We are good. All right. All right. Hello, everybody. My name is Doug Schenkel. On behalf of my colleagues here at UBS, it is my pleasure to welcome Julie Sawyer Montgomery to our conference.
Thank you.
I think this is your first conference as President and CEO.
It is.
All right.
Thank you for having me.
No, thank you for doing this. I will try to not mess it up.
Good.
All right. Just to give everybody a roadmap, I thought what we would do is really start on some high-level but important strategic questions and how you are thinking about priorities, portfolio, growth. The second thing would be really to get into your assessment of the growth outlook and the key growth drivers. The third, I thought we could go division by division.
Sure.
Thinking about the different businesses and what your thoughts are as you assess these businesses in your new seat.
Great.
To start with strategic priorities, what are they? Where do you see the greatest opportunities to accelerate growth?
Yeah. The opportunity for Danaher, in my view, is clear, and that is to be the defining leader in life sciences and diagnostics. That means faster core growth, sustainable and profitable, with unambiguous share gain to add and unlock more value for our shareholders. The path there is really focused on commercial execution, innovation, talent, and capital allocation. I am really confident on this path because, one, I have been at Danaher for nine years, and I understand the power of the Danaher Business System to architect outcomes. Also, this is a playbook that I have seen work at the diagnostics group, which I have led, and where this playbook resulted in us over doubling our core growth, ex-respiratory, in China. W hat does that look like?
In terms of commercial execution, it means that leaders are really focused on and inspecting DBS commercial excellence, but they are also putting in place the incentives and necessary collaboration to be able to present a more fulsome cross-operating company value proposition to our customers. In diagnostics, in a relatively short period of time, this has created hundreds of millions of dollars of incremental opportunity. It also means, from an innovation standpoint, that we are really focused on strategy-led innovation, which is pretty simple. It means that we understand what are the most important bets we can make to deliver on growth, and then we are ensuring that we are funding those at the enterprise level. More recently, I think we have done some really promising M&A in terms of Masimo and StatLab. Y ou bring this together, and we are really excited about the path forward.
You've set 4%-5% core growth as a starting point for 2027. As we think about what you just described, what enables the company to go from that level of growth, excluding respiratory—
Yep.
—to high single-digit growth, and how long is it going to take to get there?
Yeah. Mid-single digits, ex-respiratory, is where we are today, and it's very clear to me that we can deliver higher growth. Part of the reason for that is there's some really nice secular tailwinds backing up our markets. Just to name a few, when I think about biotechnology, I think about the proliferation of biologics. When I think about life sciences, I think about the new opportunities in AI drug delivery. Then when I think about diagnostics, I think about the formation of an entirely new market, which some believe could be up to $5 billion in 10 years for blood-based biomarker testing for Alzheimer's disease. A lot of nice secular drivers where we are well-positioned as Danaher.
Then you put that with this ability to gain more share of wallet from our customers by setting ourselves up for this horizontal selling and ensuring that we are funding innovation at the enterprise level, it is clear that we can deliver a lot more growth on this path to becoming that defining leader in our space.
From a portfolio optimization perspective, are there things that need to change? One thing I have in mind is, when we look at Abcam and Aldevron, I think things are getting better, and we will talk about this in a little bit, but they did not go great from the outset. I am wondering if, as you think about portfolio optimization, also how you do M&A, if things need to change, especially as you think about being a higher growth business.
From a capital allocation standpoint, I mean, that is still our priority. M&A is still our priority for capital allocation, and that is because the DBS playbook, I believe, still really works in M&A. In terms of targets, I am looking for strategically compounding M&A where the company has a credible ability to offer differentiated growth, and by coming into the Danaher portfolio, the company and the other Danaher operating companies will grow better, and that company will benefit from DBS, and we can have a strong return. When those conditions are present, we will execute. Where they are not, we will remain very disciplined and clear-eyed and move on. Right now, I have the privilege of seeing the Danaher playbook at work at Masimo, and it is amazing the traction you get from that first kaizen.
You generate the first kaizen at Masimo, we saw over 50% productivity increase in one of their processes with 50% less resources. People's eyes light up, and they get excited, and there is a pull for DBS. I see working well on the top line, the bottom line, I have got no concerns about our playbook.
Are there areas across the segments that you would say are higher priorities within each business from an M&A standpoint?
Really, I see opportunities that fit that criteria that I described across all three of our platforms, biotechnology, life sciences, and diagnostics. That is good news, and it is certainly an area where I spend a lot of my time.
Couple more on growth drivers, starting with artificial intelligence.
Yeah.
Where is AI creating incremental demand versus supporting existing workflows, and is there any way to quantify the opportunity as we sit here today?
I believe AI drug discovery autonomous science is going to be a very nice tailwind for Danaher and for the industry. It's one where I think Danaher has a really nice opportunity to play a leadership role in this space. Our rep as Danaher has always mattered, but in this world of AI, I think it matters more. Now we're in a situation where we have all the building blocks that companies need from a partner. We have the instruments from companies like SCIEX and Mol Dev. We have the automation from Beckman Life Sciences. We have the software from Genedata and IDBS. We have the consumables from Abcam and IDT, and we have a scale that makes us a priority for the frontier labs and the other partners in the ecosystem.
I think it's a little early to tell how big this is going to be, how to size the opportunity, but I do think it will be a share gain opportunity for Danaher, and we're investing to win. You've seen announcements from us recently about our first autonomous laboratory, which we're excited about, partnerships with Anthropic and NVIDIA, and it's at the forefront of every discussion I have with pharma and biopharma customers.
Presumably, there is even new customer creation as a result.
There is. This tech bio group, which is amazing to spend time with these customers, they are very interested in partnering with a company like Danaher that can provide that fulsome—
Right
—solution.
Reshoring, MFN.
Yeah.
Big estimates up to approximately $1 billion of opportunity. Is this 2027 or is it still more of a 2028 event? What should we in the investment community be looking for to see, hey, this is actually really turning into something for Danaher?
Reshoring is real.
Yeah, no doubt.
As you said, we have estimated that as a billion-dollar market opportunity. Just to give you some color on how we think about that, first, we're very meticulous on how we track these reshoring announcements, and we have extensive conversations with our customers about this. W hen we say a billion dollars, yes, sometimes there's some window dressing with these public announcements.
Right.
T hat is our view of the true incremental market opportunity, and that will show up primarily in our equipment business as part of bioprocessing, and then to a lesser extent in our life sciences instruments group. We are starting to see some of those brownfield orders in our order book now, it is really more of a 2028 and beyond opportunity in terms of revenue.
Let us talk about the biotech segment.
Yeah.
About 30% of your business. Specifically on Cytiva. What supports Cytiva's longer-term high single-digit growth, market growth? How much of its market, how much of its share gains, how much of its innovation? What gets you back to sustainable, at least high single-digit growth within Cytiva?
A s you can imagine, in my early days as CEO, this is a part of the business where I've spent a lot of time. I t's clear to me that Cytiva is a long-term, high single-digit growing business.
Okay.
It has a fantastic portfolio, and the breadth of Cytiva's offering in bioprocessing is really unparalleled. W e have the opportunity, we are positioned to win at virtually any customer at nearly any stage of the workflow. It also has really nice secular trends. W e have the proliferation of biologics, increased number of biosimilars, the reshoring opportunity hitting our equipment business, and we also see greater volume going to some of these more advanced modalities outside of your sort of mother and father's monoclonal antibodies, as one customer put it. T hat is an area where customers really benefit from our expertise. I really think we're positioned strongly here and very confident in the high single-digit long-term growth rate.
A question I get a lot from investors, especially over the last few quarters, is Cytiva losing share?
We are quite confident that we are not losing share at Cytiva, and we look at this from the two parts of our business. T he vast majority of our business is in commercial therapeutics, and there, nothing has changed in the industry. Once you are specced in, you really are specced in, and nothing has changed there. Then, you also look at the new spec-in opportunities, and there, we are continuing to win at a rate that is what you would need to see from our share position in the market. We're very meticulous about how we look at these spec-in opportunities. I'd say that in cell culture media, that's an area where we even see some additional upside traction in holding our own sort of commanding share position in resin.
On the equipment side, I think it is the third quarter you reported mid-teens equipment order growth.
Yes.
How does that convert into revenue in 2027?
Yeah.
Part of the reason I am asking this, beyond just the obvious of wanting to update my model with a little more intelligence, is as we think about what we are hearing across the group, it does seem like conversion cycles might have lengthened a little bit. You know, really nice order growth, but I am curious, when do you think it is going to convert and have cycles extended for some reason as part of this recovery cycle?
Yeah. We are really happy to see the mid-teens order growth. Our order book is growing, the backlog is increasing, and that means benefit for 2027. We really see that timeline to convert an order to revenue as in that 9- 12 month time horizon. I actually do not know if that is different than it was in the past, but it is 9- 12 months.
You are not seeing anything that would suggest anything different from. Okay.
No.
Biosimilars. I mean, we talked about the breadth of your company, and what we did not really talk about is the geographic breadth, which I think is particularly important as we think about biosimilars. We have not talked about that as a key driver to growth for Cytiva. How are you positioned as we think about more biosimilars coming to market?
Well, I do think that the growth of biosimilars, and there are many originators, about 100, right, coming off patent here, and that is a tailwind for Cytiva. Essentially, Cytiva is a volume business, and biosimilars are lowering the price of biologics, they are creating more patient accessibility, and that is a good thing for the industry. What you find with biosimilars is incumbency really matters. W e are specced in today to about 90% of monoclonal antibody volume, and generally, the companies putting out these biosimilars want to keep as much the same as possible, that puts us in a really good position.
Let us pivot to life sciences. We are seeing some signs of recovery in life sciences, and I think your expectations imply a 4%-5%, a mid-single-digit exit rate.
Yeah.
for life sciences. Which businesses are starting to drive that improvement?
Yeah. W here we see the most improvement is really based on where we see the markets most improving. In life sciences, pharma, biopharma growing nicely. We see the increase in biotech funding coming through. Then when you look at that academic and government business, it's still below historic levels. Some modest sequential improvement, but still down versus sort of other times. O ur businesses that are doing best are ones that have less exposure to academic and government. I'd call out in particular the traction that we are seeing at SCIEX, high single digits last quarter, some really nice momentum from commercial execution, and the ZenoTOF 8600 launch, which is going really well. Beckman Coulter Life Sciences, there, again, it's early days, but we're starting to see some momentum from this AI drug discovery from our liquid handling business, which is nice to see.
I'd also call out Abcam. w hen we acquired Abcam, we knew that we had an opportunity there to invest in the commercial engine. W E've put more sales resources in place, and some of those going to their historic sweet spot in academic, also more of that pharma and biopharma, and we're starting to see traction from those investments as well.
That was going to be one of my questions on Abcam specifically, given it did have a pretty high mix of revenue exposure to the academic end market, but the plan has been to broaden that. It sounds like you're starting to see progress there?
We're seeing progress. It still has the exposure to academic and government, but we're seeing nice traction with growth the last three quarters at Abcam.
If that gets going, that's pretty important from a margin perspective as well.
It is. Abcam, we've got the momentum, I also really like the connection of Abcam to the rest of Danaher. This autonomous laboratory that I spoke of, that is housed at Abcam, our first autonomous lab is focused on antibodies. Now that increases Abcam's productivity by 8x, but it also makes us really good at working with those pharma and biopharma customers to find the precise antibody that's going to work best with their application.
I could see where that would be fairly complementary with other parts of your business, including IDT.
Over time, yes.
Yeah.
Absolutely. What we're learning from these autonomous laboratories, they all have a lot of learnings that then can be leveraged in the next one.
Yeah.
Right?
Yeah.
There's a little bit of an internal competition on where the next one will be. I think about things like taking that kind of AI expertise and thinking about process development for chromatography, for example.
Let me ask another IDT question. IDT was one of the early leaders in synthetic oligo manufacturing DNA, by extension RNA. As we sit here today, how do you think IDT's doing in terms of competing on turnaround time, flexibility, scale, and cost? I ask because, we've talked about AI-driven drivers to growth, antibody development, mRNA vaccine demand, and then just role in target capture across liquid biopsy. How do you think IDT's positioned in these areas?
IDT, we are also seeing some nice momentum there with growth over the last two quarters. W here IDT really excels is making these high-quality, high-yield oligos at scale. W here that is incredibly relevant, and we see really attractive double-digit growth at IDT and growth above market, is in clinical applications like MRD. And there, IDT is part of the solution at eight out of the 10 large MRD players. And of course, that is a really attractive space. Where IDT has had historically less exposure, and still does, versus some others in the market, is synthetic biology. We are not resting there. We are seeing some early traction on investments we have made with Rapid Genes, and also how our CRISPR portfolio at IDT is giving us exposure to gene editing. T here is more investment and development that will come there.
China.
Yeah.
China sounds a lot better as a geographic end market within life sciences and bioprocessing. What are you seeing? How durable is it? It is interesting. I thought of this earlier today when we were briefly catching up.
Yeah.
One of the things you talked about at the diagnostic day a couple years ago was how in diagnostics you were doing a better job cross-selling in China.
Yeah.
I am wondering if that is happening in life sciences as well.
Yes, the short answer. China, I am able to say that it is kind of an exciting market again. I was not always able to say that.
Right. Yeah.
China grew high single digits in Q3, double digits in biotechnology, mid-single digits in life sciences, and it even grew in diagnostics. That was a really nice milestone for us. We see the pharma, biopharma, having some really nice momentum in China. Cytiva plays very big there. With all of the interest around the world of people shopping for innovation in China, they want to work with partners that are going to help them globalize or be global-ready for who buys that innovation. That positions Cytiva exceptionally well. In life sciences, I would also call out SCIEX and Beckman Coulter Life Sciences there. In diagnostics, the China healthcare reform impact kind of is as we called it, but the patient volumes are getting a little better than we anticipated. Even some good news there.
It is a good segue to diagnostics.
Sure.
I was going to ask a China diagnostic question.
Yeah.
You touched on some of it. Do you feel like we are getting to the point where some of the policy dynamics, things like test fee unification and VBP are kind of whatever normalization is going to look like? Are we closer to that, especially as we think about Beckman Coulter?
I put all of the China healthcare reform policies into one bucket.
Yeah.
Right? VBP, medical service guidelines, sunshine—
That is cleaner. I am going to do that.
You name it.
Yeah.
I just call it China healthcare reform. I would say that we are in the seventh inning of a nine-inning game here. What is important is what we will see next year is really annualization of policy that was finalized this year. On the ground, as a result, customers and channel partners, they are feeling more confident. They feel like they kind of understand what is going on as opposed to waiting for some kind of shoe to drop. That is great, and our team is executing extremely well there. Better days ahead.
As we think about getting back to higher levels of growth across diagnostics, respiratory, you cannot control what the season is going to look like.
Yeah.
Although I will point out that, having a college student, there's a lot of kids with flu right now.
I hear.
He's picking up. Well, he's doing all right. That's good and bad, but all right. Anyway, broader growth. We got respiratory, we got China.
Yeah.
I'm going to put Masimo to the side for a second. What innovations do you think are in the near term, meaning over the next year and a half, are going to be key to accelerating growth across the diagnostic business?
Yeah. There's a lot of exciting activity right now in diagnostics. I'll start with Beckman Coulter, and I think what's important to understand about Beckman Coulter, which is the largest operating company there, is we are just now fully launching our DxI 9000 with all the associated assays into the U.S. market. That's always been very important for us because immunoassay is the higher growing part of the market and one where historically Beckman has been underrepresented, and the DxI 9000 is our key to that. We're also building up a neurodegenerative portfolio at Beckman that really positions us for leadership in Alzheimer's testing. E Xcited about that. E arly days still there.
At Cepheid, outside of respiratory, that team continues to gain share, growing double digits, and that kind of flywheel and customers' preference for the GeneXpert platform only gets better as we add more clinical content onto those instruments. You saw us earlier in the year enter mid-plex testing, first with a GI panel and then more recently with a respiratory panel. While that has respiratory in the name, the larger panels are, they move less with the flu season. E xcited about those product launches, and we have more coming next year.
In Leica Biosystems, what is driving growth there is the clinical adoption of digital pathology, and this is an area where Leica has a leadership position. It is even able to parlay that kind of commanding scanner market share into moving into more agreements with pharma companies for companion diagnostics. Again, the higher growing part of the market, where Leica Biosystems historically didn't play.
Super helpful, and I want to ask one follow-up on Cepheid.
Yeah.
With what you are seeing in the pipeline, some of the innovation you just talked about, is it reasonable to think that that can remain around a double-digit grower ex-respiratory?
Yes. Yeah. I think that when we look at all of the new assays that we plan to launch and the momentum that we have with our share position at Cepheid, yes, that is what we think will happen.
Masimo.
Yeah.
We have kind of brought it up a couple times in passing. How is it going? What are the integration priorities from here?
Really excited about the Masimo acquisition. The team there delivered high single digits in Q3, high single digits year to date, and it has been fantastic to see how that team is adopting the Danaher Business System, basically to make a great company greater. We are seeing them really get at the cost synergies that we forecasted with excellence. We are building a healthy portfolio of the commercial synergy opportunities between diagnostics generally and with Radiometer. I think the team is starting to see that that is the Danaher playbook. We take out costs, and then that lets us add more to commercial excellence as well as innovation. This is a team that definitely has more strong innovation ideas than they have historically been able to pay for.
I am particularly excited as a daughter of someone who has Atrial Fibrillation and would be a healthier person if that had been diagnosed earlier, to see Masimo's most recent launch, which takes their AI-enabled pulse oximetry technology and adds to it an early detection AI algorithm for AFib. So, excited about what that team will do.
Maybe just in the couple minutes we have left.
Yeah.
As you think about three to five years from now, what, I will say, three outcomes would demonstrate that your strategy is delivering? What are the three things we should look for as we think about milestones for the success of Julie in the CEO role?
In five years, investors should see this strategy paying off in terms of our performance. Higher core growth, unambiguous share gains, and that moving through the P&L to create more shareholder value creation. The kind of proof will be more competitive wins, seeing that horizontal selling take hold from a more connected Danaher, impactful innovation, and high-quality M&A.
That's fantastic. All right. We'll leave it there. That's a great spot to leave it. Thank you so.