It's time. Good morning, everyone. Thanks for joining us. I'm Andrew Cooper. Welcome to the Raymond James Institutional Investor Conference. I cover life science tools and diagnostics here for Raymond James, and happy to have Thermo Fisher joining us this morning. I think most of you probably know Thermo, you know, a leader in a broad chunk of the life science tools arena, from reagents, analytical instruments, diagnostics, contract research and manufacturing, et cetera. I could keep going, but I'll stop. Thrilled to be joined by CEO and Chairman Marc Casper for a discussion this morning. Maybe just to kick it off, you know, the state of the union question, where are we today? There's been a lot going on in the last, at this point, half decade it feels like.
Would just love a little bit of color on sort of how Thermo's positioned today and how you're thinking about that road ahead.
Andrew, thanks for having us. I'm joined by Eileen Pattinson from Investor Relations. When I think about the state of the union, we had a good 2025, right? I think it's always about, you know, what we actually do. When I think about the company, not only did we, you know, have strong financial performance and strong earnings growth, but we actually exited the year with a lot of momentum, right, and entered 2026 in a strong point. The second thing is that our industry is evolving in a positive direction, right? There's been a period of volatility post-COVID, and last year was a much more predictable year.
Even with all of the macro things that we read about and caused lots of angst, I would say, in the investor community, the reality was, the year played out pretty smoothly. We enter this year in a position of strength as a clear industry leader, you know, deep relationships with our customers and, you know, have been consistently gaining market share. It's a really super exciting time for the company as we enter 2026.
Great. We're going to dive into a bunch of the moving parts there as we think about entering 2026. First, you talked about momentum exiting 2025. I think one thing is four Q earnings have wrapped up for this space broadly. We've seen a lot of companies in the tool space guide how the street is thinking might be conservatively, I think especially in one Q, and there's a little bit of question of, is there some sort of pause in this end market recovery? Is this just conservatism, or sort of what the setup for the year is? Maybe the question here is, how do you think about philosophically the way you approach guidance, how we should interpret the way you laid out the 2026 outlook?
Help us understand sort of the balance of what's prudence, what's a pause, if there is one, and some of the moving parts around 2026.
Yeah. I think there's a, you know, a core philosophy that we've executed over a long period of time, right? Which is, you know, set goals that are ambitious and worthy, but goals that you're going to achieve. Try to be in a consistent long-term mode of being able to slightly beat the numbers that you put out, not, you know, where you have so much room that you know, the numbers become irrelevant, but that you're in a mode of just a series of positive news. Having been in my role for 17 years, I sort of, you know, have lived under different models where if I say what period works best, it's that.
Coming out of an industry where you have lots and lots of little companies, right, with, you know, several $100 million of market cap versus, you know, a couple companies with post, you know, greater than a $100 billion market cap, you know, it can be a very noisy industry in terms of guidance. What we did both in July is set out a couple-year framework, and then when we gave our guidance in January, is we're super clear that actually the market is playing out as we expected. It's recovering. We delivered a little bit over 2% organic growth last year. We're expecting 3%-4% growth this year, on the way to ultimately, longer term, you know, in the 5%-6% range, and then eventually we think 7% +.
That's sort of the progression that we've articulated. We believe that the 3%-4%, just given where we finished last year, is a very logical place to start. The way we've always managed the company is you retire risk each quarter and, you know, as long as you're performing well, you're gonna, you know, raise your outlook, and that's how we're approaching the year. This is one of the first years as I've read through pretty much every earnings report or, you know, the report that everybody else has in the industry, most companies seem to follow that approach. I don't know that factually, but just kinda reading, you know, the view, we always go first or second in the cycle, and it seems like the industry took that, and no good deed goes unpunished.
I think the take was, well, then the outlook must be bad for the industry because of that. I actually think it's really setting the industry up for less volatility, which will be a good thing.
Safe to say, not suggesting to us that there's a major pause or anything like that.
No, actually, I think the industry continues to strengthen. I look at the signs of, you know, activity with biotech, what's going on with pharma, the fact that we got a budget pass on NIH. These are all good factors in our industry that would say that the market should continue to strengthen.
Perfect. Wanna jump into exactly that end market, pharma and biotech. As the recovery continues, how has customer behavior, excuse me, evolved in terms of prioritization and what they're thinking about today across the drug development life cycle, and where are you seeing the most momentum there?
When you look at pharma and biotech, it's our largest end market, about 60% of our revenue. Last year we grew mid-single digits in serving that end market. We ended the year on the fourth quarter with high single-digit growth. We've had strong momentum. You know, our business is clearly gaining market share. A lot of what we talk about as we describe the company is that we're the trusted partner to pharma and biotech. And what does that really mean? We have such a unique set of capabilities that we're working with the management teams of our pharmaceutical and biotech customers almost on a daily basis in some fashion, and that allows us to understand evolving trends, understand how we're performing, and ultimately it opens up new opportunities.
Our business has great momentum in serving pharma and biotech and I'm certainly excited about it. You know, one of the things that we've done is effectively been building out our capabilities, right? Over the last roughly 10 years, we built out a meaningful service business, right, in serving pharma and biotech beyond our products, businesses that serve it. In having both clinical research and in clinical development, meaning that we design the clinical trials, we execute them to determine the efficacy and safety of medicines, we develop the physical medicines all the way up through scaling up the commercial production, and we're the largest company that does that set of activities. I look at what has happened is when a customer selects us, we're actually able to do it faster than anybody else, right?
There's just insights on all of the handoffs that happen, in the development of a medicine that has allowed us to ultimately win significant new business. That positions us really well for the future.
Great. One kind of big topic of the last, call it handful of months at this point, has been reshoring.
Sure
... and the potential impact there. I think you called out on the fourth quarter call some new contracts, in terms of U.S. manufacturing needs. Can you step back and share how you see that trend evolving from here and where are customers in the process today of-
Sure
of trying to reshore, and how do you think it plays out in the next, call it, few years?
The larger biopharmaceutical companies have made significant commitments to reshore manufacturing to the U.S. In exchange for that, they've been able to negotiate, you know, exemptions from tariffs as well as pricing mechanisms for the medicine. There's a direction of travel in our industry of a lot more activity. When you look at that, you know, we also, because we're a contract developer of medicines, have made a $2 billion commitment to the U.S. government in terms of additional capacity to produce medicines here. We've won a meaningful number of new contracts to fill that capacity. Effectively for many customers, it's more economical to rent the capacity from us than building a whole new facility. We've seen that.
That revenue will show up faster than the greenfield revenues that would show up in our pharma and biotech customers. When you think about it, we would expect, you know, 2027, 2028, even into 2029, you should see a nice step-up in growth above the trend line, if you will, from that activity. The way a new facility works, and there'll be a significant number of them built in the U.S., is we play a role in equipping the facilities, we stock the labs. Our position in bioproduction of the enabling technologies to produce medicines is much stronger today than it was when the old plants were built 15, 20 years ago. We're likely to have a much higher market share of the activity as well. It's a really, it's quite a positive trend for Thermo Fisher and for the industry more broadly.
Great. Now, touching on something you mentioned a little bit in the prior question. You launched Accelerator, I think, at the end of 2024
Mm-hmm
which integrates that contract research side with the contract manufacturing side to, like you said, streamline some of the timing there, reduce costs.
Sure
... et cetera. As that solution sort of picks up traction, how should we think about that offering driving growth across your pharma services and clinical research business? Is it changing the nature of the relationships and the nature of the engagements with the customers you're working with?
If you think about what we're doing, right? You know, you have in developing a medicine, you're going through the clinical trial process, which is around safety and efficacy, and then you actually have to be able to manufacture the medicine, right? We play a meaningful scale role in both. If you're a biotech company, right, and you have neither the capabilities of executing the trial or the capabilities to manufacture the medicines, it's incredibly compelling actually in the case studies that we've developed, the studies that were put out by Tufts University about how much time this process is saved through using the combination of the capabilities, and we're able to implement it that works for our customers.
The reason that the adoption has been so strong, and you see it in the authorizations and contract wins that we've gotten over the last six quarters, since we've offered it, you know, is effectively the value creation in the biotech and pharmaceutical industry is how long is the period of exclusivity and who's first to market for a new medicine? We're able to impact both, right? The faster you can go, effectively, the longer your economic benefit is as a client, as well as de-risking that you're second or third class of a medicine. It's really been incredible in terms of the momentum.
You've seen our Clinical Research business, you know, which is roughly a $8 billion business, has really been gaining very meaningful share, and you see that through the numbers as we publish them.
Maybe one you just made me think of, you know, it logically makes so much sense.
Mm-hmm.
Why have we not seen more players follow suit and try to more tightly align a CRO business and a CDMO business to make it easier and to be able to, frankly, keep up with what you're able to offer?
You have to do it at scale, right? It has to be done at scale because of the complexity, right? That really limits who the opportunity set is available to. Like everything-It takes a while for the industry to understand the changes and then ultimately, we have a huge first mover advantage. That's really been the reason that, you know, we have the concept, we didn't overpromise to our customers, ultimately they've been super pleased, that position is well for the future.
Now the topic that no one can escape.
Sure.
Let's jump into the AI question.
Yeah.
I think there's a lot of excitement about what AI can do for drug development. A lot of the market has looked at that as scary.
Mm-hmm.
For life science tools, so, especially the CRO landscape. Can you help us think about how you view AI as changing or maybe not changing...
Mm-hmm.
The long-term profile for, you know, that, this industry, and where you think Thermo Fisher is sort of positioned to play in a world where AI is a bigger part of what we're doing?
Andrew, it's a great question. Thank you for asking it. Let me start with the 30-year view, right? Having seen many evolutions of technologies and many evolutions of change, right? Which is in our industry and the customer base we serve, the better the technology that advances scientific discovery, the better the capabilities to bring medicines out more effectively, has always led to a reinvestment cycle in the industry, right? Inefficiency that comes out effectively leads to more money coming in to go after the big opportunities. Because human health and the challenges globally is so enormous that that has been the ecosystem that as we've seen it. I think the capabilities around AR, AI are incredibly profound, right?
When I think about how we use AI in just running the company, it's making us meaningfully more efficient, right? It's creating a better customer experience. That's not gonna differentiate any company, but it becomes a sort of, it's here, it's we're living it, we're driving it. In clinical development, which is one of the areas that is, you know, the most cost, you know, intensive for our customers, you know, developing a medicine, the ability to shave time out, the ability to regenerate reports more quickly, more effectively, to select the right sites and the right patients, it creates meaningful value, right? The only way you do that is by who owns the data, right? We have, you know, and one or two of the other large CROs have the most data, if you will, on how to ultimately do the development better.
You can think about it as an enabling technology to leverage our insight to do a better job. What is it gonna mean over time? Couple things. You're gonna have molecules that are more likely to be successful going to clinical development. That's great because it means waste comes out. Two, you're gonna be able to do it more quickly, right? When I think about our own economics and all of the modeling of that, we win, right, through that process, right? While we make some money on things that fail, ultimately the reality is we make most of our money actually on the things that are successful, right? Therefore, we're energized about it.
The things that have made the company successful, scale, a unique portfolio, a trusted partner status and outstanding execution every day, quarter in, quarter out, year in, year out, AI plays to the strength of that, right? It actually is an accelerator and a multiplier. This is the most exciting time, right, in terms of leading the company, in terms of going through a change evolution, revolution on certain things, evolution on other things. It's awesome, right? You know, I'm excited about how well-positioned we, you know, are to win, and it's our job to execute well and help our clients be successful.
Perfect. Shifting a little bit to the bioproduction space, we get a lot of questions about it. I think you do as well. Maybe first just help us understand how Thermo fits into that, because I think a lot of people use the word-
Yeah.
In a lot of different ways.
Bioproduction, in our vernacular, which is generally the industry vernacular, is the enabling technologies to produce biologic medicines. There are major categories of technologies, right? There is the cell culture media, the supplements, effectively the things you would add to grow a medicine. There are the single-use technologies, the capabilities you need to be able to produce it in a sterile fashion. You have the purification, capabilities that you need, and then ultimately the filtration. Those are the four major categories in bioproduction. We're the industry leader in two of those categories, in cell culture media and in single-use technologies. We have a rapidly growing purification business. While we're not the industry leader there, we're winning a very large share of new molecules, so business with a lot of long-term tailwind.
We acquired from Solventum their filtration business, to give us a foothold in that category and we're excited about how that integration is going. We're in our first year of ownership. It's a business that's growing the fastest in the company. It's been growing the fastest in the company for the last 15, 20 years. We're well respected by our customer base, and things like the reshoring efforts, as you asked about earlier, are real positives for this business. We're well positioned here.
Just thinking about that, you have delivered really strong performance there. I think there's been periods of noise for various pockets of the end market at times. What have been the key differentiators for Thermo to deliver that strong performance even in some of these more kind of challenged times?
Yeah. I think we talk about trusted partner. If you get down to the practical aspect of it, right, you know, we're a large developer of medicines. We also are a large supplier to the competitors of those developers of medicines. Coming out of the pandemic, our largest competitor in the field called me and said, "You are our best supplier of the enabling technologies throughout the pandemic. You put the care to our success unlike any other player in the industry." Right? That's why we're the trusted partner, because, you know, I'm sure there were people at that particular company that feared and said, "Well, if there's a limit of supply, then Thermo Fisher's gonna prefer their own, you know, internal capability." The reality is those customers have put their life's work with us, right?
If we do great work for them, they will be loyal forever, and that's been the differentiator. We have great technologies, but we have a mindset that if we help our customers successful, they'll open up new opportunities. If I just think about the first, you know, six months or so with Solventum, in the filtration business, we're getting very meaningful trial of the capability, meaning that customers know we spent $4 billion. They know that that's a big commitment of capital, and they wanna know why, right? They wanna test out the product, and they're gonna ultimately adopt it. It's a great time for the company.
Great. Shifting gears a little, analytical instruments, excuse me, were ahead of expectations in the fourth quarter and delivered a solid kinda overall year. Innovation was a really big part of that, I think. You had Astral Zoom and Mass Spec. You had some big launches in electron microscopy over the last couple years. As you look ahead, how do you think about the growth trajectory in, I wanna say AI, but I probably shouldn't do that to confuse anybody?
Sure
... but in analytical instruments in 2026 and more broadly, sort of the pace of innovation and what's needed and what it contributes to that segment longer term?
Yeah. When you think about Thermo Fisher Scientific, we have four values that have been deeply ingrained in the company. The first of those values is integrity. The second is innovation. Our customers expect the best products and services. They just do, right? You're trying to develop a medicine, you're trying to diagnose a sick child, you want the best technology. We spend $1.4 billion on R&D in our product businesses, and our instrument business is known as the innovation leader in the industry. Whether it's the new mass spectrometers that we launched, the Astral Zoom, whether it's the suite of electron microscopes that we launched around both in the life sciences setting, the Krios 5 or the automated technologies in semiconductor yield ramp that use our electron microscopes.
We've been just launching a suite of incredible products, and we're driving good adoption, gaining market share, and that's a business that was most pressured, even though our results were decent. You had pressures from China, pressures from academic funding, the area that, you know, tariffs. You had a lot of what could go wrong, and actually the business did reasonably well and enters this year with incredible momentum. It's an exciting time for the business, and we'll have a really good set of launches coming up as the year progresses.
Maybe now is a good time to touch on academic and government markets a little bit. Ones that have been certainly noisy over the last couple years as well. I think the general sense is things are more getting better than anything else, but would just love sort of the lay of the land today, knowing, you know, what we know about NIH budgets, knowing what we know about sort of the way folks are thinking, you know, what you're seeing in the field.
Yeah. You have a period of 2025, lots of anxiety amongst the customer base in the U.S., with whether it was DOJ, whether it was what was gonna be funded on NIH, yet our view was that NIH was gonna be okay in terms of what the budget was, it ultimately was in terms of slight growth that was passed. You know, customers are still a bit cautious, but that will improve over time. You don't have the shock anymore. Now there's more stability, customers are getting back into the cycle of reinvesting and upgrading fleets and of instruments and so forth. I would expect that market gradually improves and gets to a better spot. Europe has been good, interestingly enough, actually, in terms of the academic markets.
There's been a good commitment to, you know, spurring innovation across the continent. That's been a bit of an offset.
Great. Now maybe touching on capital deployment, you're in sort of the mid-twos from a leverage perspective. You already did $3 billion of buybacks this quarter. You've got a $9 billion or so acquisition pending. As that kind of slides leverage higher in the near term, how should we think about capital deployment, both sort of near term and then what you're seeing in the M&A market as you sit today?
Yeah. When I think about our capital deployment strategy, we are an industry consolidator. We have a very clear approach that's been consistently deployed, which is, we do a balance of M&A and return of capital with M&A being the priority. You know, over long periods of time, you know, about 2/3 of our capital goes to M&A and about 1/3 to return of capital. We are very clear on acquisition, you know, what the strategy is. It has to make the company stronger. It has to be highly valued by our customers of transaction and ultimately has to deliver strong returns, as measured by return on invested capital, internal rate of return, so that, we clearly are, you know, generating, you know, shareholder value through those activities.
Last year was a good year, right, in terms of the targets that were available to us, and we were more active because they were good fits. We announced the acquisition of Clario, which we are expecting to close in the second quarter. You know, that's a $9 billion transaction. It's a business that is the leader in endpoint solution generation. What that means in English is when you're doing clinical research, you know, you need to know the safety profile, so the cardiac profile on a patient that's taking a medicine you need to know what's going on in terms of the body from the physiology of the medicine. You need to know what the patient is saying to the doctor. It's called the clinical outcome assessment. Clario has the best set of technologies for those capabilities.
The fourth thing that you need to know is what's going on physically in the body from the blood, or whatever biological sample. We're already the number two player in that. We will integrate that into a unified endpoint for our clients, and they can do those trials themselves. They can do that through our CRO or anybody else, but we believe we'll have the best solution. It's going to be a high-growth business. We're focused on closing that, doing a great job with it. That's our priority for 2026. We're actively looking at things. You know, we have a strong management team. We've got, you know, balance sheet flexibility, and if the right transaction's available to us, we certainly would consider it.
I always like to focus on what we actually are in the middle of doing, and this is a really exciting time for the company.
Great. The next one I wanna ask is admittedly more of a philosophical question-
Sure
... probably than anything else. Whether it's trade, policy, tariffs, general sort of policy impacts on life science tools, it's never been, I'd say, more... There's never been more going on...
Mm-hmm
It's never been changing as quickly as it has been.
Mm-hmm.
just philosophically, how do you think about navigating that, knowing that what's here today may not be what's here tomorrow and-...
Sure
... you know, thinking about the here and now, but also.
Mm-hmm
... the long term and the decisions you have to make for that, for that time period as well?
You know, I think one of the things that there's headline and then there's reality. This has been by far the noisiest headline period. Actually the amount of change actually has been more modest actually than what might appear, right? If I think about the health of the industry, it's actually quite strong in terms of the end markets, what's going on in pharma biotech, how some of the larger players in serving those customers are positioned. It's actually a good time and, you know, we're in the room, right? You know, we have access to the governments around the world. We are the largest domestic producer of these capabilities in every major market around the world.
Whether we're in Germany or whether we're in the U.K. or the United States or Finland or China, we are the largest player, and that allows us to be able to educate, inform, and ultimately, you know, advance human health in a way. I actually think this is a really interesting period of time where, you know, you're seeing some things that have been challenges for the industry in terms of some of the concerns around pricing. That seems to have worked well in terms of how pharma has navigated it. I'm actually quite bullish on what the prospects are for our industry.
Great. With just a minute or two left, maybe the classic closing question of, you know, what would you most want investors to take away about Thermo Fisher? What do you think the markets are most underappreciating about the story today and how you see the trajectory longer term?
Yeah. When I think about the company, and how I perceive our investors' understanding, I think actually our investors understand the strength that we have, right? As the industry leader, understand the consistent growth strategy, the good stewards of our shareholders' capital. The fundamental who Thermo Fisher is, I think is largely pretty well understood, and our discipline about driving earnings growth and gaining market share, those are the things that are well understood. I think where investors have struggled broadly in the industry is actually the question you asked about sort of the environment. What I would say is that, we have a really good handle on the environment, and we try to articulate to the investment community, you know, how do we see the world, playing out? Our track record's been pretty good about that.
Right now, I think there are two different factors that investors are trying to get their heads around. The guidance question, less about us than sort of what is the outlook for the industry. I think the outlook for the industry is actually quite good, right? It's actually progressing in a stable way and improving. I think that one will just shake out over time as results come out across the industry and our results as we continue to deliver strong performance. Then the second is you see the volatility around AI in sectors that we would all say, "Huh, why would AI affect transportation or something else?" Right? There is a bit of you take a headline, you extrapolate doomsday.
The reality is, we're incredibly well positioned as the industry leader, to adopt AI and strengthen the moat around our business, and that's what we're doing. It's an incredibly exciting time to lead the company and, to ensure we're doing a fabulous job for our customers. I think ultimately it's the performance that matters, and we're well positioned to deliver a great 2026.
Fantastic. Appreciate the time, and looking forward to the breakout downstairs. Thank you.