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Danaher Prepares for Volume-Based Procurement, Respiratory Headwinds in Dx Biz in 2025

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NEW YORK – Danaher executives said Wednesday that the firm expects the effects from the volume-based procurement program in China and anticipated lower respiratory testing volumes will have an impact on its Diagnostics business going forward into 2025.

On a conference call to discuss the firm's financial results, Danaher President and CEO Rainer Blair noted that in Q4, core Diagnostics revenues declined 2 percent in part due to the impacts of VBP in China. While clinical diagnostics core revenues were up in the low-single-digit percent range due to nearly 10 percent growth from Leica Biosystems, Beckman Coulter Diagnostics core revenues were essentially flat. Mid-single-digit core revenue growth outside of China was offset by the impact of VBP within China at Beckman Coulter.

Danaher CFO Matt McGrew said that the firm saw a $50 million impact in Q4 related to VBP and noted that it expects a $150 million impact in 2025. In Q4, Danaher saw a more "aggressive stance in China, particularly from the central government" regarding both VBP and reimbursement cuts. Those cuts accelerated late in Q4 and informed the firm's financial guidance for 2025, he added.

Outside of China, the Diagnostics business is expected to grow in the mid- to high-single-digit percent range in 2025, McGrew said. The business overall is expected to remain flat or grow in the low-single-digit percent range.

The respiratory testing business is also expected to decline year over year, McGrew noted. The firm tallied nearly $2 billion in respiratory revenues in 2024 but is forecasting approximately $1.7 billion in respiratory revenues in 2025. He said that the firm "always thought [$1.7 billion] was about the normal range for a normal respiratory season in an endemic state," noting that the past two years have had spikes in Q3 due to students returning to school and in Q1 due to the peak of the winter respiratory season. However, Danaher "didn't really see that this year," so the firm assumes it is returning to the normal respiratory pattern, he noted.

More broadly, the firm saw its Q4 2024 revenues rise 2 percent year over year as Life Sciences and Biotechnology revenues grew, offsetting the decline in Diagnostics revenues.

For the three months ended Dec. 31, the Washington, D.C.-based conglomerate posted $6.54 billion in total sales compared to $6.41 billion in the year-ago period. The analysts' consensus estimate was $6.43 billion.

The results are in line with the firm's preliminary results announced earlier this month.

Core revenues were up 1 percent year over year in the quarter. 

By sector, Life Sciences revenues increased 5 percent year over year to $2.03 billion from $1.93 billion, while Diagnostics revenues fell 3 percent to $2.64 billion from $2.72 billion. The firm's Biotechnology segment revenues rose 6 percent to $1.87 billion from $1.76 billion.

Core revenues in the Biotechnology segment were up 8 percent. The bioprocessing business was up in the high-single-digit percent range, while the discovery and medical businesses were up in the low-double-digit percent range.

Core revenues in the Life Sciences business were up 1 percent, with growth in the instruments business and modest demand improvement in the US and Europe from pharma and applied customers. The business in China saw a "modest benefit" from the government's stimulus program, but Blair noted that market conditions "continue to be challenging as customers remain cautious with their investments."

The genomics consumables business core revenues declined in Q4 as growth in next-generation sequencing products and basic research was offset by declines in proteins, plasmids, and gene writing and editing solutions, Blair said.

Within Diagnostics, Leica's nearly 10 percent revenue growth in the quarter was led by core histology, advanced staining, and digital pathology. The firm placed a record number of its GT450 digital pathology slide scanners in the quarter, Blair said.

In Cepheid's core non-respiratory reagent portfolio, core revenues grew in the mid-teens percent range. The firm saw double-digit growth in all product lines, including growth of more than 20 percent in its sexual health portfolio as customers have increasingly adopted the multiplex vaginitis panel, Blair said. The increasing use of the panel "underscores the significant growth opportunities ahead, as we continue to expand our women's health business," he added.

Respiratory revenues of approximately $550 million in the quarter exceeded expectations thanks to higher volumes and use of the company's four-in-one respiratory virus panel. The installed base grew in the high-single digit percent range, and Blair said Cepheid now has more than 60,000 instruments placed globally.

Healthcare systems and integrated delivery networks have been "accelerating the placement of new instruments at alternate care sites, such as clinics and urgent care centers" to provide standardized care across all their locations, Blair added.

Blair said that core revenues in developed markets were essentially flat, with North America declining in the low-single-digit percent range and Western Europe increasing in the low-single-digit percent range. High-growth markets saw revenues grow in the low-single-digit percent range, with markets outside China more than offsetting a decline in the mid-single-digit percent range in China.

Net earnings were $1.09 billion, or $1.49 per share, for the recently completed quarter compared to $1.08 billion, or $1.45 per share, a year ago. Non-GAAP EPS for Q4 2024 was $2.14, missing the consensus Wall Street estimate of $2.16.

For full-year 2024, Danaher's revenues fell slightly to $23.88 billion in 2024 from $23.89 billion in 2023. Core revenues fell nearly 2 percent, Danaher said.

Life Sciences revenues rose 3 percent year over year to $7.33 billion from $7.14 billion. Diagnostic revenues increased 2 percent to $9.79 billion from $9.58 billion, while Biotechnology revenues declined 6 percent to $6.76 billion from $7.17 billion.

The firm posted net earnings of $3.90 billion, or $5.29 per share, in 2024 compared to $4.76 billion, or $6.38 per share, in 2023. Non-GAAP EPS for 2024 was $7.48.

The company ended the year with $2.08 billion in cash and cash equivalents.

For Q1 2025, Danaher said it expects core revenues will decline in the low-single-digit percent range year over year. For full-year 2025, the company anticipates core revenues will increase approximately 3 percent. Blair noted that Danaher expects headwinds of about 2 percent due to the recent strengthening of the US dollar.

He added that the company expects the Life Sciences instruments business to be up in the low-single-digit percent range, while the genomics business is expected to see revenues decline. The Life Sciences business will be impacted by comparisons to a multimillion-dollar project undertaken by Pall in Q1 2024, Blair said.

In morning trading on Wednesday on the New York Stock Exchange, Danaher's shares were down 9 percent to $226.08.