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Thermo Fisher Scientific Clinical Research Business Delivers Strong Results in First Full Year


NEW YORK – Thermo Fisher Scientific said on Wednesday that PPD, the clinical research business it acquired in late 2021, delivered outstanding results for the company in its first full year under Thermo Fisher's ownership.

The Waltham, Massachusetts-based firm said that PPD delivered over 20 percent of core organic revenue growth for the fourth quarter and contributed $1.90 billion of revenue to the company’s laboratory products and biopharma services segment.

For full-year 2022, PPD was responsible for core organic growth "in the high teens" of the segment, the company noted, generating over $7.00 billion in revenue and contributing over $2.00 to adjusted earnings per share. This exceeded the company’s previous expectation of $6.5 billion in revenue contributions from PPD.

"Our clinical research group performed incredibly well," Marc Casper, Thermo Fisher's CEO, chairman, and president, told investors during a conference call recapping the results. "A great first year as part of the company, exceeding our own high level of ambition for the business."

Thermo Fisher completed the acquisition of PPD on Dec. 8, 2021, and its integration into the company has "gone smoothly," Casper told investors.

Looking ahead into 2023, Casper said the firm expects PPD to grow at a rate that’s above the company's estimated 7 percent core organic revenue growth overall.

"The combination of great first-year performance and excellent progress on our synergy realization is delivering very strong returns for our shareholders that are well ahead of the deal model," he said. "From a customer lens, the acquisition further elevated our trusted partner status, as customers are realizing significant value in partnering with our team to advance a scientific idea to an approved medicine."

Overall, Thermo Fisher booked $11.45 billion in revenues for the quarter that ended Dec. 31, up from $10.70 billion in Q4 2021 and beating analysts' average estimate of $10.43 billion.

Q4 organic revenues decreased 3 percent, acquisitions increased revenue by 14 percent, and currency translation effects decreased them by 4 percent. The firm saw 14 percent organic growth from its core business in the quarter, and COVID-19 testing revenue contributed $370.0 million to the total.

Revenues in the life sciences solutions segment in Q4 fell 27 percent to $3.05 billion from $4.15 billion a year ago, and 24 percent organically. Strong growth in the bioproduction and biosciences businesses was offset by lower testing revenue versus the prior year.

Analytical instruments Q4 revenues grew 9 percent to $1.88 billion year over year from $1.73 billion, and 14 percent organically. Growth was driven by the electron microscopy, chromatography, and mass spectrometry businesses.

Specialty diagnostics revenues declined 23 percent year over year to $1.12 billion from $1.45 billion, and 20 percent organically. Strong growth in the healthcare market channels, transplant diagnostics, and microbiology businesses was offset by lower COVID-19 testing revenues compared to the year-ago quarter.

Laboratory products and biopharma services revenues climbed 42 percent to $5.95 billion in Q4 versus $4.20 billion a year ago, and 11 percent organically.

Looking at Q4 organic revenue performance by geography, Stephen Williamson, Thermo Fisher’s senior VP and CFO, said North America grew in the low-single digits, Europe declined in the low teens, Asia-Pacific declined in the mid-single digits, with China declining in the mid-single digits, and rest of the world declined in the high-single digits.

Net income in Q4 totaled $1.58 billion, or $4.01 per share, compared to $1.66 billion, or $4.17 per share, for the year-ago quarter. Adjusted EPS for the quarter was $5.40, surpassing the analyst consensus estimate of $5.19.

Q4 R&D costs were $391 million, down slightly from $392 million in the previous year, and SG&A costs dipped 6 percent to $1.84 billion from $1.96 billion a year ago.

For full-year 2022, Thermo Fisher reported $44.92 billion in revenues, up 15 percent from $39.21 billion in 2021. This exceeded the company's previously raised guidance of $43.8 billion and beat the analyst consensus estimate of $43.88 billion. Organic revenues remained flat, acquisitions increased revenue by 18 percent, and currency translation effects decreased revenues by 3 percent. The firm's base business saw 14 percent organic growth and COVID-19 testing revenues totaled $3.11 billion in 2022.

Life sciences solutions revenues declined 13 percent year over year to $13.53 billion from $15.63 billion, and 12 percent organically. Analytical instruments revenues rose 9 percent to $6.62 billion from $6.07 billion, and 14 percent organically; specialty diagnostics revenues decreased 16 percent to $4.76 billion from $5.66 billion, and 13 percent organically; and laboratory products and services revenues grew 51 percent to $22.51 billion from $14.86 billion, and 10 percent organically.

By region, North America grew in the low-single digits, Europe declined in the high-single digits, Asia-Pacific grew in the high-single digits, including China, which also grew in the high-single digits, while the rest of the world declined in the high-single digits on a core organic growth basis.

Full year R&D costs grew 4 percent in 2022, to $1.47 billion from $1.41 billion the year before, and SG&A expenses increased 4 percent to $7.13 billion from $6.84 billion.

Net income for 2022 totaled $6.96 billion, or $17.63 per share, down from $7.73 billion, or $19.46 per share, in 2021. Adjusted EPS was $23.24, surpassing the company’s guidance of $23.01 and beating the analysts' average estimate of $23.04.

As China abandons its zero-COVID policy and opens up, Casper said, the company expects "a weaker first quarter" in the country, followed by "a strong rebound" for the rest of the year. "China will grow on our expectations and our guidance a little bit faster for the full year for core growth," he said.

"I'm very impressed with how they've dealt with all of the complexities and keeping our colleagues safe," he added. "It's been a challenging period of time."

Thermo Fisher finished 2022 with $8.52 billion in cash and cash equivalents.

The company said it expects 2023 revenue of $45.30 billion, $380 million more than in 2022. Adjusted EPS is expected to be $23.70 per share, representing a 2 percent year-over-year increase.

In midafternoon trading on the New York Stock Exchange, Thermo Fisher shares were up 2 percent at $582.42.

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