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Thermo Fisher Scientific's Q4 Revenues Grow 6 Percent

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

NEW YORK (GenomeWeb) – Thermo Fisher Scientific today reported a 6 percent year-over-year increase in fourth quarter revenues.

For the three months ended Dec. 31, 2016, the company's revenues totaled $4.95 billion, up from $4.65 billion in Q4 2015 and just below the consensus Wall Street estimate of $4.98 billion.

Organic revenues for the quarter, which had four fewer business days than last year's Q4, were essentially flat year over year. While acquisitions increased revenues by 8 percent, currency effects reduced them by 1 percent.

By business segment, Life Sciences Solutions, which includes Affymetrix, had 10 percent revenue growth in Q4 compared to the previous year, $1.34 billion compared to $1.21 billion. CFO and Senior Vice President Stephen Williamson said during a call to discuss the firm's earnings that organic revenue growth for the segment was about 9 percent.

Growth occurred across the segment, including the bioproduction, next-generation sequencing, and biosciences businesses. Next-gen sequencing, in particular, has been "growing in the teens" percentage points, President and CEO Marc Casper said later during the call, and "continues to progress very well."

Also, the integration of Affymetrix has "gone very smoothly," Casper said, and in the fourth quarter, the microarray business began to stabilize. While the business was "still below our expectations" from early 2016, he said, the company anticipates that it will grow at the same rate as the company average, or slightly better, in 2017.

Analytical Instruments, which includes the recent FEI acquisition, posted $1.22 billion in revenues, up from $925.3 million in Q4 of 2015, a 32 percent increase. Organic revenue growth for the quarter was about 3 percent. Williamson said the segment benefitted from strong growth from the chromatography and mass spectrometry businesses. Revenues from FEI were also strong, he added.

Specialty Diagnostics revenues decreased 4 percent to $834.4 million from $864.7 million, while organic revenue growth was about 3 percent and "consistent across the businesses," he said.

Laboratory Products and Services revenues decreased 3 percent to $ 1.76 billion from $1.82 billion, but grew 3 percent organically.

Thermo Fisher Scientific's profit for the quarter was $630 million, or $1.59 per share, up from $602.6 million, or $1.50 per share, a year ago. Adjusted EPS for the quarter grew 14 percent to $2.41 from $2.12 in Q4 of 2015, beating analysts' consensus estimate of $2.38.

Its R&D spending for the quarter increased to $212.6 million from $180.3 million a year ago, while SG&A expenses rose to $1.02 billion million from $968.7 million.

For full year 2016, Thermo Fisher Scientific's revenues increased 8 percent, to $18.27 billion from $16.97 billion in 2015, slightly below the average analyst estimate of $18.3 billion.

Organic revenues grew 4 percent year over year. Acquisitions increased revenues by 4 percent, while currency effects reduced them by 1 percent.

"I'm pleased to report that we delivered an excellent 2016," Thermo Fisher Scientific President and CEO Marc Casper said during a conference call to discuss the firm's earnings. "We leveraged our unique scale and depth of capabilities to gain market share, we continued to execute our growth strategy to strengthen our competitive position, we deployed significant capital to enhance our value proposition for our customers and create value for our shareholders."

Life Sciences Solutions revenues totaled $4.98 billion in 2016, up 12 percent from $4.44 billion in 2015. Analytical Instruments sales increased 14 percent to $3.67 billion from $3.21 billion. Specialty Diagnostics revenues increased to $3.34 billion from $3.24 billion a year ago, and Laboratory Products and Services grew 6 percent to $ 7.03 billion from $6.66 billion.

In terms of its end markets, Casper said, the company grew its pharma and biotech business 10 percent last year, with strong contributions from its bioproduction, biopharma services, chromatography, and mass spec businesses.

In the area of healthcare and diagnostics, revenues grew "just below the company average" in 2016, he said. The clinical next-generation sequencing business "performed very well and delivered strong growth for the year," he added.

The company's business in the academic and government market as well as in the industrial and applied markets each grew by low single-digit percentage points, he said.

Thermo Fisher Scientific also continued expanding in Asia Pacific and emerging markets last year, he said, especially in China, where its business grew in the high teens. In the fourth quarter, the company also added a bioproduction development lab at its China Innovation Center in Shanghai. Business in India and South Korea also did well, Casper said, and emerging markets now account for 20 percent of the company's total revenues.

In terms of future growth drivers, Casper said the company is investing in three areas: broadening the applications of mass spectrometry, expanding clinical next-generation sequencing, and structural biology applications of electron microscopy.

Casper said that the firm's specialty diagnostics segment has been operating below the company's average for a while now. The firm has a "fairly large" program in clinical mass spectrometry that it expects to "have an impact" in 2018, he added.

An "interesting area of growth" in diagnostics has been the sepsis biomarker area, he said. Last summer, the company received FDA clearance for extended use of its BRAHMS PCT sepsis test, and its partners, Roche and BioMérieux, obtained separate FDA clearances to run the test on their instruments. Those clearances "should drive further adoption in the US" where the test is now used for monitoring patients with sepsis, Casper said, "which allows for a larger recurring revenue stream, so we're excited about those opportunities."

Thermo Fisher posted net income of $2.02 billion for 2016, or $5.09 per share, compared to $1.98 billion, or $4.92 per share, in 2015. Adjusted EPS for the full year was $8.27, just above analysts' average estimate of $8.24.

The company's R&D spending in 2016 was $754.8 million, up from $692.3 million in 2015. Its SG&A expenses increased to $4.04 billion from $3.72 billion in 2015.

Thermo Fisher Scientific ended the year with $786.2 million in cash and cash equivalents.

In 2017, the company expects revenues to grow between 6 and 7 percent over 2016, to between $19.38 billion and $19.62 billion, and organic revenue growth is expected to be 4 percent, company officials said during the call. The firm anticipates adjusted EPS to range between $9.06 and $9.24, a 10 to 12 percent increase over 2016. The guidance does not include benefits from potential tax reforms in the US, they said.

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