BALTIMORE – Despite the strict COVID-19 lockdown in China, Thermo Fisher Scientific's Chinese team delivered 20 percent revenue growth in Q2, boosting the company's overall strong financial results for the quarter.
"Obviously, the lockdowns were very severe, but I'm so proud of the way the team responded," Thermo Fisher Chairman, President, and CEO Marc Casper told investors in a conference call recapping the company's Q2 financial results. He attributed Thermo Fisher's substantial growth in China to the company's "very strong" core business, deep relationships with customers, and support for local COVID-19 testing efforts.
Although the company does not sell its COVID-19 diagnostic assays in China, Casper said, instrument and reagent sales in support of COVID-19 testing drove the company's business growth this quarter.
For the three months ended July 2, the Waltham, Massachusetts-based company reported revenues of $10.97 billion, up 18 percent from $9.27 billion a year ago and well above the average estimate by Wall Street analysts of $9.97 billion. Organic revenues grew 3 percent, while acquisitions increased revenue by 19 percent and currency translation decreased revenue by 4 percent, Thermo Fisher reported.
Overall, revenues were $930 million higher than the company’s previous guidance, Thermo Fisher CFO Stephen Williamson told investors. Of this, $640 million was driven by strength in the core business and $400 million by testing, partially offset by $110 million in foreign currency exchange effects.
"From a geographic lens, $200 million of the beat was from China," Williamson noted during the call. According to him, the company's previous guidance assumed a $200 million headwind due to the lockdowns in China, and the Chinese team offset all of that driven by "strong local core growth" and COVID-19 testing efforts. Meanwhile, the company's business in North America grew in the high single digit percentage points while declining in the low double digits in Europe.
Revenues from the life sciences solutions business unit dipped 8 percent to $3.29 billion in Q2 from $3.56 billion in Q2 2021, and revenues from the specialty diagnostics segment fell 11 percent to $1.10 billion from $1.24 billion. Meanwhile, revenues from the analytical instruments segment rose 9 percent to $1.61 billion from $1.48 billion in the year-ago quarter, primarily driven by electron microscopy, chromatography, and mass spectrometry. Around $1.72 billion of revenues came from PPD, the clinical research business Thermo Fisher acquired last year. "PPD and clinical research businesses performed very well and continues to exceed our expectations," said Williamson.
In terms of performance by end markets, Casper said the company delivered mid-teens percentage growth in the pharmaceutical and biotech segment. In the academic and government market, the firm grew by mid-single digits, driven by business in biosciences, chromatography, and mass spectrometry. In addition, he said the company saw "a very strong growth" in electron microscopy, chromatography, and mass spectrometry in the industrial market segment. Finally, although the company's diagnostics and healthcare revenue was 20 percent lower year over year, he said that immunodiagnostics and microbiology products performed well in this market.
Thermo Fisher's Q2 net income totaled $1.67 billion, or $4.22 per share, compared to net income of $1.83 billion, or $4.61 per share, a year ago. On an adjusted basis, the company reported EPS of $5.51 per share for the quarter, beating analysts' average estimate of $4.99 per share.
The company's R&D costs rose 6 percent in Q2 to $365.0 million from $343.0 million a year ago, while its SG&A expenses increased 8 percent to $1.74 billion from $1.61 billion.
During the call, Casper highlighted an array of new products that Thermo Fisher released this quarter. These include the AccelerOme automated sample preparation platform, which aims to simplify workflows for proteomic researchers by eliminating a range of manual steps; the Direct Mass Technology mode for complex and large biotherapeutics; the Gibco CTS TrueCut Cas9 Protein, designed for genome-editing clinical research applications such as CAR-T therapy; and the Phadia 2500+ instrument series for autoimmune disease testing, including connective tissue disease (CTD), antiphospholipid syndrome (APS), celiac disease, rheumatoid arthritis, autoimmune liver disease, and autoimmune thyroid disease.
Thermo Fisher ended the quarter with cash and cash equivalents of $1.89 billion.
For full-year 2022, the company is raising its revenue guidance by $700 million to $43.15 billion. This would result in 10 percent revenue growth over 2021. The firm also raised its adjusted EPS guidance by $.38 to $22.93 for the year, which would represent 18 percent year-over-year growth.
"We're really well positioned to continue to differentiate ourselves for all of our stakeholders, and the team is doing an excellent job navigating the dynamic times we live in," said Casper.
In terms of the outlook for the company's China business, Casper said he has no doubt that there'll be "some level of COVID disruption" in the second half of the year, given the country's strict COVID policies. "There'll be bumps in the road," he said. "But the team knows how to navigate that, and I feel like we'll get through that period effectively."
In afternoon trading on the New York Stock Exchange, Thermo Fisher's shares were up more than 2 percent, at $595.74.