Amazing. Thank you everyone for joining us, day two of Morgan Stanley's Global Healthcare Conference. I'm Kallum Titchmarsh, I run the life science tools and diagnostics team. Really pleased today to be joined by Marc Casper, Thermo's CEO. We have a lot to discuss, I think, Marc, today. Maybe we can just kick off with a state of the union.
We've seen obviously growing momentum throughout 2026, following perhaps a more dynamic few years. Q2 performance obviously came in ahead of guidance, and obviously the strongest growth we saw organically since 2021. Before we dive into each of the end markets and the segments specifically, how do you see the business today, and how has that environment evolved from your vantage point?
Kallum, thanks for having us, and I'm joined today with two colleagues from Thermo Fisher Scientific, Raf Tejada, who's responsible for investor relations, and Sandy Pound, our Chief Communications Officer. When I think about 2026, it's setting up to be really an outstanding year. It is a combination of improving end markets in the direction that we've expected to see that progression and very strong operational performance by the company
As we exited the second quarter, it was good to be back to 5% organic growth, and we grew our EPS by 13% in the quarter. We're able to raise our outlook for the full year and now expect our organic growth to be about 4% this year. Actually progressing nicely in that range that we said it would happen, getting to a period over this year and next, range from 3%-6%, and you're seeing it progress higher in the range.
I'm sure we'll delve into a lot of the different details, but if I'd say one of the things as I reflect on the first quarter or the first half of the year, I should say, is the strength of the customer relationships that we've built is really paying off in a really strong way. The acquisitions that we've done are performing well because customers want to adopt the technologies that we've added. It's a super exciting time in our industry and an even more exciting time at Thermo Fisher.
Amazing. Maybe just turning to Pharma and biotech, I think demand from pharma's remained pretty strong. More recently, we've started to see an improvement in the earlier stage biotech funding too, and I think that's starting to show up as well in the revenue base. Can you just give us a perspective on the health of that end market today of both and what you're hearing from customers and what is driving that improving trajectory?
Yeah. So when I think about Pharma and biotech, it's the largest customer set that we serve. It's about 60% of our revenue. We grew mid-single digits in the quarter, and that Q2 has followed the progression that we've now seen for several quarters, which each quarter is actually a little bit stronger in terms of the organic growth versus the prior quarter. So you're seeing it strengthening. The business is performing in a logical fashion. So, what we're seeing is the pharmaceutical customers are quite positive.
They're building their pipelines. They're excited about the science that's happening now, and the understanding that they have the benefits of AI to drive stronger impact on the returns within drug development, and that is definitely fueling an investment cycle. At the same point in time, you're seeing biotech also in a much better part of the cycle simply because funding is improving, the confidence has been improving, and you're seeing the spending. We saw broad strength. When I think about Q2, you saw strength in clinical research, you saw strength in our research and safety market channel. You saw very strong performance in bioproduction, all driving very positive growth.
How should we think about that lag, I guess, between biotech getting funded to them actually spending money and for them generating revenue for you? Because it feels like those funding dollars have sustained themselves pretty well throughout the years. How are you just thinking about that relationship between funding and revenue generation?
Yeah. As our investors know, we spend an enormous amount of time as a management team with our customers, and if I think about in 2025, a lot of what the commentary you heard from us was the tone, the sentiment is improving. Even though funding wasn't super strong, it was improving. But the confidence from our customers in the emerging biotech companies really was picking up. You saw funding start to improve as 2025 progressed. Has stepped up even further in 2026. The M&A that's happened in the industry has fueled an investment cycle from VC.
You've seen IPOs. You're seeing a much healthier end market, and that sentiment has now translated into spending, right? It follows a logical pattern, right? Usually when funding happens, it usually takes two to three quarters, depending on the business, for that funding to flow. Funding typically will first go into clinical research because that's ultimately how you get to your next milestone in terms of the next funding round. You've seen that in very strong authorizations growth in our clinical research business.
You've also seen it in the strong revenue growth that we've been delivering. Now what you're starting to see as it progresses, as those companies are now working on, how do they refill their research pipelines? You're starting to see that growth pick up first in our research and safety market channel, Fisher Scientific. That's the next natural thing to happen. You're starting to see lab spend go up. Then the next step you would see is kind of the high-tech reagent business would be the next part of the progression that you would expect to strengthen over the next couple of quarters.
We've had some quite exciting data intra-quarter on personalized mRNA cancer vaccines. Obviously had been a market more broadly, vaccines that were perhaps a bit softer post-COVID on that roll-off. How are you thinking about the opportunity created from that? Just given the breadth of your capabilities across the drug development cycle, where can you play the most meaningful role?
Yeah. So when you think about a significant event from a new approach for therapy, it spurs a huge amount of interest, right? In a certain respect, it is less about the Moderna and Merck specific spending and two important customers, but more about the interest in the area, which then spurs a reinvestment cycle. If you think about, really it is a therapy. Less of the marketing, but effectively, it is to address an individual's specific cancer, and it really is very exciting.
What ultimately will be is that it will benefit patients, and that will then see capital flow to support that area, just like it has in ADCs and some of the other areas that maybe two or three or four years ago, the industry was talking about being a positive. This is yet another leg to drive growth in the industry.
Just sticking with Pharma and biotech, our checks have suggested that we are starting to see increased activity around reshoring to the U.S., and I think a number of companies have spoken a bit more proactively to it during the second quarter. That seems like it could be a multi-year investment cycle that you have opportunity to benefit from. So maybe just talk through how you are going to be participating in that trend and what you are seeing from those customer discussions today.
So Kallum, when I think about reshoring, it is worth delving into a little bit of the context on it. It is all positive, but I think it is helpful to understand, which is today, certainly serving the U.S., a large proportion of medicines are made in Western Europe or are made in Asia-Pacific, depending. Generics mostly in India, but a lot of the innovative medicines are made in Western Europe. What you are seeing with the administration's policies is there is real economic benefits to produce in the United States and create more jobs and supply chain resiliency.
The activity that it is spurring is really in three different ways, right? To meet the U.S. government's requirements, you can sign CDMO contracts. You do not have to build a factory. You can just commit to U.S. production. When you look at that, we have secured a number of large contracts for our capability to produce in the U.S. In fact, in March of this year, President Trump visited our CDMO site in Cincinnati, one of the beneficiaries of those jobs moving back to the U.S., where we have a very high-tech facility in the oral solid dose category.
That is the first phase, because in a way, the factories exist. We are producing medicines. Customer might have produced those medicines somewhere else. They sign a contract with us, we tech transfer it, and we start to create jobs. It creates more growth for us. The second area is expansions of existing facilities. In that case, that happens next most quickly, if you will, which is they are buying equipment, they are moving medicines into the U.S. You will see the one-time demand for that equipment.
You will see the one-time demand to stock labs or stock supplies. You are seeing activity pick up there, and that is probably more of a 2027 timeframe when it really steps up. That is consistent what we have been saying. The final one is the one where you see most of the announcements, most of the dollars, is the brand-new facilities, the greenfield that are being built. They will have more one-time purchases. They will buy more equipment. They will equip the labs.
We will supply to Fisher Scientific all of the labs, all of the inventory to get those facilities up and running, and that should be a 2027, 2028 type timeframe in terms of when that plays out. When it is all said and done, we are still producing the exact same amount of medicines. So it is a one-time benefit. It is sort of, in a way, additive to how we have thought about our growth outlook. It is a good thing, and it will normalize over time. You are just starting to see it now, and we will take it. Then ultimately, you get back to volume growth in the industry. So it should be a nice positive over the next couple of years.
Yeah, makes sense. Maybe just turning to AcadGov. Started to see some signs of stabilization. It was a pretty dynamic period for that end market, particularly in the U.S. How would you characterize the health of that end market today, and what are you hearing from customers on the ground? I guess more importantly, what do you think is needed to drive a more meaningful recovery here?
Yeah. So we had a strong quarter in the second quarter in academic and government. We returned to low single-digit growth. We had strong growth in Europe. The U.S. returned to growth, slightly positive. China is still a headwind in terms of academic spending, but it was a better quarter, largely driven by the adoption of our high-end instrumentation in terms of innovation. Our chromatography mass spec business did very well. You saw strong adoption there.
The way that I see the market is funding has been okay. But anxiety has been high. It is really, in a way, academic and government over long periods of time, spending just follows the flows of funding. But over the 2025 timeframe, there were so many pronouncements about changing or potentially changing policies that customers got cautious. Our view in 2026 is it's stabilizing, but it's still a muted market, but the funding is flowing, and our expectation is that will continue to progress, and it should return to growth in 2027, is the way I would think about it. We'll take a good Q2 in terms of the performance that we had.
Maybe just unpack a little regionally what you're seeing in AcadGov.
Sure.
I think you briefly touched on it, but what do you think is driving that difference in performance and perhaps the relative anxiety, I guess?
Yeah. I think the anxiety is literally only a U.S. dynamic in terms of it. In terms of the way I would think about. We have very strong adoption of our technologies, particularly in our mass spectrometry category. What you're seeing is Europe was even stronger because they have less of the sort of policy things that they're working through. The U.S. was positive. China continues to be muted as government has been quite restrained on spending in academic and government.
Maybe just implied in industrial, I think it was one of the stronger end markets in Q2. That seems to be improving and on the up as well. What are you seeing from customers on the ground here? I would love as well a bit more color on the electron microscopy business. I think that and semis has been an interesting topic for-
Sure.
...our discussions with investors as well.
Right. About 15% of our revenue is the industrial and applied markets. When you look at the drivers of the mid-single-digit growth that we delivered in Q2, we actually had broad strength. We had a very strong performance in our electron microscopy business. We saw chemical analysis return to growth, and the research and safety market channel had a strong quarter. When I think about the individual drivers, chemical analysis, which is the smallest of our three instruments business, really is benefiting from two things.
Safety and security spend, things like radiation detectors, explosive detectors, things of that sort, where we have deep expertise from a technological standpoint, has returned to growth. High commodity prices drives a lot of demand for spectroscopy instruments, and that has driven growth there as well. So that is that part of the business. Electron microscopy, which is a much bigger business, has got good momentum, really driven by semiconductor.
We have a very leading set of technologies, an essential set of capabilities for the semiconductor industry, where if you are developing the next generation of a semiconductor or thinking about chiplets and some of the other technologies, you need the electron microscope to actually understand what is going on at the atomic level to make sure that you are developing the right product. You use our technologies more and more in the yield ramp of production, and you are seeing more automation that we have provided so that you can literally take off of the fab, a near-line, actually test what are the quality issues that might be in the factory, and that has allowed for a faster ramp of a new fab.
You're seeing very strong demand, and it's long-cycle business, meaning that our orders are far outstripping revenue, and that bodes well for the future in terms of growth in the semiconductor industry and the number of new fabs being built will continue to drive strength in that business. Strong technology business, very well respected by the customer base, and business is performing at a good level.
Great. I want to hit on China. You obviously recently visited China, met with customers, key stakeholders there. What did you take away from the visit in terms of the environment on the ground and customer activity? I guess looking ahead, what do you see as the key drivers for spending to be, again, more proactive and more speculative than perhaps it had been in the past?
Yeah. So Kallum, when I think about China, one of the things, as a company, we've been in China for over 40 years. I've had the good fortune of working with our Chinese colleagues and our customers in the 25 years that I've been at the company. I'm a regular visitor, meeting with customers, governments, our colleagues, and just continuing to ensure that our business has a bright future there. Over the last few years, China has been a drag on the industry growth. While our business generally has performed better than others, it's been a flattish to down type business. You saw our business return to growth in the second quarter.
When we talked about our mid and long-term guidance, what we've said consistently is that China doesn't need to be a meaningful contributor to our growth for us to progress through the 3%-6% range, and then ultimately to the 7%+ range in 2028. When I came away from my visit in August, which was my second trip of the year, I actually came away more positive on China. One of the trends that is really picked up, in a way it's obvious, but actually hear it firsthand helps crystallize it, which is the innovative biotech industry that has been developed in China is really investing heavily in R&D. They are looking to work with Western companies.
They want to, in a way, de-risk a licensing deal because effectively, if we're putting our name behind a product or technology, then the customer that might be licensing from them will understand that it works. If our clinical research team is running a trial, we're putting our brand about the quality of the information being generated.
Those things are really quite valuable, and you're seeing our business return to growth. I actually came away more bullish on China and believe that over time it can return to be at least growing at the company average, if not better. I'm quite encouraged about what the opportunity set is. I still think Academic and Government will be challenged there until the government has a different policy about fiscal spending, but I don't think that matters all that much.
Understood. Maybe just shifting from end markets to a few of the individual businesses. Let's maybe start with bioproduction. Been delivering really strong growth there.
Sure.
I think outpacing that of the market from our data.
Right.
What do you think is driving that outperformance, and how does the addition of that Purification and Filtration business from Solventum change the trajectory looking ahead?
Sure. We have a strong bioproduction business. Has had a very long track record of gaining market share. The way that customers buy in the bioproduction segment is a best in breed approach, meaning that they will optimize the various technologies to produce their medicine that gets the most cost-effective way to produce. Our growth has been driven by our leadership position in cell culture media and single-use technologies where our technologies have been widely adopted and continue to drive adoption.
We have had great strength in our DynaDrive single-use technology bioreactor, and that really is a very efficient way to produce medicines, and you are seeing the adoption. We have a rapidly growing purification business, a resins business that we have had for many years. We won many molecules years ago. When you win a molecule, it is an infinitesimal amount of revenue. It is a long journey. But you are seeing the benefit of the wins over the last five to seven years actually materializing into revenue growth.
A year ago, we just celebrated our one-year anniversary. We acquired the Filtration business from Solventum. The view there was great technology, didn't have strong commercial reach, and that our customers were looking for a trusted partner to be able to support their filtration needs. We have had very high level of customer interest in that business. That acquisition is off to a good start. We are excited by that. It will now become part of our organic growth. We expect that business to continue to be a mid to high single-digit growth business.
Which actually means it is a little bit of a drag on the organic growth of bioproduction, sort of mathematically, but it is accretive to the company's organic growth. Over time, as we build the pipeline and expand capacity, it will become in line with actually the bioproduction growth as well. It is a great business. It is performing well, and it will be highly accretive to our EPS. We have a really good business, and I would say that we are well-positioned in the long term to continue to have strong growth.
How do we think about, I guess, the timing of benefit from that fully integrated bioproduction portfolio that you have? Because I think it seems you get the benefit from when new molecules come online because now you have this broader suite. Maybe just help us understand the cadence of benefits there.
Yeah. When I think about the long-term growth for this business, I always think about it as a high single, low double-digit growth in aggregate. We've been able to, coming through 2019, sort of in that period, we were able to grow at that rate for a long period of time. We had supersized growth in the beginning of the pandemic. The whole industry had the hangover effect, which we all want to forget. Now you're seeing the market stepping up. When I think about long term, the business is bigger with the addition, and it'll be a more meaningful contributor to growth over time.
Great. Maybe just turning to Pharma Services. Growth a little more modest there in the second quarter, but you've expressed confidence in that bouncing back-
Right.
...in the second half. Feels like one of the businesses where lead time should be a little longer, so you perhaps have visibility-
Yeah.
...into customer patterns. So as you look ahead, how are you thinking about the growth path in 2026 and into 2027 there?
Yeah. So when I think about Pharma Services, we are an industry leader in that segment. When I look at the phasing of the year, and I go back to what we said in January, we said that Pharma Services would have more modest growth in the first half, a step up in the second half as we were giving the color back in January. Because we actually have quite a bit of visibility to when customers are expecting production from us. You do not have perfect visibility, but you have the best visibility of any of our businesses. It has been playing out as we expected.
When I think about, we would expect the second half to see a nice step up from the first half, and the activity supports that in terms of the contracts and the shipment schedules. So, that business is well-positioned. When you think about what we do in the space, we are the leader in clinical trials packaging, logistics, distribution, which means that roughly 40% of all experimental medicines in some way are touched by Thermo Fisher in terms of the physical side of that process.
We also have a strong position in drug product, which is primarily our sterile fill finish business, which is the dosage form that you would administer a medicine. We have a drug substance business where we are one of the largest of the single-use technologies producer of biologics. Those are the three businesses, and we look forward to the growth stepping up in the second half as we ship the demand that we have. We have been expanding capacity, particularly in sterile fill finish. So that business should be a nice growth business in 2027, 2028 as well.
Looks like that could be a nice beneficiary of the reshoring-
It is, and we've won some nice contracts. You'll see that in our drug product business, and you'll see that a bit in drug substance as well.
Great. Maybe turning to clinical research, another one of the standout performance. You've spoken, I think, to a very competitive book-to-bill as well relative to what's out there in the market. I'm curious how that business has been evolving, how you feel competitively stacked there. Clario as well I think was really interesting-
Sure.
...as an add-on there. How's reception been on the back of that?
Yeah. Business is performing very well. We've had very strong authorizations growth, which is the new wins that you get, growing well in excess of our revenue. That bodes well for what the trajectory of the business is. When I think about the whys, we have been very aggressive at the capabilities, what we call accelerated drug development. What that is all about is time to market. Ever since we acquired PPD five years ago, we've been leveraging some of the combinations with Patheon to help our clients actually shave time out of the process.
In clinical research, you want to know very quickly whether something's going to fail, because it's a lot less expensive if you do that, and you want to get the products that are going to be successful to market as fast as you can, so you can have the longest time of exclusivity to drive returns on it. So time matters. We've demonstrated the benefits of Accelerator, and you're seeing incredibly strong demand for our capabilities. We have deployed AI quite aggressively in the business to, again, further take time out of the process, and these things are really very relevant for our customers.
Ultimately, our customers benefit and we benefit from the improvements that we're seeing from AI. Then we bought Clario, one of our larger acquisitions. We closed in March, a $9 billion investment. Because what Clario is a technology platform for generating and managing the endpoints that are generated in a clinical trial. It has leading position in three of the four major endpoints. Because we're a large CRO, we use all of the different providers.
We actually understand the business fundamentally. We understood the benefits of what Clario's technology was. We have a large central lab, which is the fourth of the major endpoints. We will bring those capabilities together and make it more seamless for our sponsors, and more seamless for the investigational sites so that our goal is to be the standard on whether we're doing the clinical research, whether another CRO is doing the clinical research, whether a sponsor is doing it themselves.
We want to be the best technology platform that's AI-enabled to be able to support the drug development process and help shave time and cost out of the process, and ultimately build a really big business. We've had a great first six months in terms of the performance of the business since we've owned it. So we're very excited about what the future holds in that combination.
Also feels like one of the businesses where you perhaps have more of that visibility into that path-
You do.
...later this year into next year as well.
Right.
Right. Yeah, that makes sense. You also have, I guess, a unique view with the CRO of early-stage innovation new indications coming through. Anything that's exciting you in that pipeline that you're perhaps hearing of that perhaps could evolve into something more meaningful as we look multi-year out?
Yeah. There's huge interest in the areas that all of the investment community would understand. Neurology is incredible level of work being done, progress slowly being made, which is such an important area for progress, and oncology continues to be a big driver. We're seeing high level of interest, and we're seeing new modalities being adopted, which is exciting.
I'm super excited about what's going on in the drug development business and the investment cycle that will spur, but most importantly is the benefit for patients, right? We all know somebody that has either had a neurological disease or cancer, and the breakthroughs that are coming out are going to make a huge difference in patient life. That's ultimately what gets all of our colleagues fired up to do their best work.
Yeah. Maybe just turning to capital deployment. You've spoken about an attractive M&A environment, active pipeline as well of opportunities. Just given the capital you've already deployed and where leverage sits today, how are you thinking about capital deployment priorities from here? How does the current balance sheet factor into your appetite for M&A?
Yeah. Kallum, when I think about it, we're always going to focus on delivering a very strong investment-grade rating. We have plenty of financial capacity from where we sit from a leverage standpoint. We have managerial capacity as well, and we serve a very fragmented industry. Despite our industry leadership and the strength that we have, there are many things that we can buy. We're always very active. We're very active at evaluating different acquisitions. This has been a really active year for us actually, because if you think about it, we spent $9 billion on M&A.
We bought back $4 billion worth of share. We raised our dividend by 10%, and we divested our microbiology business, which we closed in August as well, just to be able to redeploy the capital into higher value areas. It has been exciting, and we are continuing to be very active in developing our pipeline and looking for the right fit with our company.
Just turning to the outlook, the guidance implies roughly 4% organic growth in the second half. Pretty balanced, I think, between Q3 and Q4. Just given that improving outlook that we have started to see across several of those end markets and what you have covered already across the different businesses, what are the key puts and takes that inform that outlook, and how are you feeling as we work our way through the back part of Q3?
Yeah. We feel very good about the 4% outlook for the second half of the year. In terms of phasing, we would expect the quarters, as you said, to be pretty similar in terms of the organic growth. We think of our business more on an annual basis and more on a six-month basis than any particular quarter. The first half of the year grew 3%. The second half of the year is going to go 4%. We will expect to go 4% for the full year.
We are seeing our orders running ahead of revenue, so that bodes well for the future. In terms of the puts or takes, they are really going to be largely the execution against the backlog that we have and the continued strengthening of the end markets, which are playing out as we would expect. We feel very confident in our ability to achieve our outlook for the year and enter 2027 with very solid momentum.
Stepping back a little, looking beyond 2026, at the Investor Day, you outlined 3%-6% organic growth over the medium term and the path to 7% over the longer term. Just given how the sector itself has evolved over recent years, I think investors we speak with want to know how that midterm outlook could evolve in a bit more detail. What just gives you confidence in the building blocks to deliver that growth progression?
Sure.
What should investors be watching as the business continues to evolve?
Yeah. So when I think to our Investor Day back in May, a couple of the key themes were, this is a great end market, right? It has been a painful last few years. No one is confused about that. But if I actually think about the drivers of an aging population, the importance of scientific breakthroughs, what medicines will do, and ultimately the demand it will drive for life science tools and Pharma Services, it really is an outstanding neighborhood to live in. We are very proud to be the industry leader, and we have got to keep earning that.
So our progression, because we have some reasonable level of visibility to how our customers are thinking, we expected this year and next to somewhere be in the 3%-6% range. As a reminder, we said this year, probably 3%-4%, it is likely to be 4%. We would expect, just based on orders, that that will continue to strengthen into 2027. That is at least our view as we sit here now. Nothing surprising about that.
We believe that 2028 and beyond, we should be operating in the 7% range, and that the cycle that we are seeing, that Academic will continue to stabilize, biotech funding is continuing to improve, and that will flow into our end market, will support that growth. The big drivers are stabilization in Academic, improving biotech. You are seeing both of those dynamics play out. Upsides or tailwinds is probably China, given that we have been relatively modest in our assumptions there. Headwinds would be some mess in the world, right?
It is less about life science tools issue. If there is something that really throws the economy off track or something like that would be the thing that could be a headwind to that. But things feel good, and we feel like we are well-positioned to return to that 7% growth and what now does not feel like very far from today's date. That is what we are focused on.
Great. Maybe one more just thematically. We have had a question quite recently just on how you think broader AI spend from Pharma is impacting spend on traditional tools. Is that something you think could impact spend on traditional life science tools, or are you expecting investment to be pretty important as part of this broader ecosystem?
Yeah. So, it is a common question, and it is a good question, right? If you think about the industry we serve, Pharma and biotech, what drives investment is actually the ROI on the drug development process. As AI improves the ROI, customers will fuel their pipeline to capitalize on that. You will see more indications going in parallel on clinical research. You will see insights from better biological understanding in the research spend. So I am actually quite bullish that AI will actually be a facilitator of industry growth.
You are seeing demand pick up in some of the early research spend because there is new activity happening which would not have happened in the past, which is you are seeing large-scale lab experimentation being done just to populate biological models. Right? Which is just to create that foundational biological model. You're seeing these high throughput labs actually executing and consuming a lot of reagents. It's really a quite dynamic and exciting time. Ultimately, as the industry leader, we have the most data, the most customer relationships and insights, and we view it as an accelerator of our competitive position. It's an incredibly exciting time. It's dynamic, and we think it's another tailwind for Thermo Fisher Scientific.
Amazing. Thank you so much, Marc. Appreciate it.
You're very welcome. Thanks for having us.