decline for the year due to reduced sales in China of US-produced products and increased costs for China-sourced components. Mitigation efforts, though not fully effective until post-2025, are expected to offset the $375 million hit to adjusted operating income. Non-China tariffs are raising costs on imports and US purchases with foreign content, but foreign exchange rate shifts, specifically the weakened US dollar, are boosting revenue by $600 million. The combined mitigation strategies are expected to neutralize any adjusted EPS impact from non-China tariffs by 2025.

The paragraph discusses the impact of changes in US policy focus on the company's academic and government customers, particularly in terms of reduced purchases expected in 2025 due to potential changes in government funding. This, along with decreased clinical trials related to vaccines, has lowered the company's revenue guidance by $500 million, operating income by $150 million, and adjusted EPS by $0.30. While short-term effects are unfavorable, the company anticipates long-term opportunities by leveraging US manufacturing capabilities to mitigate tariff impacts. For 2025, revenue is projected between $43.3 billion to $44.2 billion, with 1% to 3% organic growth and adjusted operating income margins of 22% to 22.6%. Tariff-related costs have reduced margins by 120 basis points, impacting reported profits, resulting in an adjusted EPS range of $21.76 to $22.84.

The paragraph discusses financial projections and expectations for a company, noting potential variations in outcomes for 2025 based on macroeconomic conditions. The company anticipates benefiting from supply chain improvements and adapting to changes in the market. It expects foreign exchange (FX) to negatively impact revenue by $50 million and adjusted operating income by $90 million, including a $60 million one-time transactional FX impact. Adjusted EPS is expected to face a $0.19 FX headwind, with net interest expenses projected at $330 million in 2025. The adjusted tax rate is reduced to 10.5% from 11.5%. Capital expenditures are anticipated between $1.4 billion and $1.7 billion, with free cash flow ranging from $7 billion to $7.4 billion. The company completed $2 billion in share buybacks and plans to return $600 million to shareholders through dividends, maintaining a diluted share count of 378-379 million shares.

The paragraph discusses a financial update provided during a call, where the guidance shared does not account for future acquisitions or divestitures, specifically excluding the pending acquisition of Soventum's purification and filtration business. The company anticipates similar organic growth in Q2 as in Q1, with an adjusted EPS expected to be $0.05 to $0.10 higher. Emphasizing agility and adaptability in navigating current uncertainties, the company remains committed to delivering for customers, colleagues, and shareholders. Acknowledging a more unpredictable environment, they maintain their approach. The speech transitions to a Q&A session with Michael Ryskin asking about the guidance approach amid market uncertainties, highlighting a broader range and seeking elaboration on potential outcomes given the market's volatile nature and strategic responses to possible changes.

In this paragraph, Marc Casper discusses the company's strong start to the year with successful performance across various metrics, including low employee turnover and effective growth strategy execution. He notes the dynamic and challenging macroeconomic environment but affirms the company's readiness to adapt with a fully mobilized approach to mitigation actions. He emphasizes the importance of being agile in response to changes, ready to capitalize on unforeseen opportunities while managing risks effectively. He highlights the potential upside scenario of improved US-China relations, which could prevent a significant decrease in demand. Overall, he expresses confidence in the company's ability to navigate the current environment.

The paragraph discusses the challenges and strategies related to US-made products based in China. It mentions that only a small percentage of products for China are produced in the US, and assumes this will decrease unless supply chains can be aggressively mitigated. The scenario anticipates relocating production to other sites, with potential short-term actions. There's positive commentary from the FDA commissioner and a potential for a robust biotech environment. However, negative factors could include tariff rates and macroeconomic impacts. The paragraph emphasizes the stability of life science tools amidst volatility and the intention to grow EPS, providing a reliable option in a challenging environment. Michael Ryskin then acknowledges the situation and shifts focus to consider long-term aspects beyond 2025, specifically discussing the tariff situation and US government funding through NIH.

Marc Casper expresses optimism about the long-term growth of the tools market, despite current short-term focus. He believes that aging populations, increased demand for healthcare, and scientific breakthroughs will drive industry growth. The long-term growth rate is influenced by global GDP growth, with higher GDP growth leading to upward pressure on industry growth. He notes that academic funding, particularly from sources like the U.S. National Institutes of Health (NIH), can also impact growth, depending on government budget appropriations and policy changes. Overall, he remains positive about the industry's future prospects.

In the paragraph, Matt Sykes from Goldman Sachs asks Marc Casper about changes in order behavior in the large biopharma market, particularly any pull forward of inventories due to tariffs, and how the company works with customers to avoid supply chain disruptions. Marc Casper responds that due to the short notice of the tariff announcements, there hasn't been a significant change in customer order patterns and no unusual activity was observed in the first quarter. In a follow-up question, Sykes inquires about manufacturing flexibility across different product types like instruments, consumables, and reagents. Casper doesn't provide a detailed response within this excerpt, but the discussion revolves around understanding the flexibility and priority in manufacturing adjustments given the diverse product offerings.

The paragraph discusses the company's rapid mobilization and execution of strategies across different businesses and product types, highlighting the complexity and hard work involved. It emphasizes the advantage of having large-scale facilities in multiple major markets, which allows for flexibility and quick movement. This scale presents a significant competitive advantage and opportunity for market share growth. The speaker feels confident about their competitive position and operational execution, particularly within the PPI business system. The paragraph concludes with an interaction between the operator, who introduces the next speaker, Jack Meehan from Nephron Research, and a request for information on customer feedback and potential risks and opportunities related to pharmacy tariffs for Thermo Fisher Scientific.

In the paragraph, Marc Casper discusses the ongoing interactions with pharmaceutical and biotech customers, noting that while no tariffs have been formalized, there is interest in leveraging US manufacturing capabilities. This includes a significant $2 billion investment over four years to expand capacity in pharma services, analytical services, and R&D in the US. Regardless of tariff outcomes, there is a trend toward increasing activity in these areas. Jack Meehan then questions how far along the pharma services business is in its post-COVID recovery and where demand is highest. Casper responds that demand is primarily in fill-finish services and drug product tableting, reflecting a preference for more operations to be conducted in the US.

The paragraph discusses the impact of policy changes on a company's updated guidance, specifically noting a $500 million reduction due to weaknesses in the academic and government sectors, as well as in clinical trials related to vaccines. It is clarified that $200 million of the reduction is attributed to canceled or paused vaccine studies within the clinical research business. The paragraph includes a question and answer session with Marc Casper, who provides these details in response to a query from Rachel Vatnsdal of JPMorgan.

The paragraph discusses funding for biotech and clinical trials, noting that half is government-funded and half comes from innovators. It mentions strength in biotech authorization and anticipates short-term adaptation by others in the industry. The speaker believes good medicine is being studied, and there's uncertainty about when policies might change. US academic funding is expected to be soft for the rest of the year, with possible improvement based on summer appropriations. The guidance doesn't account for a positive shift. Rachel Vatnsdal asks about pricing assumptions related to tariffs, seeking clarification on mitigation strategies and pricing expectations. Marc Casper is then addressed for further insights.

The article paragraph discusses a company's approach to pricing in response to the current inflationary environment and changes in world tariffs. The company plans to implement modest price increases, close to 2%, across its portfolio without exploiting the situation. This strategy is in line with previous actions during similar times. The discussion then shifts to Doug Schenkel from Wolfe Research, who expresses concern over the current business climate, noting that major pharmaceutical companies, like Lilly, are reducing R&D and capital expenditure investments. Schenkel suggests that assuming the White House's intentions do not impact policy has proven to be a poor strategy, highlighting the challenging environment for the industry over the past five years.

The paragraph features a conversation between two individuals, Doug and Marc Casper, discussing the state of their industry over the past five years, particularly in light of challenges such as a global pandemic. They acknowledge both the industry's significant achievements, like supporting the global response to COVID-19 and producing innovative developments, and its struggles during this period. Despite potential structural changes to market growth rates, Marc feels optimistic about the industry’s importance and believes that slight fluctuations in volume should not overshadow its potential for a bright future. Doug questions whether these changes might influence market strategies, like gaining market share or considering mergers and acquisitions.

The paragraph discusses the company's resilience and the attractiveness of its industry, despite current negative headlines. As the largest player in the field, the company expects to disproportionately benefit from policies aimed at strengthening the US. The speaker acknowledges potential lower global GDP growth and its impact on market growth but remains optimistic about the US economy's positioning. They emphasize transparency, stating they will update investors if their long-term market growth views change, based on available facts. The speaker has extensive industry experience, providing perspective through various economic environments.

The paragraph discusses optimistic future prospects for Thermo as larger pharmaceutical companies and biotechs, like Roche, plan to build new infrastructure in the US. Doug Schenkel inquires about the potential benefits for Thermo from this trend toward reshoring and infrastructure development. Marc Casper responds by highlighting that new manufacturing facilities can result in significant revenue for Thermo through increased demand for equipment, lab infrastructure, consumables, and inventories. He mentions that these developments represent a positive growth opportunity, with recent customer dialogues indicating a favorable outlook and tailwinds for the company.

In the conversation, Marc Casper discusses the current situation in the pharma services sector. He notes that despite a $200 million vaccine cancellation affecting PPD, the overall activity in the biotech segment remains strong, with good growth in biotech authorizations. Much of this growth is attributed to share gains and bundling services with Patheon. Casper doesn't express concerns about potential pharma cuts due to tariffs, particularly in R&D. He highlights the robust performance of biotech in clinical research and the value of accelerated drug development, where biotech companies outsource work to CROs for conducting studies.

The paragraph highlights the company's differentiated capabilities and insights in clinical research, which allow for faster and more cost-effective outcomes. It mentions their strong positioning in human trials amidst FDA efforts to modernize and reduce reliance on animal studies. The company feels confident about navigating potential changes, such as tariffs, affecting the pharmaceutical industry. The strong first-quarter performance is noted, with a commitment to delivering value and transparency to stakeholders, and an update on second-quarter results is anticipated in July.

The paragraph is a closing statement for a call, thanking Thermo Fisher Scientific for their support and the participants for joining. It indicates the call has ended and instructs everyone to disconnect their lines.

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