Q3 2023 Danaher Corp Earnings Call

Speaker 1: We appreciate your patience, everyone. Please stay in touch. Your program will begin shortly.

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We will begin shortly.

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Speaker 1: I my father.

Speaker 2: Good morning. My name is Todd and I will be your conference facilitator today.

Good morning, My name is Todd and I won't be your conference facilitator today.

Speaker 2: At this time, I would like to welcome everyone to Danaher Corporation's third quarter 2023 earnings results conference call. All lines have been placed on mute to prevent any background noise after the speakers.

At this time I would like to welcome everyone to Danaher Corporation third quarter 2023 earnings results Conference call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

Speaker 2: If you would like to ask a question during that time, simply press star then the number one on your telephone keypad.

I would like to ask a question during that time simply press Star then the number one on your telephone keypad.

Speaker 2: If you would like to withdraw your question, please press star then none number two on your telephone keep.

If you would like to withdraw your question. Please press Star then the number two on your telephone keypad.

Speaker 2: Now turn the call over to Mr. John Bedford by his president of Investor Relations. Mr. Bedford.

I will now turn the call over to Mr. John Bedford, Vice President of Investor Relations. Mr. Bedford May begin your conference.

Speaker 3: Good morning, everyone, and thanks for joining us on the call. With us today, our Riner Blair, our President and Chief Executive Officer, and Matt McGrue, our Executive Vice President and Chief Financial Officer.

Good morning, everyone and thanks for joining us on the call.

With us today are Rainer Blair, our president and Chief Executive Officer, and Matt Mcgrew, Our executive Vice President and Chief Financial Officer.

Speaker 3: I'd like to point out that our Form 10Q for the third quarter, our earnings release

I'd like to point out that our Form 10-Q for the third quarter. Our earnings release, the slide presentation supplementing today's call the reconciliations and other information required by SEC regulation G relating to any non-GAAP financial measures provided during the call.

Speaker 3: The slide presentation's supplementing today's call, the reconciliation and other information required by SEC regulation G relating to any non-GAAP financial measures provided during the call.

Speaker 3: and a note containing details of historical and anticipated future financial performance are all available on the Investor section of our website www.danniver.com under the heading on the Investor section of our website.

No containing details of historical and anticipated future financial performance are all available on the investors section of our website www Dot Danaher Dot com.

Under the heading quarterly earnings.

Speaker 3: The audio portion of this call will be archived on the investor section of our website later today under the heading events and presentations. And will remain archived until our next.

The audio portion of this call will be archived on the investors section of our website later today under the heading events and presentations and.

And will remain archived until our next quarterly call.

Speaker 3: A replay of this call will also be available until November 8, 2023.

A replay of this call will also be available until November eight 2023.

Speaker 3: During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance.

During the presentation, we will describe certain of the more significant factors that impacted year over year performance.

Speaker 3: The supplemental materials describe additional factors that impacted your over-year performance.

The supplemental materials describe additional factors that impacted year over year performance.

Speaker 3: Unless otherwise noted, all references in these remarks and supplemental materials to company specific financial metrics relate to the third quarter of 2023. And all references to period to period increases or decreases in financial master's are year over year.

Unless otherwise noted all references in these remarks and supplemental materials to company specific financial metrics relate to the third quarter of 2023, and all references to period to period increases or decreases in financial metrics are year over year.

We may also describe certain products and devices, which have applications submitted and pending for certain regulatory approvals or are available only in certain markets.

Speaker 3: We may also describe certain products and devices which have applications submitted and pending for certain regulatory approvals or are available only in certain markets.

During the call we will make forward looking statements within the meaning of the federal Securities laws.

Speaker 3: During the call, we will make four looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future.

<unk> statements regarding events or developments that we believe or anticipate will or may occur in the future.

Speaker 3: These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filing.

These forward looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings.

Speaker 3: And actual results might differ materially from any forward looking statements that we make today.

And actual results might differ materially from any forward looking statements that we make today.

These forward looking statements speak only as of the date that they are made and we do not assume any obligation to update any forward looking statements, except as required by law.

Speaker 3: These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements except that it is required by law.

Before turning the call over to Reiner I'd also like to point out that since for Alto as part of Danaher through the end of the third quarter. Our financial highlights will include the combined Danaher for Alto results.

Speaker 3: Before turning the call over to Reiner, I'd also like to point out that since Veraldo is part of Danahir through the end of the third quarter, our financial highlights will include the combined Danahir and Veraldo results.

Speaker 3: We will then provide detail for the businesses remaining with the enter.

We will then provide detail for the businesses remaining with Danaher.

We're also will be reporting their third quarter results separately later this week and we'd ask that you. Please save any questions about the royalty businesses until that.

Speaker 3: Barolto will be reporting their third quarter results separately later this week. And we'd ask that you please save any questions about the Barolto businesses until that.

Our guidance for Danaher, continuing operations will exclude for auto for the fourth quarter and the full year.

Speaker 3: Our guidance for Dan and hers continuing operations will exclude Barolto for the fourth quarter and the full year.

Speaker 3: I'd also like to mention that historical financial results reflecting only Dan Herr's continuing operations, excluding Veraldo, are available on the investor section of our website under the subheading financial reports. With that,

I'd also like to mention that historical financial results, reflecting only danaher is continuing operations. Excluding for alto are available on the investors section of our website under the sub heading financial reports.

With that I'd like to turn the call over to Rainer.

Well, thank you John and good morning, everyone. We appreciate you joining us on the call today.

Speaker 4: Well, thank you, John , and good morning, everyone. We appreciate you joining us on the call today.

Speaker 4: Poor revenue in the third quarter came in ahead of our expectations with biotechnology performing as anticipated and higher testing revenues more than offsetting slightly softer than expected demand in life sciences.

For revenue in the third quarter came in ahead of our expectations with biotechnology performing as anticipated and higher testing revenues more than offsetting slightly softer than expected demand in life Sciences.

Speaker 4: Our team's consistent, NBS-driven execution also enabled us to deliver better than expected earnings and cash flow in what remains a challenging and dynamic operating environment.

Our team's consistent DBS driven execution also enabled us to deliver better than expected earnings and cash flow and what remains a challenging and dynamic operating environment.

This was also a transformative quarter for Danaher.

Speaker 4: This was also a transformative quarter for Danaheur. On September 30th, we completed the spin-off of Walto Corporation, a global leader in water and product quality.

At September 30, we completed the spinoff of <unk> Corporation, a global leader in water and product quality.

Speaker 4: The successful launch of RALTO is a testament to the team's execution focus and outstanding teamwork.

The successful launch of are also is a testament to the team's execution focus and outstanding teamwork.

Speaker 4: We believe this separation creates exceptional opportunities for both Dan and her and Veralto to better serve their customers, deliver on their respective strategic priorities, and create greater long-term shareholder value in the years ahead.

We believe this separation creates exceptional opportunities for both Danaher and we're also to better serve their customers deliver on their respective strategic priorities and create greater long term shareholder value in the years ahead.

Now I want to thank Jennifer Honeycutt, all the <unk> associates for their contributions to danaher over the past two plus decades, and we wish them the very best as Dan Park on their exciting endeavor to help safeguard the world's most vital resources.

Speaker 4: Now I want to thank Jennifer Honeycutt and all the Veralto Associates for their contributions to Dan and her over the past two plus decades. And we wish them the very best as they embark on their exciting endeavor to help safeguard the world's most vital resource.

Speaker 4: Now going forward, Danaher is a more focused life sciences and diagnostic innovator committed to accelerating the power of science and technology to improve human health.

Now going forward Danaher is a more focused life sciences, and diagnostic innovator committed to accelerating the power of science and technology to improve human health.

Speaker 4: We've got a great lineup of leading franchises, well-positioned in attractive end markets with durable, high-recurring revenue business models, and our strong free cash flow generation positions us well to further enhance our portfolio going forward.

We've got a great lineup of leading franchises well positioned in attractive end markets with durable high recurring revenue business model and our strong free cash flow generation positions us well to further enhance our portfolio going forward.

Speaker 4: This unique combination of our leading science and technology portfolio and financial strength, all powered by the Dan and her business system, differentiates us and reinforces our sustainable long-term competitive advantage.

This unique combination of our leading science and technology portfolio and financial strength, all powered by the Danaher business system differentiates us and reinforces our sustainable long term competitive advantage.

So with that.

Speaker 4: Let's turn to our third quarter results in more detail.

Let's turn to our third quarter results in more detail.

As John mentioned since were also as part of Danaher through the end of the third quarter, our financial highlights for the third quarter include <unk> results.

Speaker 4: Now, as John mentioned, since Veralto was part of Danaher through the end of the third quarter, our financial highlights for the third quarter include Veralto's results.

Okay.

Speaker 4: Sales were $6.9 billion in the third quarter, and core revenue declined 11.5%, including a 3% decline in our base business and a COVID-19 revenue headwind of approximately 8.5%.

Sales were $6 $9 billion in the third quarter and core revenue declined 11, 5%, including a 3% decline in our base business and a COVID-19 revenue headwind of approximately eight 5%.

Speaker 4: Geographically, core revenues in developed markets declined low double digits, primarily driven by lower COVID-19 revenues.

Geographically core revenues in developed markets declined low double digits, primarily driven by lower COVID-19 revenues.

Speaker 4: High growth markets were down high single digits, including a mid-teens decline in China where the economic landscape remains challenging.

High growth markets were down high single digits, including a mid teens decline in China, where the economic landscape remains challenging.

Our gross profit margin for the third quarter was 58, 2%.

Speaker 4: Our gross profit margin for the third quarter was 58.2%.

Speaker 4: Our operating margin of 20.9% was down 540 basis points, primarily due to the impact of lower volume in our biotechnology and diagnostics segment and costs related to the separation of Viralta.

Our operating margin of 29% was down 540 basis points, primarily due to the impact of lower volume in our biotechnology and diagnostics segment and costs related to the separation of the Walter.

Adjusted diluted net earnings per common share or $2 and two we.

Speaker 4: Adjusted diluted net earnings per common share were $2.02.

Speaker 4: We generated $1.3 billion of free cash flow in the quarter and $4.6 billion year-to-date.

We generated $1 $3 billion of free cash flow in the quarter and $4 6 billion year to date.

Speaker 4: resulting in a year-to-date free cash flow to net income conversion ratio of more than 120 percent.

<unk> in the year to date free cash flow to net income conversion ratio of more than 120%.

Speaker 4: Strong free cash flow generation continues to be one of the most important metrics at FANAHR and enables us to actively pursue high-impact organic growth and M&A opportunities.

Strong free cash flow generation continues to be one of the most important metrics at danaher and enables us to actively pursue high impact organic growth and M&A opportunities.

Yeah.

Speaker 4: Now let's take a closer look at our results across the portfolio and give you some color on what we're seeing in our end markets today.

Now, let's take a closer look at our results across the portfolio and give you some color on what we're seeing in our end markets today.

Reported revenue in our biotechnology segment declined 19% and core revenue was down 21%.

Speaker 4: Reported revenue in our biotechnology segment declined 19% and core revenue was down 21%.

Speaker 4: bioprocessing core revenue declined over 20%, as anticipated, while discovery and medical was down mid-single digits as a result of lower demand from our earlier stage research and lab filtration customers.

Bio processing core revenue declined over 20%.

Anticipating while discovery and medical was down mid single digits as a result of lower demand from our earlier stage research and lab filtration customers.

Speaker 4: In bioprocessing, base business core revenue declined mid-teens, and market conditions were consistent with our expectations coming into the third quarter. Our customers are still working through inventory built up during the pandemic, while also continuing to conserve capital as a result of funding pressures.

And bio processing base business core revenue declined mid teens end market conditions were consistent with our expectations coming into the third quarter.

Our customers are still working through inventory built up during the pandemic, while also continuing to conserve capital as a result of funding pressures.

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Speaker 4: China was down approximately 45% in the quarter, driven by a weak funding environment and lower underlying activity level.

China was down approximately 45% in the quarter driven by a weak funding environment and lower underlying activity levels.

Speaker 4: Based on what we're seeing today, we're maintaining our full-year outlook of approximately 10% base business decline in bioprocessing, which assumes that market conditions in the fourth quarter are consistent with what we saw in the third quarter.

Based on what we're seeing today, we are maintaining our full year outlook of approximately 10% base business decline in Bioprocess, Inc, which assumes that market conditions in the fourth quarter are consistent with what we saw in the third quarter.

Speaker 4: Although these market dislocations are impacting our recent performance, global demand for biologic medicines continues to increase.

Although these market dislocations are impacting our recent performance global demand for biologic medicines continues to increase.

Speaker 4: Since 2018, underlying demand for biologics has grown at an average annual rate of approximately 10%. And it's continuing to grow in 2023.

Since 2018 underlying demand for biologics has grown at an average annual rate of approximately 10% and is continuing to grow in 2023.

In addition to more patients using biologic medicine. This year is on pace to be a record year for FDA approvals of biologics, including approvals for meaningful indications such as all timers disease and several cancer Immunotherapies.

Speaker 4: In addition to more patients using biologic medicine, this year is on pace to be a record year for FDA approvals of biologics, including approvals for meaningful indications, such as Alzheimer's disease and several cancer immunotherapy.

Speaker 4: These positive trends reinforce our conviction in the tremendous opportunity ahead in the biologics market and the high single-digit long-term growth outlook for our leading bioprocessing franchise.

These positive trends reinforce our conviction and the tremendous opportunity ahead in the biologics market in the high single digit long term growth outlook for our leading bio processing franchise.

Speaker 4: Now the pace of innovation and advancement in biologic medicine is accelerating and it's ITV is uniquely positioned to support customers as they pursue life-changing breakthroughs.

Now the pace of innovation and advancement in biologic medicine is accelerating and <unk> is uniquely positioned to support customers as they pursue life changing breakthroughs.

Speaker 4: Sachiva's recently launched NanoAssembler, the industry's first end-to-end lipid nanoparticle formulation system, is a great example of how our investments in innovation are supporting customers' needs around quality, yields, and cost.

<unk> recently launched nano assembler the industry's first end to end its lipid nanoparticle formulation system is a great example of how our investments in innovation are supporting customers' needs around quality yields and costs.

Speaker 4: The NanoAssembler automates and streamlines the lipid nanoparticle manufacturing workflow, helping improve reproducibility and scalability in the nucleic acid therapy manufacturing process. Turning to our life sciences segment.

Annual assembler automate and streamline the liquid lipid nanoparticle manufacturing workflow, helping improve reproducibility and scalability in the nucleic acid therapy manufacturing process.

Turning to our life Sciences segment.

Reported revenue declined 1%.

And core revenue was down two 5%, including a low single digit decline in our base business.

Speaker 4: and poor revenue was down 2.5% including a low single digit decline in our base business.

Speaker 4: Our life sciences instrument businesses collectively declined mid-single digits in part driven by China, where an already challenging funding environment further deteriorated as the quarter progressed.

Our life Sciences instrument businesses collectively declined mid single digits in part driven by China, where an already challenging funding environment further deteriorated as the quarter progressed.

Outside of China, We continued to see softness at pharma and Biopharma customers, while demand remains stable and life Science research and applied markets.

Speaker 4: Outside of China, we continued to see softness at pharma and biopharma customers while demand remains stable in life science research and applied markets.

Our genomics consumables base business declined low single digits in the quarter double digit growth across plasmids proteins and gene writing and editing solutions, which are primarily used in projects that are in later stages of the drug development pipeline or have been commercialized was more than offset by.

Speaker 4: Our genomics consumables based business declined low single digits in the quarter. Double digit growth across plasmids, proteins, and gene writing and editing solutions, which are primarily used in projects that are in later stages of the drug development pipeline, or have been commercialized, was more than offset by declines in next generation sequencing and basic research.

Declines in next generation sequencing and basic research.

Speaker 4: Our life sciences businesses continue to deliver innovative solutions that are helping accelerate the discovery and development of biologic medicine.

Our life Sciences businesses continued to deliver innovative solutions that are helping accelerate the discovery and development of biologic medicines.

Speaker 4: Molecular devices recently released the Selixpress.ai, an artificial intelligence driven cell culture system that automates traditionally manual cultivation process.

Molecular devices recently released the sell express dot AI and artificial.

Artificial intelligence driven cell culture system that automate traditionally manual cultivation processes.

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Speaker 4: The CellExpress.ai is engineered to improve workflows and reproducibility in growing and scaling human-relevant cell lines, which can reduce reliance on animal models and fast-track potential therapeutics to preclinical trials.

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Tycho Peterson: My name is Tycho and I will be your conference facilitator today. At this time, I would like to welcome everyone to Danaher Corporation's third quarter, 2023 Earnings Results Conference Call All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star then none number two on your telephone keypad.

Engineered to improve workflows, and reproducibility and growing and scaling human relevant cell lines, which can reduce reliance on animal models and fast track potential therapeutics two preclinical trials.

Speaker 4: We're also actively leveraging strategic M&A to enhance our capabilities and bring greater value to our customers.

We're also actively leveraging strategic M&A to enhance our capabilities and bring greater value to our customers and.

Speaker 4: In August , we announced our intention to acquire ad camp, a leading producer of protein consumables that are critical for advancing drug discovery, life science research, and diagnostics.

In August we announced our intention to acquire <unk> a.

A leading producer of protein consumables that are critical for advancing drug discovery life Science research and diagnostics.

John Bedford: I will now turn the call over to Mr. John Bedford, Vice President of Investor Relations.

Speaker 4: Epcam has a long track record of innovation, outstanding product quality, and its rest of antibody portfolio, which positions them as a key partner for the scientific community.

<unk> has a long track record of innovation outstanding product quality and breadth of antibody portfolio, which positions them as a key partner for the scientific community.

John Bedford: Mr. Bedford, may begin your conference. Good morning, everyone, and thanks for joining us on the call. With us today, our Reiner Blair, our President and Chief Executive Officer, and Matt McGrew, our Executive Vice President and Chief Financial Officer. I would like to point out that our form 10Q for the third quarter, our Earnings release, the slide presentations supplementing today's call, the reconcilations and other information required by SEC regulation G, relating to any non-GAAP financial measures provided during the call, and a note containing details of historical and anticipated future financial performance are all available on the Investor section of our website, www.danniver.com, under the heading quarterly earnings.

Speaker 4: The addition of Ab Campbell, give Dan and her entry into this highly attractive market, furthering our strategy to help map complex diseases and accelerate the drug discovery process.

The addition of <unk> Campbell, if danaher entry into this highly attractive market furthering our strategy to help map complex diseases and accelerate the drug discovery process.

Speaker 4: We expect ABCAM will be accretive on multiple levels, including core growth, earnings, and talent. And look forward to welcoming this incredibly innovative team to Dan or her once the transaction closes. Thank you.

We expect App can will be accretive on multiple levels, including core growth earnings and talent and look forward to welcoming this incredibly innovative team to danaher once the transaction closes.

Okay.

Now moving to our diagnostics segment.

Speaker 4: reported revenue declined 16 percent and core revenue declined 15.5 percent with mid-single digit growth in our base business more than offset by lower COVID-related respiratory testing volumes at Cepheid.

<unk> revenue declined 16% in core revenue declined 15, 5% with mid single digit growth in our base business more than offset by lower COVID-19 related respiratory testing volumes at Cepheid.

John Bedford: The audio portion of this call will be archived on the Investor section of our website later today, under the heading events and presentations, and will remain archived until our next quarterly call. A replay of this call will also be available until November 8, 2023. During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance, the supplemental materials describe additional factors that impacted year-over-year performance. Unless otherwise noted, all references in these remarks and supplemental materials to accompany specific financial metrics relate to the third quarter of 2023, and all references to period to period increases or decreases in financial master's are year-over-year.

Our clinical diagnostics businesses collectively delivered mid single digit core revenue growth radiometer led the way with high single digit core growth and solid results across both blood gas and point of care immunoassay product lines.

Speaker 4: Our clinical diagnostics businesses collectively delivered mid-single-digit core revenue growth. Radiometer led the way with high-single-digit core growth and solid results across both blood gas and point of tear and amino acid product life.

Speaker 4: Beckman culture diagnostics was up mid single digits with double digit growth and instrumentation and notable strengths across clinical chemistry and immunoscient

Beckman Coulter diagnostics was up mid single digits with double digit growth in instrumentation, and notable strength across clinical chemistry and immunoassay.

Speaker 4: Beckman's recent strong performance is a direct result of leveraging the data her business system to improve commercial execution.

Beckman. The recent strong performance is a direct result of leveraging the danaher business system to improve commercial execution.

Speaker 4: or seeing better wind and retention rates globally, particularly in North America, which grew high single digits in the third quarter.

We're seeing better win and retention rates globally, particularly in North America, which grew high single digits in the third quarter.

John Bedford: We may also describe certain products and devices, which have applications submitted and pending for certain regulatory approvals, or are available only in certain markets. During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC violence, and actual results might differ materially from any forward-looking statements that we make today.

The team has also been accelerating new product innovation and there is encouraging early traction in Europe for the <unk> 9000, Beckman next generation Immunoassay analyzer.

Speaker 4: The team has also been accelerating new product innovation and there's encouraging early traction in Europe for the DXI 9000. Beckman's next generation immunosatical analyze.

In molecular diagnostics increased menu utilization by customers paired with recent new product innovation helped drive over 20% core revenue growth and non respiratory testing at cepheid, including more than 25% core revenue growth and group, a strep and <unk>.

Speaker 4: In molecular diagnostics, increased menu utilization by customers paired with recent new product innovation helped drive over 20% core revenue growth and non-respiratory testing at CESU, including more than 25% core revenue growth in group A strep and sexual all the things happening on biographics, through MCHEP or KFC provider,

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In respiratory testing cepheid revenue of approximately $350 million in the quarter exceeded our expectation of $100 million.

Speaker 4: In respiratory testing, Cephia's revenue of approximately $350 million in the quarter exceeded our expectation of $100 million.

John Bedford: These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements, except as required by law. Before turning the call over to Rainer, I'd also like to point out that since Viralto is part of Danaher through the end of the third quarter, our financial highlights will include the combined Danaher and Viralto results. We will then provide detail for the businesses remaining with Danaher.

Speaker 4: higher prevalence of COVID-19 drove both higher volumes and a preference for our 4-in-1 test for COVID-19, FUE, FUB and RSV.

Higher prevalence of COVID-19 drove both higher volumes and a preference for our 401 test for COVID-19 flu, a flu b and RSV.

Speaker 4: As we move into the fourth quarter and our customers begin planning for the respiratory season, we now expect approximately $1.6 billion of respiratory testing revenue for the full year versus our previous expectation of $1.2 billion.

As we move into the fourth quarter and our customers begin planning for the respiratory season, we now expect approximately $1 $6 billion of respiratory testing revenue for the full year versus our previous expectation of $1 2 billion.

John Bedford: Viralto will be reporting their third quarter results separately later this week, and we'd ask that you please save any questions about the Viralto businesses until that. Our guidance for Danaher's continuing operations will exclude Viralto for the fourth quarter and the full year. I'd also like to mention that historical financial results reflecting only Danaher's continuing operations, excluding Viralto, are available on the investor section of our website under the subheading financial reports.

Speaker 4: The broad-based strength across Sefiyah's testing menu is a result of the team's thoughtful approach to placing systems over the last few years.

The broad based strength across Cepheid testing menu as a result of the team's thoughtful approach to placing systems over the last few years.

Speaker 4: Customers who realize the benefit of accurate, easy to use molecular testing during the pandemic are increasingly consolidating their point of care testing platforms onto the gene expert and adding additional assays from our leading test menu.

Customers, who realize the benefit of accurate easy to use molecular testing during the pandemic are increasingly consolidating their point of care testing platforms onto the gene expert and adding additional assays from our leading test menu.

Rainer Blair: With that, I'd like to turn the call over to Rainer. Well, thank you, John, and good morning, everyone. We appreciate you joining us on the call today. Our revenue in the third quarter came in ahead of our expectations with biotechnology performing as anticipated and higher testing revenues, more than offsetting slightly softer than expected demand in life sciences. Our team's consistent NBS-driven execution also enabled us to deliver better than expected earnings and cash flow in what remains a challenging and dynamic operating environment.

Speaker 4: Their preference for the gene expert within their labs and across their healthcare networks has led to a more than 2.5 times increase in both our installed base and revenue since 2019. And we believe Cepheid is well positioned to continue gaining share and expanding our installed base in today's endemic environment.

Their preference for the gene expert within their labs and across their healthcare networks has led to a more than two five times increase in both our installed base and revenue since 2019.

And we believe Cepheid is well positioned to continue gaining share and expanding our installed base in todays endemic environment.

Speaker 4: Now let's briefly look ahead at the expectations for the fourth quarter and the full year.

Now, let's briefly look ahead at the expectations for the fourth quarter and the full year.

Speaker 4: As a reminder, both our fourth quarter and full year guidance include only Danagers continuing operations and exclude Gralto.

As a reminder, both our fourth quarter and full year guidance include only danaher continuing operations and exclude we're also.

Rainer Blair: This was also a transformative quarter for Danaher. On September 30th, we completed the spin-off of Viralto Corporation, a global leader in water and product quality. The successful launch of Viralto is a testament to the team's execution focus and outstanding teamwork. We believe this separation creates exceptional opportunities for both Danaher and Viralto to better serve their customers, deliver on their respective strategic priorities, and create greater long-term shareholder value in the years ahead.

In the fourth quarter, we expect core revenue in our base business to be down mid single digits year over year.

Speaker 4: In the fourth quarter, we expect core revenue in our base business to be down mid-single digits year over year.

Speaker 4: We also expect total core revenue to decline in the high teams percent range, primarily as a result of lower demand for COVID-19 testing, vaccines, and therapeutic.

We also expect total core revenue to decline in the high teens percent range, primarily as a result of lower demand for COVID-19 testing vaccines and therapeutics.

Speaker 4: Additionally, we expect a fourth quarter adjusted operating profit margin of approximately 28%, which includes additional anticipated productivity initiatives to further adjust our cost structure.

Additionally, we expect our fourth quarter adjusted operating profit margin of approximately 28%, which includes additional anticipated productivity initiatives.

Rainer Blair: Now, I want to thank Dana for honey cut and all the Viralto Associates for their contributions to Danaher over the past two plus decades. And we wish them the very best as they embark on their exciting endeavor to help safeguard the world's most vital resources.

To further adjust our cost structure.

Turning to the full year 2023.

Speaker 4: Turning to the full year 2023, we anticipate poor revenues in our base business will be down slightly.

We anticipate core revenues in our base business will be down slightly.

And we also expect total core revenue declined low double digits for the year as a result of lower demand for COVID-19 testing vaccines and therapeutics.

Rainer Blair: Now, going forward, Danaher is a more focused life sciences and diagnostic innovator, committed to accelerating the power of science and technology to improve human health. We've got a great lineup of leading franchises, well-positioned and attractive end markets with durable, high-repairing revenue business models, and our strong free-tash flow generation positions us well to further enhance our portfolio going forward. This unique combination of our leading science and technology portfolio and financial strength, all powered by the Danaher business system, differentiates us and reinforces our sustainable, long-term competitive advantage.

Speaker 4: Additionally, we expect a full year adjusted operating profit margin of approximately 29%.

Additionally, we expect our full year adjusted operated operating profit margin of approximately 29%.

Yes.

So to wrap up.

Speaker 4: We're pleased with our third quarter results and believe the combination of our team's DBS driven execution and differentiated portfolio enabled Dan Hurr to outperform on a relative base.

We're pleased with our third quarter results and believe the combination of our team's DBS driven execution and differentiated portfolio enabled danaher to outperform on a relative basis.

Speaker 4: With the successful spin-off of Veralto, we are now a more focused company committed to deploying leading edge science and technology to improve human health.

With the successful spin off of where also we are now a more focused company committed to deploying leading edge science and technology to improve human health.

Danaher is purpose built to help customers solve some of the most important health challenges impacting patients around the world.

Speaker 4: Daniver's purpose built to help customers solve some of the most important health challenges impacting patients around the world.

Rainer Blair: So with that, let's turn to our third quarter results in more detail. Now, as John mentioned, since Viralto was part of Danaher through the end of the third quarter, our financial highlights for the third quarter include Viralto's results. Sales were $6.9 billion in the third quarter and core revenue declined 11.5% including a 3% decline in our base business and the COVID-19 revenue at wind of approximately 8.5%. Geographically core revenues and develop markets declined low double digits, primarily driven by lower COVID-19 revenues.

Speaker 4: Our proven ability to innovate is enabling faster, more accurate diagnoses, and helping customers reduce the time and cost needed to sustainably develop and deliver life-changing therapies.

Our proven ability to innovate is enabling faster more accurate diagnoses and helping customers reduce the time and cost needed to sustainably develop and deliver life changing therapies.

So as we look ahead the unique combination of our talented team differentiated science and technology portfolio and balance sheet Optionality all powered by the Danaher business system.

Speaker 4: So as we look ahead, the unique combination of our talented team, differentiated science and technology portfolio, and balance sheet optionality, all powered by the Dan and her business system, positions as well to maximize value for our customers, our associates, and our shareholders. So with that,

<unk> as a way to maximize value for our customers our associates and our shareholders.

So with that I'll turn the call back over to John .

Speaker 3: Thanks, Reiner. That concludes our formal comments. Operator, we're now ready for questions.

Thanks, Brian that concludes our formal comments operator, we're now ready for questions.

Rainer Blair: High growth markets were down high single digits including a mid-teens decline in China where the economic landscape remains challenging. Our growth profit margin for the third quarter was 58.2%. Our operating margin of 28.9% was down 540 basis points primarily due to the impact of lower volume in our biotechnology and diagnostic segment and costs related to the separation of Rolto. Adjusted deluded net earnings per common share were $2.02. We generated $1.3 billion of free cash flow in the quarter and $4.6 billion year-to-date. Resulting in a year-to-date free cash flow to net income conversion ratio of more than 120%.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad, you may draw yourself from the queue by pressing star two.

Speaker 2: If you would like to ask a question, please press star 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star 2.

Our first question will come from Dan Brennan with TD Cowen. Please go ahead.

Speaker 2: Our first question will come from Dan Brennan with TD Cowan. Please go ahead.

Speaker 5: Morning, Dan, guys. Hey, good morning. How are you? Thanks for the questions here. Congrats on the quarter. Maybe just starting off with bio process. If you don't mind since there's.

Morning, Dan.

Hey, good morning, Ryan how are you.

Thanks for the questions Congrats on the quarter, maybe just starting off with Bioprocess, if you don't mind sensors.

Speaker 5: remains obviously, as you know, a tremendous amount of focus here. I know with Q2, you guys talked about order trends being down modestly in the second half of the year. It sounds like what you're seeing is consistent with that, but I was hoping maybe you can unpack a little bit of color on kind of what's going on on the order side for bioprocess and kind of, you know, what you're seeing in the field and kind of what this might portend as we think about, you know, looking out to 2024.

Obviously as you know a tremendous amount of focus here.

I know that Q2, you guys talked about order trends being down modestly in the second half of the year. It sounds like what Youre seeing is consistent with that but I was hoping maybe you can unpack a little bit of color on kind of what's going on in the order size for bioprocess and kind of what youre seeing in the field and kind of what this might portend as we think about.

Rainer Blair: Strong free cash flow generation continues to be one of the most important metrics at Dan Her and enabled us to actively pursue high impact organic growth and M&A opportunities.

Looking out to 2024.

Speaker 4: Sure, Dan. Let's start off with Q3 one more time here. So Q3 results were consistent with what we expected.

Sure Dan.

Let's let's start off with.

Q3, one more time here, so Q3 results.

Rainer Blair: Now let's take a closer look at our results across the portfolio and give you some color on what we're seeing in our end markets today. Reported revenue in our biotechnology segment declined 19% and core revenue was down 21%. Bioprocessing core revenue declined over 20% as anticipated while discovery and medical was down mid-single digits as a result of lower demand from our earlier stage research and lab filtration customers. In bioprocessing, faith business core revenue declined mid-teens and market conditions were consistent with our expectations coming into the third quarter.

We're consistent with what we expected.

Speaker 4: but also have to be clear that we have not seen an inflection in orders.

But also have to be clear that we have not seen an inflection in orders.

Speaker 4: And I would say that we're sort of at the bottom here bouncing along. And to give you a sense of this quantitatively, from our book to bill was around 0.8, which is consistent with what we've been seeing here for the last few quarters.

I would say that we're sort of at the bottom here bouncing along and to give you a sense of this.

Quantitatively.

Our book to Bill was.

And around 0.8, which is consistent with what we've been seeing here for the last few quarters.

And for Q4.

Speaker 4: We think that looks a lot like Q3 with likely similar book to bill.

We think that looks a lot like Q3 with likely similar book to Bill.

Speaker 4: But we do continue to expect our base business for the full year for bio processing to be down 10%. So as expected.

But we do continue to expect our base business for the full year for bio processing.

Rainer Blair: Our customers are still working through inventory built up during the pandemic while also continuing to conserve capital as a result of funding pressures. China was down approximately 45% in the quarter driven by a weak funding environment and lower underlying activity levels. Based on what we're seeing today, we're maintaining our full year outlook of approximately 10% base business decline in bioprocessing which assumes that market conditions in the fourth quarter are consistent with what we saw in the third quarter.

To be down 10% so as expected.

Speaker 4: Hey, Dan, maybe just a little bit of other color too, just to give some sense of what we saw. You know, orders in dollar terms were actually down a little Q3 versus Q2. And like Reiner said, the book to bill here has been at point eight. It's been like that for six quarters. I think we anticipate that it'll be like that in Q4 as well.

Hey, Dan maybe just a little bit of other color too just to give some sense of what we saw.

Orders in dollar terms were actually down a little Q3 versus Q2.

And like Brian said in the book to Bill here has been at <unk> eight it's been like that for six quarters. I think we anticipate that it will be like that in Q4, as well and I think kind of another triangulation that I look at it as kind of on a two year stack here orders have been kind of call. It down 32 33, 34% here for the last three quarters, So like Brian said.

Speaker 6: And I think, you know, kind of another triangulation that I look at is kind of on a two year stack here. You know, orders have been kind of call it down 32, 33, 34% here for the last.

Rainer Blair: Although these market dislocations are impacting our recent performance, global demand for biologic medicines continues to increase. Since 2018, underlying demand for biologics has grown at an average annual rate of approximately 10% and is continuing to grow in 2023. In addition to more patients using biologic medicines, this year is on pace to be a record year for FDA approvals of biologics, including approvals for meaningful indications such as Alzheimer's disease and several cancer immunotherapy.

Speaker 6: three quarters. So like Riner said, I think we're looking at a Q4. They look a lot like Q3, but but no real, no real change.

I.

I think we're looking at a Q4 that looks a lot like Q3, but.

But no real no real changes.

Speaker 5: Got it. Thanks guys. And maybe just one to kind of zoom me out a little bit if you could just just anyway any helpful way to think about, you know, obviously we have Q4 ahead of us. And you talked about this dynamic environment, which we all, which we can all see, which we had better visibility, but we can all see it. But as we, you know, if you think about flipping, you know, the calendar to 2024, any early way to think about like a framework for revenue growth and earnings and margins, you know, as we get into the new year.

Got it thanks, guys and then maybe just one just kind of zooming out a little bit if you could just any way any helpful way to think about you know obviously, we have Q4 ahead of US and you talked about this dynamic environment, which we all which we can all see wish.

Wish we had better visibility, but we can all see it but as we if you think about flipping the calendar to 2020 for any any early way to think about like a framework for revenue growth and earnings and margins.

Rainer Blair: These positive trends reinforce our conviction in the tremendous opportunity ahead in the biologics market and the high single-digit long-term growth outlook for our leading bioprocessing franchise. Now, the pace of innovation and advancement in biologic medicine is accelerating, and Sytiva is uniquely positioned to support customers as they pursue life-changing breakthroughs. Sytiva has recently launched NanoAssembler, the industry's first end-to-end lipid nanoparticle formulation system. It is a great example of how our investments in innovation are supporting customers' needs around quality, yields, and cost. The NanoAssembler automates and streamlines the lipid nanoparticle manufacturing workflow, helping improve reproducibility and scalability in the nucleic acid therapy manufacturing process.

As we get into the new year.

Speaker 4: And I think as you look towards 2024, it's really important to understand the context here of the second half. So let me lay that out for you briefly. Once again, our Q3 exceeded expectations. Diagnostics was better than we expected, driven by strengths at Beckman Diagnostics and respiratory testing at Cephiet.

Dan I think as you look towards 2024, it's really important to understand the context here of the.

Second half so let me let me lay that out for you briefly once again, our Q3 exceeded expectations.

Diagnostics was better than we expected driven by strength at Beckman diagnostics and.

Respiratory testing at Cepheid.

Speaker 4: And bioprocessing was as expected and we don't believe that changes here either. So we do believe that we're at the bottom here in 2023 and bioprocessing.

And by our processing was as expected and we don't believe that.

Changes here either so we do believe that we're at the bottom here in 2023 and bio processing.

Speaker 4: That's partially offset by weaker life science instruments. And as a reminder, life science instruments for us is less than 10% of our total business.

That's partially offset by weaker life science instruments.

And as a reminder, life science instrument stresses is less than 10% of our total business.

Speaker 4: So Q3 all in a solid out performance in the quarter with what we think are some important markers around diagnostics by a processing and life science instrument.

So Q3, all in a solid outperformance in the quarter with what we think are some important markers.

Rainer Blair: Turning to our life sciences segment, reported revenue declined 1%, and poor revenue was down 2.5%, including a low single-digit decline in our base business. Our life sciences instrument businesses collectively declined mid-single digits in part driven by China, where an already challenging funding environment further deteriorated as the quarter progressed. Outside of China, we continued to see softness at pharma and biopharma customers while demand remains stable in life science research and applied markets.

Round.

Diagnostics bio processing and life science instruments as you think about Q4.

Speaker 4: Now, as you think about Q4 and their bioprocessing and diagnostics, there's really no change to our prior expectations. We expect those to continue to perform similarly as we've talked about in the past and Q3.

And their bio processing and diagnostics Theres really no change to our prior expectations. We expect those to continue to perform similarly, as we've talked about in the past in Q3.

Speaker 4: Now as it relates to like science instruments, there we've seen some incremental weakness in Q3 and we would expect that to continue or step down slightly here in Q4.

Now as it relates to life science instruments.

There we've seen some incremental weakness.

In Q3, and we would expect that to continue.

Or step down slightly here in Q4.

Rainer Blair: Our genomics consumables base business declined low single digits in the quarter. Double digit growth across plasmids, proteins, and gene writing and editing solutions, which are primarily used in projects that are in later stages of the drug development pipeline, or have been commercialized, was more than offset by declines in next-generation sequencing and basic research. Our life sciences businesses continue to deliver innovative solutions that are helping accelerate the discovery and development of biologic medicines.

Speaker 4: So with that as a context for the second half, there's really no change to revenue as Q3 offsets Q4. So we're holding the full year here. And there's also no change to our bioprocessing expectations for the year.

So with that as a context.

For the second half Theres really no change to revenue as Q3 offsets Q4, So we're holding the full year here and there is also no change to our bio processing expectations for the year and.

Speaker 4: And we continue to believe that 2023 represents the bottom.

And we continue to believe that 2023 represents the bottom.

Speaker 4: Now as it relates to 2024, and given where markets are today, and the broader macro, we wanna see how Q4 plays out before we provide a guide on our Q4 earnings call in January as we always do. We wanna see the next couple of months here play out and then build the guide as always for our January earnings call. Now go ahead and next, wait a minute for that. If you fail, we're done. We went ahead and asked how he ???????ed our extension. Now we need no concept documents later to see the next year playing bigger. Now we need no concept documents later to see the next year playing bigger.

Now as it relates to 2024.

And given where markets are today and in the broader macro.

Rainer Blair: Molecular devices recently released the Selixpress.ai, an artificial intelligence driven cell culture system that automates traditionally manual cultivation processes. The Selixpress.ai is engineered to improve workflows and reproducibility in growing and scaling human relevant cell lines, which can reduce reliance on animal models and fast track potential therapeutics to preclinical trials. We're also actively leveraging strategic M&A to enhance our capabilities and bring greater value to our customers. In August, we announced our intention to acquire ad camp, a leading producer of protein consumables that are critical for advancing drug discovery, life science research, and diagnostics.

We want to see how Q4 plays out before we provide.

On our Q4 earnings call in January as we always do we want to see the next couple of months here play out.

And then build the guide as always for our January earnings call.

Got it thanks, Brian and thanks, Matt.

Thanks, Dan Thank you.

Speaker 2: Thank you. Our next question will come from BJ Kumar with Evercore ISI.

Thank you. Our next question will come from Vijay Kumar with Evercore ISI.

Hey, guys. Thanks for taking my question.

Speaker 7: Hey guys, thanks for taking my question. Good morning, minor. One, I just wanted to go back to this bioprocessing. So with Book of Bill, I have pointed it.

Good morning miner.

I <unk>.

One I just wanted to go back to this bio processing.

So with book to Bill of <unk>.

<unk> X.

Speaker 7: I guess, is bioprocessing going to grow next year if orders are below revenues in that 2020? I don't know if there's a restocking phenomena. Like, how should we generally broad strokes on bioprocessing, the pluses and minuses as we look at the outlook, right? Should China inflect or any levers that you have that could move bioprocess?

I guess.

East Bioprocess and going to grow next year, if the orders are below revenues in that 'twenty here.

Rainer Blair: App camp has a long track record of innovation, outstanding product quality, and rest of antibody portfolio, which positions them as a key partner for the scientific community. The addition of App camp will give Dan and her entry into this highly attractive market, furthering our strategy to help map complex diseases and accelerate the drug discovery process. We expect APCAM will be accretive on multiple levels, including core growth, earnings, and talent, and look forward to welcoming this incredibly innovative team to Danaher once the transaction closes.

I don't know if theres a restocking phenomena.

Like how should we generally broad strokes in bio processing, the plus and minuses as we look at the outlook for China inflect for any any levers that you have that could move bioprocess.

So.

Speaker 4: So, I think I come back to the actual data, VJ, that we see, which is, you know, Q3, really was very similar to Q2, the book, the book, the bill was the same. We...

I think I come back to the actual data Vijay debt that we see which is Q2 Q3.

Really it was very similar to Q2 the book the book to Bill was the same.

Rainer Blair: I'm moving to our diagnostic segment. Reported revenue declined 16% and core revenue declined 15.5%, with mid-single-digit growth in our base business more than offset by lower COVID-related respiratory testing volumes at Cepheid. Our clinical diagnostics businesses collectively delivered mid-single-digit core revenue growth. Radiometer led the way with high-single-digit core growth and solid results across both blood gas and point of tear immunosaturated product lines. Beckman culture diagnostics was up mid-single-digits with double-digit growth and instrumentation, and notable strengths across clinical chemistry and immunosaturated.

We we.

Speaker 4: We saw the market develop as we had anticipated, you know, from our prior call that we've been working with customers here to take some of the tension out of the system and try and ensure that as much inventory is burnt off as possible here in the year. And that's why we're confident that this is.

We saw the market develop as we had anticipated you know from our prior call that we've been working with customers here to take some of the tension out of the system and trying to ensure that as much inventory as burnt off.

As possible here in.

In the year and Thats why we are confident that this is is.

Is the bottom.

Speaker 4: But as it relates to 2024, there's a lot of moving pieces here, and it's quite hard to draw some generalizations. And that's why it's so important for us also to see the data here for another quarter in Q4 before we talk about what it looks like in 2024. Now, having said that, we do expect that this inventory dynamic and what's going on in China

But as it relates to 2024, there's a lot of moving pieces here.

And it's quite hard.

To draw some generalizations and Thats why its so important for US also to see the data here for another quarter in Q4.

Before we talk about.

What it looks like in 2024, and now having said that we do expect that this inventory dynamic and what's going on China is is going to.

Rainer Blair: Beckman's recent strong performance is a direct result of leveraging the Danaher business system to improve commercial execution, or seeing better win and retention rates globally, particularly in North America, which grew high-single-digits in the third quarter. The team has also been accelerating new product innovation, and there's encouraging early traction in Europe for the DXI-9000 Beckman's next-generation immunosaturated analysis. In molecular diagnostics, increased menu utilization by customers paired with recent new product innovation helped drive over 20% core revenue growth in non-respiratory testing at Cepheid, including more than 25% core revenue growth in group A strep and sexual health.

Speaker 4: is going to also go into, if you will, impact into 2024 as well. This doesn't stop at midnight on the 31st of 2023.

Also go into if you will impact into 2024 as well this doesn't stop at midnight on the 30 <unk>.

Of 2023, but we have seen a stabilization here.

Speaker 4: But we have seen a stabilization here with the last two quarters, and we wanna see how Q4 develops before calling, Q2024 in January .

With the last two quarters, and we want to see how Q4 develops before calling.

<unk> 2024 and.

In January .

Speaker 7: Mr. McWenfield, thanks for giving the standalone numbers. You know, I think...

Understood.

One for you.

Thanks for giving the Standalone numbers.

I think.

Speaker 7: It looks like the standalone margins here, XEAS for Dan Hur, for Fiscal 23 is about 28.5%, a sort of rough numbers, and that includes, I believe, perhaps 400 million of cost actions. What's the right way to think about cost actions, Matt? Is that, should that all come out next year? So the right jump off point for us, X cost actions is 30%, and that's how we should be thinking about margins for next year?

It looks like the Standalone margins here.

As for Danaher for fiscal 'twenty to use about 28, 5% a sort of rough numbers and that includes I believe.

Rainer Blair: In respiratory testing, Cepheid's revenue of approximately $350 million in the quarter exceeded our expectation of $100 million. A higher prevalence of COVID-19 drove both higher volumes and a preference for our four-in-one test for COVID-19, Poo-A, Poo-B, and RSV. As we move into the fourth quarter and our customers begin planning for the respiratory season, we now expect approximately $1.6 billion of respiratory testing revenue for the full year versus our previous expectation of $1.2 billion.

Perhaps $400 million of cost actions, what's the right way to think about cost actions Matt is that.

Should that all come out next year. So the right jump off point for US ex cost actions is 30% and that's how we should we think about margins for next year.

Speaker 6: Yeah, I mean, I think, you know, we'll kind of give a complete update when we come out because the core growth is going to be a big driver of margins. But just on the cost action part, yeah. And I think you're right. I think the way I'd probably characterize it is 350 million of one-time cost actions. We talked about 200 million in Q2 and Q3. So that'd be, again, the kind of a one-time cost actions. Another 150 million here in Q4. And like you said, that will roll forward and help next year. But that is sort of a net number, right?

Yes, I mean, I think will kind of give a complete update when we come out because the core growth is going to be a big driver of margins, but just on the cost action part, yes, I think youre right I think the way I would probably characterize it as $350 million of one time cost actions, we talked about $200 million in Q2, and Q3, so that would be again, the kind of a onetime cost actions another.

Rainer Blair: The broad-based strength across Cepheid's testing menu is a result of the team's thoughtful approach to placing systems over the last few years. Customers who realize the benefit of accurate, easy-to-use molecular testing during the pandemic are increasingly consolidating their point-of-care testing platforms onto the gene expert and adding additional assays from our gene expert within their labs and across their healthcare networks has led to a more than 2.5 times increase in both our installed-based and revenue since 2019.

$150 million here in Q4 and.

And like you said that that will roll forward and help next year, but that is sort of a net number right. If you will.

Speaker 6: We will have other pieces, some of them pretty meaningful here, that will impact margins. So think of, like I said, first core growth will have an impact.

We are going to we will have other pieces some of them pretty meaningful here.

That will impact margins. So think of like I said first core growth will have an impact FX as we sit here right now it's going to have an impact and there'll be some other cost headwinds. So we get to the guide here in January we'll sort of take that that net 150 basis points. If you will.

Speaker 6: effects, you know, as we sit here right now, it's going to have an impact and there'll be some other cost headwind. So when we get to the guide here in January , we'll sort of take that net, you know, 150 basis points, if you will, of margin.

Margin tailwind.

Speaker 6: tailwind probably and then see what those offsets are to end up where we are for 24, but that's 350 is probably the right number to think about as one time as it go away here for next year.

Tailwind, probably and then see what those offsets are to end up where we are for 'twenty four but that's $3 50 is probably the right number to think about it as one timers that go away here for next year.

Rainer Blair: And we believe Cepheid is well-positioned to continue gaining share and expanding our installed-based and today's endemic environment.

Understood. Thanks, guys.

Speaker 2: Thank you. Our next question will come from Scott Davis with Melius Research. All right, good morning, guys.

Thank you. Our next question will come from Scott Davis with Melius research.

Rainer Blair: Now, let's briefly look ahead at the expectations for the fourth quarter and the full year. As a reminder, both our fourth quarter and full year guidance include only Danagers continuing operations and exclude Grotto. In the fourth quarter, we expect core revenue in our base business to be down mid-single digits year over year. We also expect total core revenue to decline in the high team's percent range, primarily as a result of lower demand for COVID-19 testing, vaccines, and therapeutics.

Hi, Thanks, Good morning, guys good morning.

Everybody.

Okay.

Ryan are you you mentioned in your prepared remarks, China Port down 45% on the Biopharma side, I think you said, but.

Speaker 2: Reiner, you mentioned in your prepared remarks, China down 45% on the biopharma side, I think you said. But could you walk us through, first of all, what is the materiality of China now that Viralto's gone, percent of sales? I don't think we have that number. And second, just walk us through the different markets in China and maybe any

Could you walk us through first of all what is the materiality of China now that <unk> gone.

Percent of sales.

I don't think we have that number but.

And second just kind of walk us through the different markets and in China and maybe.

<unk>.

Speaker 8: you know, color or outlook or something on how that is bottoming out or hopefully.

Color or outlook or something on how that is bottoming out.

Rainer Blair: Additionally, we expect a fourth quarter adjusted operating profit margin of approximately 28%, which includes additional anticipated productivity initiatives to further adjust our cost structure. Turning to the full year 2023, we anticipate core revenues in our base business will be down slightly. And we also expect total core revenue to decline low double digits for the year as a result of lower demand for COVID-19 testing, vaccine, and therapeutics. Additionally, we expect a full year adjusted operating profit margin of approximately 29%.

Hopefully bottoming out.

Sure sure Scott and thanks for the question so just to the materiality of China here post for also.

Speaker 4: Sure, sure, Scott, and thanks for the question. So just to the materiality of China here, post-for-also, I think 12% is a good number to think about of as total revenue.

I think 12% is a good number to think about it as total revenue.

And.

Speaker 4: Now to your point, let me take you through what we saw across the portfolio here in third quarter.

Now to your point, let me take you through what we saw across the portfolio here in the third quarter.

Speaker 4: So let's start with bio processing. There we did not see a change in market demand, which has been here now for several quarters impacted by a weaker funding environment and excess capacity. And that was down 45% as mentioned previously.

So let's start with bio processing, there, we did not see a change in market demand.

Which has been here now for several quarters impacted by a weaker funding environment and excess capacity and that was down 45% as mentioned previously.

Rainer Blair: So to wrap up, we're pleased with our third quarter results and believe the combination of our team's DBS-driven execution and differentiated portfolio enabled Danher to outperform on a relative basis. With the successful spin-off of Grotto, we are now a more focused company committed to deploying leading edge science and technology to improve human health. Danher's purpose built to help customers solve some of the most important health challenges impacting patients around the world.

Speaker 4: By sciences was worse than expected on a weaker macro, as well as at the margin.

Life Sciences.

Was worse than expected on a weaker macro as well as at the margin.

Speaker 4: So not to over read this, but at the margins, some of the anti corruption initiatives in the country, which slowed down some equipment tenders, some installation of equipment at the margin.

And not to override this but at the margin some of the anti corruption.

Initiatives in the country, which slowed down some equipment tenders some installation of equipment at the margin.

Speaker 4: And in diagnostics, we're seeing, you know, consistent patient volumes and it's largely back to normal.

And then diagnostics, we're seeing consistent patient volumes and it's largely back to normal.

Rainer Blair: Our proven ability to innovate is enabling faster, more accurate diagnoses, and helping customers reduce the time and cost needed to sustainably develop and deliver life-changing therapies. So as we look ahead, the unique combination of our talented team, differentiated science and technology portfolio, and balance sheet optionality, all powered by the Danher business system, positions as well to maximize value for our customers, our associates, and our shareholders.

Speaker 4: So we expect, we don't expect this to change here, going forward in Q4, and also expect that this is going to continue into 2024. So we haven't seen the change.

So we expect.

We don't expect this to change here going forward in Q4 and also expect that this is going to continue into <unk>.

2024.

So we haven't seen a change.

In.

Speaker 4: Bioprocessing, life sciences, the worst at the margin here. And

Bio processing.

<unk> Sciences little worse at the margin here.

And diagnostics.

Speaker 4: as expected and largely back to normal.

As expected and largely back to normal.

John Bedford: So with that, I'll turn the call back over to John. Thanks, Ryder.

Speaker 8: Okay, very helpful. And just to switch gears, you know, there's

Okay very helpful.

And just to switch gears there's.

John Bedford: That concludes our formal comments.

Unknown Executive: Operator, we're now ready for questions. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. You may withdraw yourself from the queue by pressing star two.

Speaker 8: Let's talk about M&A multiples, you know, in this type of rate environment, you would expect at least

Talk about M&A multiples.

This type of rate environment, you would you would expect at least <unk>.

Speaker 8: some moderation. I didn't feel like abcam was necessarily cheap despite some of the drama that is out there. It certainly seems full, fully priced even at higher rates. But as you look at the rest of your pipeline, is there some relief in multiples that kind of reflect the reality of the higher rate environment?

Some moderation I didn't feel like App Cam was necessarily cheap despite some of the drama that.

Is out there it certainly seems full fully priced even at higher rates, but.

Daniel Brennan: Our first question will come from Dan Brennan with TD Cowan. Please go ahead. Morning, Dan. Hey, good morning, Ryan. How are you? Thanks for the questions here.

As you look at the rest of your pipeline is there some relief and multiples that kind of reflect the reality of the higher rate environment.

Rainer Blair: Congrats on the quarter. Maybe just starting off with bioprocess if you don't mind since there's remained, obviously, as you know, a tremendous amount of focus here. I know with Q2, you guys talked about order trends being down, modesty in the second half of the year. Sounds like what you're seeing is consistent with that, but I was hoping maybe you can unpack a little bit of color. I'm kind of what's going on on the order size for bioprocess and kind of what you're seeing in the field and kind of what this might pretend as we think about, you know, looking out to 2024.

Speaker 4: I would tell you that we take it as we always do.

I would tell you that.

We take it.

As we always do.

Speaker 4: based on, you know, the end market, the asset and the financial model individually. And as we look at our.

Based on the end market, the asset and the financial model individually and as we look at our.

Speaker 4: at our funnel, which is very active, there's no doubt that some valuations still do not reflect what is a higher and likely for some time sustained interest rate environment.

At our funnel, which is very active there is no doubt that some valuations still do not reflect.

It is a higher than likely for some time sustained.

Interest rate environment.

Speaker 4: When it comes down to the individual deal, we bring all aspects together and ensure that the deal model meets our expectations.

Rainer Blair: Sure, Dan. Let's start off with Q3 one more time here. So, Q3 results were consistent with what we expected, but also have to be clear that we have not seen an inflection in orders. And I would say that we're sort of at the bottom here bouncing along. And to give you a sense of this quantitatively from our book to bill was at around 0.8, which is consistent with what we've been seeing here for the last few quarters.

When it comes down to the individual deal we bring all aspects together and ensure that the deal model meets our expectations.

Speaker 4: as well. And then we, as I've always said, we'll pull the trigger if all those lights flip green on end market.

As well.

And then as I've always said, we will pull the trigger if all of those lights flip marine on end market.

Speaker 4: the actual target company as well as the financial model, excuse me. And then lastly, to reiterate, we do think valuation still have some ways to go here on average in order to reflect the interest rate environment.

Actual target company as well as the financial market.

Market.

Financial model excuse me.

And then lastly.

To reiterate we do think valuation.

We still have some some ways to go here on average in order to reflect the interest rate environment.

Rainer Blair: And for Q4, we think that looks a lot like Q3 with likely similar book to bill. But we do continue to expect our base business for the full year for bio processing to be down 10%. So, as expected. Hey, Dan, maybe just a little bit of other color too, just to give some sense of what we saw. Orders in dollar terms were actually down a little Q3 versus Q2. And like Reiner said, the book to bill here has been at 0.8.

Speaker 8: helpful, Rhiner. Best of luck. See you guys, see you, Matt and John . Thanks, Scott.

Helpful. Brian Best of luck, guys, Hey, Matt and John Thanks, Scott.

Speaker 2: Thank you. Our next question comes from Michael Riskin with Bank of America.

Thank you. Our next question comes from Michael Riskin with Bank of America.

Morning, Michael.

Speaker 8: Morning, Rhiner. Matt, thanks for taking the questions. Let me follow up a little bit on the Life Science weakness. Sounds like you guys are pretty clear that in 3Q, that was the biggest.

Good morning, Matt Thanks for taking the questions.

Let me follow up a little bit on the life science weakness it sounds like.

I mean, you guys are pretty clear that in <unk> that was the biggest step down sequentially versus <unk> and versus your expectations. We haven't in our notes that Alex instruments grew mid single digit <unk> and now declined mid single digits. So could you parse that out a little bit Si X versus beckman by geographies by customer.

Speaker 5: step down sequentially versus 2Q versus your expectations. We have it on our notes that L.S. Instruments grew in mid-sinnle-digit 2Q and now the client mid-sinnle-digit 3Q. So could you parse that out a little bit? S.I.X versus Beckman by geographies, by customer.

Rainer Blair: It's been like that for six quarters. I think we anticipate that it'll be like that in Q4 as well. And I think kind of another triangulation that I look at is kind of on a two-year stack here. Orders have been kind of call it down 32, 33, 34% here for the last three quarters. So, like Reiner said, I think we're looking at a Q4 to look a lot like Q3, but no real change.

Speaker 5: where you're seeing the slowdown? Do you think it's tied to some of the broader weakness you're seeing in pharma biotech? And just any thoughts on, you know, you already provided some commentary on 4Q, but any thoughts longer term on when that could return to growth? Just because you think that LS instruments would have a slightly longer order books, you'd have a little bit more visibility there. So.

Where where youre seeing the slowdown do you think it's tied to some of the broader weakness youre seeing in pharma biotech.

And just any thoughts on you already provided some commentary on <unk>, but any thoughts longer term on what.

And that could return to growth just because you think that Alex instruments would have a slightly longer order books, you get you have a little bit more visibility there. So some forward commentary would be helpful. Thanks.

Rainer Blair: Got it. Thanks, guys. And maybe just one just kind of zooming out a little bit if you could. Just anyway, any helpful way to think about, obviously we have Q4 ahead of us. And you talked about this dynamic environment, which we all, which we can all see, which we had better visibility, but we can all see it. But as we, you know, if you think about flipping, you know, the calendar to 2024, any early way to think about like a framework for revenue, growth, and earnings, and margins, you know, as we get into the new year.

Thanks, Mike.

Speaker 4: So, let's level set on the numbers here. Our instrument portion of our life science tools is less than 10% of Danaher revenue, just to put that in context properly.

So, let's let's level set.

On the numbers here our instrument.

A portion of our life science tools is is less than 10%.

Of Danaher revenue just to put that in context properly and.

Speaker 4: And as we mentioned, our Q3 performance was modestly below our expectations, with higher-end instrumentation holding up better than the less specialized solutions.

As we mentioned our Q3 performance was modestly below our expectations with higher end instruments instrumentation holding up better.

Rainer Blair: Dan, I think as you look towards 2024, it's really important to understand the context here of the second half. So let me, let me lay that out for you briefly. Once again, our Q3 exceeded expectations. Diagnostics was better than we expected driven by strengths at Beckman Diagnostics and respiratory testing at, at Cessia. And bioprocessing was at expected. And we don't believe that change is here either. So we do believe that we're at the bottom here in 2023 and bioprocessing.

Then the less specialized solutions.

Speaker 4: Now, if you think about this by end market, academic and life science research have held up well along with the service business that's associated with these instruments.

Now if you think about this by end market academic in life Science research have held up well along with the service business that's associated with these instruments.

Speaker 4: Applied markets were also resilient, led by food and environmental.

Applied markets were also resilient led by food and environmental.

Speaker 4: And within environmental you are aware of the PFAS testing.

Within environmental that you are aware of the P fast testing.

Volumes out there but.

Speaker 4: But form and biotech took a mod of step down. And that was particularly the case in the US and China.

Rainer Blair: That's partially offset by weaker life science instruments. And as a reminder, life science instruments for us is less than 10% of our total business. So Q3 all in a solid outperformance in the quarter with what we think are some important markers around diagnostics bioprocessing and life science instruments. And as you think about Q4 in their bioprocessing and diagnostics, there's really no change to our prior expectations. We expect those to continue to perform similarly as we've talked about in the past.

But pharma and biotech took a modest step down and that was particularly the case in the U S and China, we see large pharma customers also tightening their belts as it relates to capital expenditures. We were just talking about the interest rate environment, and that's playing out here as well and then.

Speaker 4: We see large pharma customers also tightening their belts as it relates to capital expenditures. We were just talking about the interest rate environment, and that's playing out here as well. And in China, what we're seeing there is just the sun setting of the subsidized loan program of the first half of the year and very high comps.

China.

What we're seeing there is just the sunsetting of the subsidized loan program. The first half of the year and very high comps as well as the lower funding that's available in the marketplace today in China.

Speaker 4: as well as the lower funding that's available in the marketplace today in China.

Speaker 4: So just to wrap and geographically, our developed markets were down largely due to the softness and pharma and biotech. And China, as we just talked about, was really related to the weaker macro. And like I said earlier, on the margin, only some anti-corruption initiatives there.

So just to wrap them geographically our developed markets were down largely due to the softness in pharma.

Rainer Blair: Thank you, 3. Now as it relates to life science instruments, there we've seen some incremental weakness in Q3 and we would expect that to continue or step down slightly here in Q4. So with that as a context for the second half there's really no change to revenue as Q3 offsets Q4 so we're holding the full year here. And there's also no change to our bio processing expectations for the year and we continue to believe that 2023 represents the bottom.

<unk> biotech in China as we just talked about was really related to the weaker macro.

And like I said earlier on the margin only some anti corruption initiatives there.

Speaker 4: So, as we wrap up there, I think we remain cautious on LS tools and, you know, expect.

No.

As we wrap up there I think we remain cautious.

<unk> tools.

And expect.

Speaker 4: Q4 to be down in the high single.

Q4 to be down.

In the high singles.

Speaker 4: versus but still at the low singles for the full year. Now as it relates to 24, like I said, I think Q4 is very important.

Versus.

But still at the low singles for the full year now as it relates to.

24, like I said I think Q4 is a very important.

Rainer Blair: Now as it relates to 2024 and given where markets are today and in the broader macro, we want to see how Q4 plays out before we provide a guide on our Q4 earnings call in January as we always do. We want to see the next couple of months here play out and then build the guide as always for our January earnings call. Got it. Thanks for having me. Thanks, Matt.

Speaker 4: quarter here for all kinds of reasons. As you know, in a life science business, a lot happens in Q4. And it's also gonna tell us a lot as we dialogue with our customers about how to view 2024.

Quarter here for all kinds of reasons.

As you know in our life science business a lot happens in the Q in Q4.

And it's also going to tell us a lot.

Dialogue with our customers about how to view 2024, which as I mentioned, we will talk about in.

Speaker 4: which as I mentioned, we'll talk about in January . But I do think it's fair to say that we expect a weaker farm on dial farmer end market here going into 2024.

Unknown Executive: Thank you.

In January but I do think it's fair to say that we expect a weaker at pharma and Biopharma.

And market here going into 2024.

Speaker 5: Great, thanks, that's really helpful. And then maybe a quick follow up. I just wanna touch on China a little bit. I'm not gonna ask about 24-hour work as I think you made it clear, you're not gonna address that. But just longer term structurally, China's been a major part of the growth for tools as an industry and for Dan Herne over the last five, 10 years, given everything that's happened over the last year.

Great. Thanks, that's really helpful. And then maybe just a quick follow up.

BJ Kumar: Our next question will come from BJ Kumar with every core ISI. Hey guys, thanks for taking my question.

I just wanted to touch on China, a little bit I'm not going to ask about 24 outlook is I think you made a clear youre not going to address that but just longer term structurally.

BJ Kumar: Good morning, minor. I, you know, one I just want to go back to this bio processing. So would book a bill of point X. I guess these bio processing are going to grow next year for orders or below revenues in that 20p. I don't know if there's a restocking phenomena.

Rainer Blair: Like how should we generally broad strokes and bio processing the plus and minuses that we look at the outlook right should China intellect or any, any levers that you have that could move a bio process. So, you know, I think I come back to the actual data, BJ that that we see, which is, you know, Q3, Q3 really was very similar to Q2, the book, the book, the bill was the same.

China has been a major part of the growth for tools as an industry and for Danaher.

Over the last five to 10 years, given everything thats happened over the last year.

What's your view on China going forward on a multiyear basis will it still be accretive to total company, meaning above total company growth.

Speaker 9: What's your view on China going forward on a multi-year basis? Will it still be a creative, total company, meaning above total company growth, or do you think China...

Or do you think China sort of has really taken a step back here and it's going to be a multiyear process for it to return to that level.

Speaker 9: is really taking a step back here and it's going to be a multi-year process for it.

Speaker 4: We think China long-term continues to accrete to the fleet average from a growth perspective. The demand in China will just at the tip of the iceberg of the demand in China for biologic drugs. And there's no question that we're currently going through a reset that

We think China long term continues to accrete to the fleet average from a growth perspective, Mike.

The demand in China.

We're just at the tip of the iceberg the demand in China for biologic drugs and there is no question that we're currently going through a reset.

Speaker 4: based on many of the things that occurred during the pandemic. If you think about the funds that were spent in the zero COVID effort over several years.

Based on <unk>.

Any of the things that occurred.

During the pandemic, if you think about that.

Rainer Blair: We, we saw the market develop as we had anticipated. You know, from our prior call that we've been working with customers here to take some attention out of the system and trying to ensure that it's much inventory is burnt off as possible here in the year. And that's why we're confident that this is, is the bottom.

<unk> that were spent in the zero COVID-19.

Over several years.

Speaker 4: If you look at how the pharmaceutical industry is playing out in China.

If you look at how the pharmaceutical industry is playing out in China, but all of those things over time moderate and you come back to an end market, which has an enormous demand of a population which has.

Speaker 4: But all those things over time moderate and you come back to an end market which has an enormous demand.

Speaker 4: of a population which has already a large and increasing middle class and is really demanding access to the most advanced medications in the world. So we continue to see China as a opportunity here in the mid and long term because the fundamentals are in the right place.

Rainer Blair: But as it relates to 2024, there's a lot of moving pieces here and it's quite hard to draw some generalizations and that's why it's so important for us also to see the data here for another quarter in Q4 before we talk about what it looks like in 2024. Now, having said that, you know, we do expect that this inventory dynamic and what's going on China is is going to also go into, if you will, impact into 2024 as well. This doesn't stop at midnight on the 31st of 2023, but we have seen a stabilization here with the last two quarters. And we want to see how Q4 develops before calling to 2024 in January.

Already a large and increasing middle class and.

Is really demanding.

Access to the most advanced medications in the world. So we continue to see China.

As a opportunity here in the mid and long term because the fundamentals are in the right place. Although we are going through if you will a reset here with different funding sources.

Speaker 4: Although we are going through, if you will, a reset here with different funding sources, and so forth, in a short term.

And so forth in the short term.

Okay.

Thank you we'll take our next question from Puneet <unk> with Leerink partners.

Speaker 10: Okail? Hey you pay Renneth. Thanks for the take

Yes Anthony.

Hey, Hey, Ryan Thanks for taking my questions.

Speaker 10: Um, uh, quite a bit of coverage here. So maybe, uh, let me ask about something. Um, that is, um, being discussed in healthcare markets and even now food and consumer markets. And that's the, um, GLP ones and the diabetes weight loss drugs.

Quite a bit of covered here. So maybe let me ask you about something.

That is being discussed and healthcare markets, and even now food and consumer markets and Thats the.

Matthew McGrew: Matt, one for you. Thanks for giving the stand-alone numbers. I think it looks like the stand-alone margins here, XeAS, for Dan Herf, for sister 23, is about 28.5% sort of rough numbers. And that includes, I believe, you know, perhaps 400 million of cost actions. What's the right way to think about cost actions met? Is that, you know, should that all come out next year? So the right jump-off point for us, X cost actions is 30% and that's how we should be thinking about margins for next year.

<unk> and the diabetes weight loss drugs.

Speaker 5: with invocations or expanding hair. So, wondering if you can provide some context on, if you see contributions from these drugs.

It was indeed indications are expanding here so.

Wondering if you can provide some context on if you see contributions from these drugs.

Speaker 2: um in in sort of 2024 anything there that can potentially help you offset um some of the headwinds and maybe Within that context if you could also just talk about how should we weigh the glp wants opportunities versus? Alzheimer's which is also a very large market. Uh, I believe for the maps

In 2020 for anything there that can potentially help you offset.

Some of the headwinds and maybe within that context. If you could also just talked about how should we waived the GOP once opportunities versus Alzheimers, which is also a very large market I believe for the maps.

Matthew McGrew: Yeah, I mean, I think, you know, we'll kind of give a complete update when we come out because the core growth is going to be a big driver of margins, but just on the cost action part. Yeah, and I'm I think you're right. I think the way I'd probably characterize it is 350 million of one-time cost actions. We talked about 200 million in Q2 and Q3. So that'd be, again, the kind of one-time cost actions.

Thanks, Amit, let's start with the <unk> one.

Speaker 4: Thanks, honey. Let's start with the GLC1, which are real, and they are growing, and Dan or her is represented into some extent, stuck in to all of them. And we expect over time for those to contribute to our growth. Now, I mean, said that GLC1s are a...

Which are which are real and they are growing and danaher is reps.

Represented into some extent specced in to all of them.

And we expect over time for those to contribute to.

Matthew McGrew: Another 150 million here in Q4. And like you said, that will roll forward and help next year. But that is sort of a net number, right, if you will. We've, we've gonna, we will have other pieces, some of them pretty meaningful here, that will impact margins. So think of, like I said, first core growth will have an impact. FX, you know, as we sit here right now, it's going to have an impact and there'll be some other cost headwinds.

Two our growth now having said that <unk> ones are.

A.

Hey.

Speaker 4: a class of drugs where the intensity of the use of, if you will, the standard inputs of biologic processes, for instance, such as maps, and I'll come back to that part of your question in a second, is not an intent. So you have synthetic processes for GLP-1s, you have biologic processes, and depending on how that makes develop.

A class of drugs.

The intensity of the use of if you will the standard inputs of biologic processes for instance, such as Matt and I'll come back to that part of your question in a second.

Matthew McGrew: So when we get to the guide here in January, we'll sort of take that net, you know, 150 basis points, if you will, of margin tailwind probably and then see what those offsets are to end up where we are for 24. But that's 350. It's probably the right number to think about as one-timers that go away here for next year. And so thanks guys.

Is not intent. So you have synthetic processes for <unk> do you have biologic processes and depending on how that mix develops.

Speaker 4: That also impacts the degree to which this contributes to our business. This will contribute to our business, and we think that that provides a modest tailwind here over time.

That also.

Impacts the degree to which this contributes to our business this will contribute to our business.

And we think that that provides a modest tailwind here over time.

Speaker 4: Now, as it relates to your question around Alzheimer's drugs, those are typically monoclonal antibodies, and the use of our industry's products there is far greater than, for instance, in GLP-1 processes.

As it relates to your question around all timers drugs.

Scott Davis: Thank you. Our next question will come from Scott Davis with Millius Research.

Those are typically monoclonal antibodies and the use of our industry's products there.

Scott Davis: All right. Hey, good morning guys. Good morning, everybody.

Is far greater than for instance, and <unk> processes.

Rainer Blair: Scott, Ryan, are you, you mentioned in your prepare remarks China on a down 45% on the biopharmacy, I think you said, but could you walk us through, first of all, what is the materiality of China now that Viralto has gone percent of sales? I don't think we have that number. But and second, just kind of walk us through the different markets in China. Maybe it, you know, any, you know, color or outlook or something on how that is bottoming out or hopefully bottoming out.

Speaker 4: And as those continue to make their way through the development pipelines, through the regulators, and ultimately get reimbursed and then adopted by patients, we expect that to be a more significant tailwind certainly than GLP-1.

And as those continue to make their way through the development pipeline through the regulators and ultimately get reimbursed and then adopted by patients we expect that to be a more significant.

Tailwind certainly than <unk>.

Speaker 10: Got it. Super. And then if I could follow up on ab cam.

Got it Super and then if I could follow up on outcome.

Could you talk about where you see the biggest.

Speaker 2: Could you talk about where you see the biggest opportunities for cost reduction here in the antibodies business and the protein reagents business and maybe where DBS can have the most impact and wondering what do you have in your algorithm longer term for the off margins for this business eventually? Thank you.

Opportunities for cost reduction here and the antibodies business.

Rainer Blair: Sure. Scott. And thanks for the question. So just to the materiality of China here, post Viralto, I think 12% is a good number to think about as a total revenue. And now to your point, let me take you through what we saw across the portfolio here in third quarter.

Protein reagents business.

Maybe where DBS can have the most impact wondering.

What do you have in your algorithm.

Longer term for the op margins for this business eventually thank you.

So puneet.

Speaker 4: So, Puneet, we have yet to close on this transaction. So, we won't be able to talk about, you know, the model and its contents in any detail here. But I do want to take a second to reiterate that, you know, this acquisition.

We have yet to close on this transaction, so we won't be able to talk about.

Rainer Blair: So let's start with bioprocessing there. We did not see a change in market demand, which has been here now for several quarters impacted by a weaker funding environment and excess capacity. And that was down 45% as mentioned previously. By sciences was worse than expected on a weaker macro as well as at the margin. So, not to over read this, but at the margins, some of the anti-corruption initiatives in the country which flowed down some equipment tenders, some installation of equipment at the margin.

The model and its contents in any detail here, but I do want to take a second to reiterate that.

With this acquisition.

Speaker 4: If that's an entry into a really highly attractive protein consumables market, we estimate that market to be over $8 billion in growing high single digits.

Gives us an entry into a really highly attractive protein consumables market, we estimate that market to be over $8 billion and growing high single digits.

Speaker 4: And very importantly, because of new detection technologies and other approaches, protein detection is now moving from research to bioforma and we believe over time to the clinic.

And very importantly, because of new detection technologies and other approaches.

Protein detection is now moving from research to Biopharma and we believe over time to the clinic.

Speaker 4: And so you can see how that fits our strategy of helping to map complex diseases.

So you can see how that fits our strategy.

Of helping to map complex diseases accelerate drug discovery and hopefully someday even.

Rainer Blair: And in diagnostics, we're seeing, you know, consistent patient volumes and it's largely back to normal. So, we expect, we don't expect this to change here going forward in Q4 and also expect that this is going to continue into 2024. So, we haven't seen a change in bioprocessing life sciences, the worst at the margin here in diagnostics as expected and largely back to normal. Okay, very helpful.

Speaker 4: accelerate drug discovery and hopefully someday even help Identify these diseases earlier in their progression now. This is a differentiated company with a really terrific brand and a great long-term Sustainable business model we've talked about this, but you know, this is a Pre-div to us in growth and earnings

<unk>.

<unk> these diseases earlier in there.

Their progression now this is a differentiated company with a really terrific brand and a great long term sustainable business model. We've talked about this but this is accretive to us and growth in earnings and.

Speaker 4: and also in talent. And we're looking forward to welcoming the team here. We're still focused right now, Puneet, on closing this transaction by mid-2024.

And also on talent and we're looking forward.

To welcoming the team here.

Still focused right now on closing this transaction by mid 2024.

Got it I appreciate it thanks, Brian .

Rainer Blair: And just to switch gears, you know, there's talk about M&A multiples, you know, with in this type of rate environment, you would expect at least some moderation. I didn't feel like Abcam was necessarily cheap, despite some of the drama that is out there. It certainly seemed full, fully priced even at higher rates, but as you look at the rest of your pipeline, is there some relief in multiples that kind of reflect the reality of the higher rate environment?

Speaker 2: Thank you. Our next question comes from Rachel Fenton-Stahl with JP Morgan. Hi Rachel. Good morning.

Thank you. Our next question comes from Rachel install with J P. Morgan.

Thank you Rachel good morning.

Yes. Good morning, Thanks for taking the question. So I wanted to follow up with a few more nuanced questions on China. So first you mentioned that any corruption.

Speaker 11: So I want to follow up with a few more nuanced questions on China. So first, you mentioned that anti-corruption had some impact to the life sciences segment.

The life Sciences segment. So can you quantify the impact there and then can you walk us through are you adjusting that impact any health care and diagnostics hospitals studying or is that starting to bleed into pharma and biotech as well and then shifting over to where the diagnostic side for China. Another thing you like that we start to hearing that in recent weeks.

Speaker 11: So can you quantify the impact there? And then can you walk us through? Are you just seeing that impact in the healthcare and diagnostic hospital settings?

Speaker 11: or has that started to bleed into pharma and biotech as well? And then shifting over to more the diagnostic side for China, another dynamic that we started hearing about in recent weeks is just China volume-based procurement. So can you walk us through what you're hearing on that front and what your potential exposure to that would be?

Rainer Blair: I would tell you that we take it as we always do based on, you know, the end market, the asset and the financial model individually. And as we look at our, at our funnel, which is very active, there's no doubt that some valuations still do not reflect what is a higher and likely. For some time sustained interest rate environment when it comes down to the individual deal, we bring all aspects together and ensure that the deal model meets our expectations as well. And then we, as I've always said, we'll pull the trigger if all those lights slip green on end market, the actual target company, as well as the financial market financial model, excuse me.

Just China volume based procurement. So can you walk us through what you're hearing on that front and what your potential exposure to that would be.

Rainer Blair: And then lastly, you know, to reiterate, we do think valuation, still have some, some ways to go here on average in order to reflect the interest rate environment.

Speaker 4: Sure, Rachel, starting with anti-corruption, we really do see this as a transitory effect. There were some weeks, if I can say it that way, where we saw particularly equipment tenders being postponed, delayed, as well as the installation of hardware, so larger capital equipment.

Sure Rachel.

<unk> with anti corruption.

We really do see this as a transitory effect.

There were some weeks if I can say it that way where we.

Rainer Blair: Helpful, Rhiner.

We saw particularly equipment tenders being postponed or delayed.

As well as the installation of hardware, so larger cap capital equipment.

Speaker 4: But frankly, we've seen that wane here. So we come back to normal, if you will, in the last couple of weeks. And that applies both to what we saw there in life science is really at the margin as well.

Frankly, we've seen that Wayne here, so come back to normal if you will in the last couple of weeks and that applies both to what we saw there and life science is really at the margin.

As well as what we see in diagnostics, so I would not.

Speaker 4: what we see in diagnostic. So I would not...

Speaker 4: View the anti-corruption initiative.

The view the anti corruption initiatives.

Speaker 4: as a shorter-re?ment midterm growth headwind. Frankly, in the long term, we think this is a positive as it levels the playing field from multinationals in China.

As a short or even mid term growth headwind frankly in the long term. We think this is a positive as it levels the playing field for multinationals in China.

Rainer Blair: Best of luck. See you guys. See you, Matt and John.

Unknown Executive: Thank you.

So as far as the.

Speaker 6: Value-based procurement, Rachel. I think, that's the way to kind of think about it, is I think we think it's gonna be about a $50 million kind of annual headwind here for us over the next couple of years. Most of that is at Beckman Diagnostics.

Value based procurement Rachel.

Michael Ryskin: Our next question comes from Michael Riskin with Bank of America. Hi, Michael. Morning, Rhiner. Matt, thanks for taking the questions. Let me follow up a little bit on the life science weakness. Sounds like you guys are pretty clear that in 3Q, that was the biggest step down sequentially versus 2Q versus your expectations. We have it on our notes, the L.S. Instruments grew, mid single digit 2Q, and now the client mid single digit 3Q.

I think the best way to kind of think about it is I think we think it's going to be about a $50 million kind of annual headwind here for us over the next couple of years most of that is at Beckman diagnostics.

Michael Ryskin: So could you parse that out a little bit, you know, sci-X versus Beckman, you know, by geographies, by customer. Where you're seeing the slowdown, do you think it's tied to some of the broader weakness you're seeing in the biotech? And just any thoughts on, you already provided some commentary on 4Q but any thoughts longer term on when that could return to growth, just because you think that L.S, instruments would have a slightly longer order of books you get, you have a little bit more visibility there. So some forward commentary would be helpful. Thanks Mike.

Speaker 6: So, I mean, maybe kind of the simple math is $800 million of back end revenues and maybe 40% of that is sort of subject to the VPP, you know, kind of assume a 50% type price reduction there and you can get to $150 million. We think that's kind of a two, three year kind of run rate here, so pretty modest and manageable for us over the period.

So I mean, maybe kind of a simple math is $800 million of Beckman revenues and maybe 40% of that is sort of subject to the VR the PPP.

Kind of assume a 50% type price reduction there and you can get to a 150 million Bucks, we think thats kind of a two to three year kind of run rate here, so pretty modest and manageable for four for us over the whole period.

Speaker 11: Great. And then my follow up is just your own diagnostics. So you guys listed that respiratory expectations for the year to 1.6 billion versus, you know, prior assumptions around 1.2. So how should we think about that endemic number for respiratory? Is 1.2 billion still on average the really way to think about this respiratory market? And then just heading into 2024, giving you guys listed expectations for this year by 400 million. Should we expect this after your next year for respiratory as well? Thank you.

Great and then my follow up is just around diagnostics you guys listed that respiratory expectations for the year to $1 6 billion versus prior assumptions around one point too. So how should we think about that number for respiratory is $1 2 billion still on average they're really way to think about this respiratory market.

Then just heading into 2024 are giving you guys looked at expectations for this year by $400 million should we expect a softer year next year respiratory as well. Thank you.

Rainer Blair: So let's level set on the numbers here. Our instrument portion of our life science tools is less than 10% of Danaher revenue, just to put that in context properly. And as we mentioned our Q3 performance was modestly below our expectations with higher end instrumentation holding up better. Then the less specialized solutions. Now, if you think about this by end market, academic and life science research have held up well along with the service business that's associated with these instruments.

Yes, I mean I think.

Speaker 6: Yeah, I mean, I think it's a good question on the one two. I think that's probably where my baseline would be, Rachel, and I think we did a little bit better this year because we had another respiratory season that started earlier than normal, right? Just like last year.

It's a good question on the one two I think that's probably where my baseline would be Rachel and I think we did a little bit better this year.

Because we had another respiratory season that started earlier than normal right. Just like last year. Similarly, we saw sort of September and October the ili kind of spiked up that is usually something in the past that we have seen more in the January February timeframe. So if I. If I think about the last couple of years and think about that I think one two would be sort of where I would base. It is.

Speaker 6: Similarly, we saw sort of September and October , the ILI kind of spiked up. That is usually something in the past that we have seen more in the January-February time frame.

Speaker 6: So if I think about the last couple of years and think about that, I think one, two would be sort of where I would base it as a planning kind of purpose going forward.

Planning kind of purpose going forward.

Speaker 6: But, you know, we sort of typically, as we look forward from planning perspective, do that. We look at the last couple years of ILI and try and mirror that. So that's kind of where I think I'd be.

But we.

We sort of typically.

We look forward from planning perspective, do that we look at the last couple of years.

Rainer Blair: Applied markets were also resilient led by food and environmental and within environmental you are aware of the PFAS testing volumes out there. But format and biotech took a modest step down. And that was particularly the case in the U.S, and China. You see large pharma customers also tightening their belts as it relates to capital expenditures. We were just talking about the interest rate environment and that's playing out here as well. And in China, what we're seeing there is just the sunsetting of the subsidized loan program of the first half of the year and very high cost as well as the lower funding that's available in the marketplace today in China.

And try and try and try and trying to mirror that.

That's kind of where I think I'd be.

Thank you and that was our last question today I will now turn the call back over to John Bedford for closing remarks.

Speaker 2: And that was our last question today. I will now turn the call back over to John Bedford for closing remarks.

Speaker 9: Thank you everybody for joining and we'll be around the rest of the day for questions.

Okay. Thank you everybody for joining and we'll be around the rest of <unk> for questions.

Thanks, everyone.

Speaker 2: And this does conclude today's call. We thank you for your participation. You may disconnect at any time.

And this does conclude today's call. We thank you for your participation you may disconnect at anytime.

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Rainer Blair: So just to wrap and geographically, our developed markets were down largely due to the softness and pharma and biotech. And China, as we just talked about, was really related to the weaker macro. And like I said earlier on the margin only some anti corruption initiatives there. So as we wrap up there, I think we remain cautious on L.S, tools and expect Q4 to be down in the high singles versus but still at the low singles for the full year.

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Rainer Blair: Now as it relates to 24, like I said, I think Q4 is a very important quarter here for all kinds of reasons. As you know in the life science business, a lot happens in the Q4 and it's also going to tell us a lot as we dialogue with our customers about how to view 2024, which as I mentioned we'll talk about in January. But I do think it's fair to say that we expect a weaker pharma and biopharma end market here going into 2024. Great, thanks, that's really helpful.

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Michael Ryskin: And then maybe a quick follow-up.

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Michael Ryskin: I just want to touch on China a little bit. I'm not going to ask about 24-hour work because I think you made it clear, you're not going to address that. But just longer term structurally, you know, China's been a major part of the growth for tools as an industry and for Danaher over the last 5-10 years, given everything that's happened over the last year.

Rainer Blair: What's your view on China going forward on a multi-year basis? Will it still be a creative, total company meaning above total company growth? Or do you think China is really taking a step back here and it's going to be a multi-year process to return to that level? Thanks.

Rainer Blair: We think China long-term continues to accrete to the fleet average from a growth perspective. Mike, the demand in China, we're just at the tip of the iceberg of the demand in China. For biologic drugs, and there's no question that we're currently going through a reset that's based on many of the things that occurred during the pandemic. If you think about the funds that were spent in the zero COVID effort over several years, if you look at how the pharmaceutical industry is playing out in China.

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Rainer Blair: But all those things over time moderate and you come back to an end market, which has an enormous demand of a population, which has already a large and increasing middle class and is really demanding access to the most advanced medications in the world. So we continue to see China as a opportunity here in the mid and long term because the fundamentals are in the right place, although we are going through, if you will, a reset here with different funding sources and so forth in a short term. Thank you.

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Puneet Souda: We'll take our next question from Puneet Zuda with leering partners. Thanks for taking the questions. Quite a bit of coverage here, so maybe let me ask about something that is being discussed in healthcare markets and even now food and consumer markets. And that's the GLP once and the diabetes weight loss drugs with indications are expanding here. So wondering if you can provide some context on if you see contributions from these drugs in sort of 2024, anything there that can potentially help you offset some of the headwinds.

Yeah.

Puneet Souda: And maybe within that context, if you could also just talk about how should we weigh the GLP once opportunities versus Alzheimer's, which is also a very large market, I believe, for the maps. Thanks, Puneet. Let's start with the GLP one, which are, which are real and they are growing and Dan or her is represented into some extent, stuck in to all of them. And we expect over time for those to contribute to our growth.

Puneet Souda: And I mean said that GLP ones are a class of drugs where the intensity of the use of, if you will, the standard inputs of biologic processes, for instance, such as maps and I'll come back to that part of your question in a second. And it is not an intent. So you have synthetic processes for GLP ones, you have biologic processes, and depending on how that makes develops, that also impacts the degree to which this contributes to our business, this will contribute to our business.

Puneet Souda: And we think that that provides the modest tailwind here over time. Now, as it relates to your question around Alzheimer's drugs, those are typically monoponyl antibodies, and the use of our industry's products there, it's far greater than for instance, and GLP one processes. And as those continue to make their way through the development pipelines, through the regulators, and ultimately get reimbursed, and then adopted by patients, we expect that to be a more significant tailwind, certainly than GLP one. Scott, Super.

Rainer Blair: And then, if I could follow up on ad cam, could you talk about where you see the biggest opportunities for cost reduction here in the antibodies, business and the protein reagents business, and maybe where DBS can have the most impact and wondering if what do you have in your algorithm, longer term for the off margins for this business eventually. Thank you.

Rainer Blair: So, Puneet, we have yet to close on this transaction. So, we won't be able to talk about the model and its contents in any detail here, but I do want to take a second to reiterate that this acquisition gives us an entry into a really highly attractive protein consumables market. We estimate that market to be over $8 billion in growing high single digits. And very importantly, because of new detection technologies and other approaches, protein detection is now moving from research to bioforma and we believe over time to the clinic.

Rainer Blair: And so, you can see how that fits our strategy of helping to map complex diseases, accelerate drug discovery, and hopefully someday even help identify these diseases earlier in their progression. Now, this is a differentiated company with a really terrific brand and a great long term sustainable business model. We've talked about this, but you know, this is a creative to us in growth and earnings and also in talent and we're looking forward to welcoming the team here. We're still focused right now on closing this transaction by mid 2024. Appreciate it. Thanks, Reiner.

Rachel Fett: Thank you. Our next question comes from Rachel Fett install with JP Morgan. Hi, Rachel. Yeah, thank you for taking the questions. So I want to follow up with a few more nuanced questions on China. So first you mentioned that any corruption has impacts the life sciences segment. So can you quantify the impact there and then can you walk us through are you just seeing that impact in the healthcare diagnostics, you know, hospital settings, or is that started to bleed into form on biotech as well?

Rachel Fett: And then shifting over to more the diagnostic side for China, another dynamic that we started hearing about in recent weeks is just China volume based procurement. So can you walk us through what you're hearing on that front and what your potential exposure to that would be?

Rainer Blair: Sure, Rachel, starting with anti corruption, we really do see this as a transitory effect. There were, you know, some weeks, if I can say it that way, where we saw a particularly equipment tenders being postponed delayed, as well as the installation of hardware, so larger capital equipment. But frankly, we've seen that Wayne here, so we come back to normal, if you will, in the last couple of weeks and that applies both to what we saw there in life sciences really at the margin, as well as what we see in diagnostic.

Rainer Blair: So I would not view the anti corruption initiatives as a short or even midterm growth headwind. Frankly, in the long term, we think this is a positive as it levels the playing field for multinationals in China.

Matthew McGrew: As far as the value-based procurement, Rachel, I think I best way to kind of think about it is I think we think it's going to be about a $50 million kind of annual headwind here for us over the next couple of years. Most of that is at Beckman Diagnostics, so I mean, maybe kind of the simple math is 800 million of Beckman revenues and maybe 40% of that is sort of subject to the VPP kind of assume a 50% type of price reduction there and you can get to 150 million bucks. We think that's kind of a two, three year kind of run rate here, so pretty modest and manageable for for us over the period.

Matthew McGrew: Great, and then my follow-up is just drone diagnostics. So you guys listed that respiratory expectations for the year to 1.6 billion versus prior assumptions around 1.2. So how should we think about that endemic number for respiratory is 1.2 billion still on average, the really way to think about this respiratory market and then just heading into 2024, getting you guys listed expectations for this year by 400 million. Should we expect us off to your next year for respiratory as well.

Matthew McGrew: Thank you. Yeah, I mean, I think it's a good question on the 1.2. I think that's probably where my baseline would be Rachel and I think we did a little bit better this year because we had another respiratory season that started earlier than normal, right? Just like last year. Similarly, we saw sort of September and October the ILI kind of spiked up. That is usually something in the past that we have seen more in the January, February timeframe.

Matthew McGrew: So if I think about the last couple years and think about that, I think 1.2 would be sort of where I would base it as a planning kind of purpose going forward. But you know, we sort of typically as we look forward from planning perspective do that. We look at the last couple years of ILI and try and try and try and try and mirror that. So that's kind of where I think I'd be.

John Bedford: And that was our last question today.

John Bedford: I will now turn the call back over to John Bedford for closing remarks. Thank you, everybody for for joining. We'll be around the rest of the day for questions. Thanks, everyone. And this does conclude base call. We thank you for your participation. You may disconnect at any time. [inaudible] I don't know. I don't know.