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Thermo Fisher Q1 Revenues Down 9 Percent Due to Shrinking Pandemic Business

NEW YORK – Thermo Fisher Scientific on Wednesday morning reported a 9 percent decline in Q1 revenues, due to the decline in COVID revenues.

For the quarter ended April 1, the Waltham, Massachusetts-based company booked $10.71 billion in revenues, down from $11.82 billion in the same quarter last year, beating the average Wall Street estimate of $10.67 billion.

The company’s organic revenues fell 8 percent, acquisition-related revenues increased by 1 percent, and currency translation effects decreased revenues by 2 percent. The firm saw 6 percent organic growth from its core businesses in Q1, led by its immunodiagnostics microbiology and transplant diagnostic businesses.

"Since the beginning of the year, the macroenvironment has become slightly more challenging," Marc Casper, Thermo Fisher's CEO, chairman, and president, told investors in a call recapping the Q1 results. Even so, the company’s core business "is performing very well," he said, and shares have gained during the quarter.

According to CFO and Senior VP Stephen Williamson, COVID-19 pandemic-related revenues were "as expected" in Q1, consisting of $140.0 million in testing revenues, which declined 14 percent year-over-year, and $180.0 million in vaccines and therapies revenue.

The company’s revenues by region were "skewed" by pandemic-related revenues in the current and prior year, Williamson said. Specifically, North America revenues declined by high single digits, revenues from Europe declined in the low double digits, Asia Pacific revenues grew in the low single digits with China declining slightly, and revenues from the rest of the world declined by high single digits.

In terms of business segments, Q1 revenues in life sciences solutions dropped 38 percent, or 37 percent organically, to $2.61 billion from last year’s $4.23 billion. The decline was due to moderation in pandemic-related revenue, according to Williamson.

Analytical instruments revenues increased 13 percent, or 17 percent organically, to $1.72 billion from $1.52 billion in Q1 2022. This growth was led by the chromatography, mass spectrometry, and electron microscopy businesses.

Specialty diagnostics revenues decreased 25 percent, or 28 percent organically, to $1.11 billion from $1.48 billion. Williamson said the company saw "strong underlying growth" from its immunodiagnostics, microbiology, and transplant diagnostics businesses, which was partially offset by lower COVID-19 testing volumes.

Laboratory products and biopharma services revenues saw a 6 percent increase, or 7 percent organically, to $5.76 billion from $5.44 billion a year ago, driven by pharmacy services and clinical research services.

Thermo Fisher's net income for Q1 totaled $1.29 billion, or $3.32 per share, compared to net income of $2.22 billion, or $5.61 per share, in the year-ago quarter. Adjusted EPS was $5.03 for the quarter, the same as the analyst consensus estimate.

The firm's R&D expenses dipped 5 percent in Q1 to $346.0 million from $364.0 million in Q1 of 2022, while SG&A costs dropped 9 percent to $1.65 billion from $1.81 billion a year ago.

Thermo Fisher ended the quarter with $3.48 billion in cash and cash equivalents.

The company is maintaining its 2023 revenue guidance of $45.3 billion, which includes 7 percent core organic revenue growth, and expects adjusted EPS of $23.70. This includes $3.10 billion in share buybacks, which the company completed in January, leading to a full-year average diluted share count of approximately 388 million.

"There's no net change overall in our guidance," Williamson pointed out, "but how we expect to achieve this guidance is different from the way we planned at the start of the year." He explained that since Thermo Fisher set its initial guidance for the year, the firm saw $0.25 of additional headwinds to adjusted EPS, $0.15 from its business mix, and $0.10 from foreign currency exchange rates.

"We're actively offsetting all of this headwind by $0.20 through cost management and $0.05 through actions below the [top] line," he added.

Within its core businesses, Williamson said, the company expects $500.0 million in vaccines and therapies revenues for the year, which will be $1.20 billion less than in 2022.The firm also anticipates $400.0 million in 2023 COVID testing revenues. In addition, the Binding Site Group, which Thermo Fisher acquired at the beginning of the year for $2.70 billion, will contribute approximately $250 million to annual revenues this year.

In morning trading on the New York Stock Exchange, Thermo Fisher's shares were down 3 percent at $532.81.