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Thermo Fisher Scientific Reports 14 Percent Revenue Growth in Q3

This article has been updated with additional information from Thermo Fisher Scientific's earnings call.

NEW YORK (GenomeWeb) – Thermo Fisher Scientific today reported a 14 percent increase in third quarter revenues, with a particularly strong quarter for its analytical instruments segment.

"We delivered another excellent quarter, both financially and operationally," said President and CEO Marc Casper on a conference earnings call this morning.

For the three months ended Sept. 30, the company had $5.12 billion in revenue, up 14 percent from $4.49 billion in the third quarter of 2016, and beating analysts' average estimate of $5.03 billion. Organic revenue grew 5 percent, acquisitions increased revenue by 8 percent, and currency effects increased revenue by 1 percent.

In terms of geography, revenues from Europe grew in the mid-single digits, from North America in the low-single digits, from Asia Pacific grew in the low-double digits, and from other geographies in the mid-single digits.

Revenues from the life sciences solutions segment grew 5 percent to $1.38 billion from $1.31 billion in the third quarter of 2016. Organic revenue grew 4 percent, and the bioscience business in particular had strong growth.

Analytical instruments revenues, which include electron microscopy maker FEI, acquired in late September 2016, increased 33 percent to $1.19 billion, from $898 million during Q3 of 2016. Organic revenues grew 11 percent, driven by strong growth in the chromatography and mass spec businesses as well as in the material science business. The chemical analysis business also grew. FEI's revenues in particular increased in the strong double digits, Casper said, both from material science and life science customers, and the business has a strong backlog of orders.

Specialty diagnostics revenues grew 6 percent to $843.7 million from $798.9 million in the third quarter of 2016. Organic revenues grew 4 percent, driven by all businesses in the segment, especially immunodiagnostics and transplant diagnostics.

Laboratory products and services revenues grew 16 percent to $1.93 billion from $1.67 billion in the year-ago period. This segment now includes Patheon, which Thermo Fisher acquired in late August. Organic revenue grew 3 percent, driven by the channels business. The clinical trials business of the segment was negatively affected by the discontinuation of a large Phase III clinical trial in late 2016.

With regard to end markets, revenues from pharma and biotech customers grew in the mid-single digits, Casper said. The chromatography, mass spectrometry, and biosciences businesses performed well in this market, and the company saw strong growth in the research and safety market channel.

Diagnostics and healthcare-related revenue grew in the low-single digits, he said, with good growth from the company's transplant and immunodiagnostics businesses.

Academic and government-related revenues grew in the mid-single digits, he added, driven by strong performance in Europe and China.

Industrial and applied markets revenues also grew in the mid-single digits, driven in particular by the analytical instruments business in Asia Pacific.

Thermo Fisher's net income for Q3 increased to $533.9 million, or $1.34 per share, from $473.5 million, or $1.19 per share, during the same period last year. Adjusted EPS was $2.31, beating analysts' average estimate of $2.25.

The company's R&D spending for the quarter increased 19 percent to $218.1 million from $183.3 million a year ago. Its SG&A spending increased 8 percent to $1.12 billion from $1.04 billion last year.

Casper pointed out during the call that the acquisition of Patheon closed in late August, ahead of schedule, adding 9,000 employees to the company. He said that the integration of Patheon is "off to a good start", and that the company expects to realize synergies of approximately $120 million in total three years after the acquisition.

Thermo Fisher launched four new electron microscopy systems during the quarter – two new scanning electron microscopes for material science applications and two cryo-EM systems for life sciences to analyze the structures of proteins and other biomolecules. "Our goal is to bring cryo-EM to a broader range of scientists and raise the standards of performance and workflow automation," Casper said. He added that the three scientists who won the Nobel Prize in chemistry this year worked with Thermo Fisher's cryo-EM systems.

The company also launched a new line of air quality monitors during the quarter, he said, designed to help customers in the power industry and government agencies.

In addition, Casper said that several mass spectrometry systems the company launched in June have been "exceptionally well received" by customers working in research and applied markets.

Casper also pointed out that the company's Dynabead magnetic bead technology was integral to a recently FDA-approved gene therapy for a specific form of leukemia. The new therapy was the result of a long-standing collaboration between Thermo Fisher and Novartis, he said, and "another great example of our commitment to advance precision medicine by partnering with leaders in industry, government, and academia."

In terms of geographic expansion, the company continued to perform strongly in Asia and emerging markets. Business in China grew in the high teens, Casper said, and the company had strong results in South Korea and India. Thermo Fisher also opened a Precision Medicine Customer Experience Center in Guangzhou in China during the quarter.

The company was also affected by Hurricane Maria. It has about 700 employees and three sites on Puerto Rico, Casper said, the largest of which, a former Patheon site, is still offline. However, he said the firm is "making steady progress" in getting the facility back to operation.

Thermo Fisher finished the second quarter with $741.1 million in cash and cash equivalents.

To reflect the acquisition of Patheon and the Thermo Fisher's strong operational performance, the company again increased its revenue and EPS guidance for 2017. It now expects revenues between $20.50 billion and $20.66 billion for the year, representing 12 to 13 percent growth over 2016. Its previous revenue guidance was $19.71 billion to $19.89 billion. Adjusted EPS are now expected to be between $9.29 and $9.38 in 2017, up 12 to 13 percent over 2016, compared to the previous guidance of $9.15 to $9.28.

In aternoon trading on the New York Stock Exchange, shares of Thermo Fisher Scientific were up nearly 3 percent at $199.49.