Q3 2023 Thermo Fisher Scientific Inc Earnings Call

Good morning, ladies and gentlemen, and welcome steps that Mike Fisher scientific 20th century third quarter Conference call. My name is Ellen and I'll be the operator today's call.

During the presentation all lines will be on mute, how 'bout, but that will be an opportunity for question and answer session. At the end stretched. Your question. Please press star followed by one when you kind of think he pads.

I'd now like to introduce all moderates for the cool Mr. Rafael Shahada, Vice President of Investor Relations. Mr. Haag, you may begin Nicole.

Good morning, and thank you for joining us on the call with me today is Marc Casper, Our chairman, President and Chief Executive Officer, and Stephen Williamson Senior Vice President and Chief Financial Officer.

Please note this call is being webcast live and will be archived on the investors section of our website Thermo Fisher dot com under the heading news events and presentations until November 10 2023.

A copy of the press release of our third quarter 2023 earnings is available in the investors section of our website under the heading financials.

Before we begin let me briefly cover our safe Harbor statement.

Various remarks that we may make about the company's future expectations plans and prospects constitute forward looking statements for purposes of the safe Harbor provisions under the private Securities Litigation Reform Act of $19 95.

Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, including dose discussed in the company's most recent annual report on Form 10-K, and subsequent quarterly reports on Form 10-Q, which.

Are on file with the SEC and available in the investors section of our website under the heading financials SEC filings.

While we may elect to update forward looking statements at some point in the future. We specifically disclaim any obligation to do so even if our estimates change. Therefore, you should not rely on these forward looking statements as representing our views as of any date subsequent to today.

Also during this call we will be referring to certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP.

Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure is available in the press release third quarter 2023 earnings and also in the investors section of our website under the heading financials, so with that I'll now turn the call.

Call over to Mark thank.

Thank you Ralph good morning, everyone and thanks for joining us today for our third quarter call.

Let me recap our financial performance for the quarter and then I'll provide additional context on what we're seeing play out in the macro economy and the implications for our guidance.

In the third quarter, our revenue was $10 $5 7 billion.

Our adjusted operating income grew 8% to $2 $5 6 billion.

And we expanded our adjusted operating margin 200 basis points to 24, 2% 24, 2%.

And we delivered excellent growth in adjusted EPS, achieving a 12% increase to $5, 69% $5 69 per share.

We delivered a very strong third quarter.

In the quarter the market environment continued to get more challenging so I thought that it would be best to update you on what we're seeing and the implications on our guidance for the full year.

As a reminder, coming out of the second quarter, we assumed core market growth to be in the zero to 2% range for the year driven by two factors cautious customer spending and low economic activity in China.

As we indicated in September those same two factors increased impacts.

We now expect core market growth to be slightly negative for the year.

Our team did a good job capitalizing on the available opportunities in the quarter and we continue to expect to grow faster than the market for the full year and to once again deliver share gains in 2023.

Factoring in the current macroeconomic conditions that I discussed as well as the related increase in FX headwinds, we're revising our revenue and adjusted EPS guidance for 2023, we now expect revenue to be $42 7 billion and adjusted EPS to be $21 50 per share.

Ellen: Good morning ladies and gentlemen and welcome to the Thermo Fisher Scientific 2023 third quarter conference call. My name is Ellen and I'll be the operating today's call. During the presentation all lines will be on mute, however there will be an opportunity for question and answer session at the end. To register a question, please press star, roll it by one on your telephone keypad.

Stephen will outline the underlying assumptions later in the call along with some thoughts to help frame 2024.

So as I look ahead, the combination of our proven growth strategy and PPI business system will enable us to successfully navigate dynamic times positioning us to deliver differentiated short term performance and simultaneously strengthening our long term competitive position and outlook.

Raffaio Zahada: I'd now like to introduce our moderator for the call, Mr. Raffaio Zahada, Vice President of Investor Relations. Mr. Zahada may begin the call. Good morning and thank you for joining us. On the call with me today is Marc Casper, our chairman, president and chief executive officer and Stephen Williamson, senior vice president and chief financial officer. Please note this call is being webcast live and will be archived on the investor section of our website thermo Fisher dot com under the heading news events and presentations until November 10, 2023.

The long term prospects for our industry remain as bright as ever.

Science continues to advance at a rapid pace and our tools are used by scientists for their most important work that they do providing the foundation for the scientific breakthroughs they enable.

And our capabilities enable the pharma and biotech industry, which is addressing so many unmet health care needs.

Raffaio Zahada: A copy of the press release of our third quarter 2023 earnings is available in the investor section of our website under the heading financials. So before we begin, let me briefly cover a safe upper statement. Various remarks that we may make about the company's future expectations, plans and prospects constitute forward-looking statements for purposes of the safe part of provisions under the private securities litigation reform act of 1995. Actual results made differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's most recent annual report on form 10K and subsequent quarterly reports on form 10Q, which are on file with the SEC and available in the investor section of our website under the heading financials SEC violence.

Let me now turn to our Q3 revenue performance in the context of our end markets.

Starting with pharma and biotech growth declined 1% for the quarter. The COVID-19 vaccine and therapy revenue runoff performed as expected during the quarter.

<unk> and a headwind in this customer segment in Q3 performance in this end market was led by our pharma services business.

In academic and government we grew in the high single digits in the quarter, we delivered very strong growth in our electron microscopy in chromatography and mass spectrometry businesses.

In industrial and applied growth was flat for the third quarter performance. In this end market was led by our electron microscopy business and.

And finally diagnostics and healthcare in Q3 revenue was approximately 20% lower than the prior year quarter.

In this end market the team delivered good core business growth highlighted by our immuno diagnostics microbiology and transplant diagnostics businesses.

Raffaio Zahada: What we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. Also, during this call, we will be referring to certain financial measures not prepared in accordance with generally accepted accounting principles or DAP. A reconciliation of these non-DAP financial measures to the most directly comparable DAP measure is available in the press release over a third quarter, 2023 earnings, and also in the investor section of our website under the heading financials.

We made strong progress on our growth strategy in Q3 as a reminder, our strategy consists of three pillars high impact innovation, our trusted partner status with customers and our unparalleled commercial engine.

Starting with innovation it was another great quarter for the company.

We launched a number of high impact new products across our businesses that are further strengthening our industry leadership and providing our customers with new technologies to enable breakthroughs in their work.

Let me start with a brief update on the groundbreaking thermo scientific Astral, which we launched at the American Society of mass spectrometry in June demand has been very strong and it's great to see these instruments being so quickly adopted by our customers for their protein discovery research.

In the quarter, we launched the <unk> solution in Europe after receiving IV Dr certification.

It's the latest innovation from our protein diagnostics business, which as you know became part of Thermo Fisher with the acquisition of the binding cited at the beginning of the year.

Marc Casper: So with that, I'll now turn the call over to Mark. Thank you, Ref. Good morning, everyone, and thanks for joining us today for our third quarter call.

<unk> complements our leading portfolio of assays that help to diagnose and monitor a blood protein abnormalities related to multiple myeloma and other disorders.

Marc Casper: Let me recap our financial performance for the quarter, and then I'll provide additional context on what we're seeing, play out in the macro economy, and the implications for our guidance. In the third quarter, our revenue was $10.57 billion. Our adjusted operating income grew 8% to $2.56 billion, and we expanded our adjusted operating margin 200-based Justice Points to 24.2%, and we delivered excellent growth in adjusted EPS, achieving a 12% increase to $5.69 per share. We delivered a very strong third quarter.

In our bio production business, we introduced the gift co Cts detachable diabetes, our next generation <unk> platform to accelerate manufacturing of life changing cell therapies and in our electron microscopy business, we launched the thermo scientific hydro bioplasm focused ion beam, providing high resolution <unk>.

Imaging, along with a simplified workflow for cell biologists and earlier. This week time magazine selected Thermo Fisher's pre eclampsia test.

One of times 2023, best innovative best inventions.

As you May recall this is the first and only immunoassay to aid in the risk assessment and clinical management of Preeclampsia and received FDA breakthrough designation and clearance earlier in the year.

Marc Casper: In the quarter, the market environment continued to get more challenging, so I thought that it would be best to update you on what we're seeing and the implications on our guidance for the full year. As a reminder, coming out of the second quarter, we assumed core market growth to be in the zero to 2% range for the year, driven by two factors, cautious customer spending and low economic activity in China. As we indicated in September, those same two factors increased in impact, and we now expect core market growth to be slightly negative for the year.

Now turning to the trusted partner status, we've earned with our customers. This unique relationship gives us early insights into our customers' unmet needs and enables us to bring our industry, leading products services and expertise together in ways that no one else can.

We continue to strengthen our capabilities to be an even stronger partner for our customers.

As you know we've had strong demand for our biologics drug substance manufacturing capabilities and during the quarter. We completed an expansion of our site in St. Louis Missouri. This facility supports therapies for a wide range of diseases, including cancer autoimmune conditions and rare genetic disorders if.

Marc Casper: Our team did a good job capitalizing on the available opportunities in the quarter, and we continue to expect to grow faster than the market for the full year and to once again deliver share gain in 2023.

It features our new Thermo scientific high performer Diamond drive 5000 liter single use bioreactor.

Marc Casper: Factoring in the current macroeconomic conditions that I discussed, as well as the related increase in FX headwinds, we're revising our revenue and adjusted EPS guidance for 2023. We now expect revenue to be $42.7 billion and adjusted EPS to be $21.50 per share. Stephen will outline the underlying assumptions later in the call, along with some thoughts to help frame 2024. So as I look ahead, the combination of our proven growth strategy and PPI business system will enable us to successfully navigate dynamic times, positioning us to deliver differentiated short-term performance and simultaneously strengthening our long-term competitive position and outlook.

Which is a significant advancement in single use technology. The Diamond drive offers better performance and is scalable to much larger volumes than previous generation Bioreactors.

We also further strengthened our clinical research offering by opening a facility in Ohio to produce sample collection kits for clinical trials. This enables us to deliver customized kits to our clients and provide greater supply chain stability to support their trials.

As always our PPI business system, and our mission driven culture enabled our success during the quarter.

<unk> engages empowers all of our colleagues to find a better way every day and it enables us to improve quality productivity and customer allegiance, while also helping us to navigate a dynamic environment.

Marc Casper: The long-term prospect for our industry remain as bright as ever. Science continues to advance at a rapid pace, and our tools are used by scientists for the most important work that they do, providing the foundation for the scientific breakthroughs they enable, and our capabilities enable the farmer and biotech industry, which is addressing so many unmet healthcare needs.

I am proud of our team's efforts, which resulted in strong operating margin expansion in the quarter.

We continue to successfully execute our disciplined capital deployment strategy, which is a combination of strategic M&A and returning capital to shareholders.

Been a very active year as I mentioned earlier, we closed the binding site in January the business is performing exceedingly well during the quarter. We completed our acquisition of <unk>, a leading provider of regulatory grade real world evidence for approved medical treatments and therapies.

Marc Casper: Let me now turn to our 23 revenue performance in the context of our end markets. Starting with farm and biotech, growth declined 1% for the quarter. The COVID-19 vaccine and therapy revenue runoff performed as expected during the quarter, resulting in a headwind in this customer segment. In Q3, performance in this end market was led by our farmer services business. In academic and government, we grew in the high single digits in the quarter.

As a reminder, our real world evidence is the collection and use of data from patient health outcomes gathered through <unk> clinical care. This.

This is a high growth market segment, as pharmaceutical and biotechnology customers as well as regulated bodies are increasingly looking to monitor and evaluate the safety of approved medicines and examine their effectiveness and value in the post approval setting.

Marc Casper: We delivered very strong growth in our electronic microscopy and chromatography and mass spectrometry businesses. In industrial and applied, growth was flat for the third quarter. Performance in this end market was led by our electron microscopy business. And finally, diagnostics and healthcare in Q3 revenue was approximately 20% lower than the prior year quarter. In this end market, the team delivered good core business growth highlighted by our immunodagnostics microbiology and transplant diagnostics business. Services.

The business in that part of our clinical research business and it's off to a great start.

Shortly after the close of the quarter, we announced the agreement to acquire <unk> a company that is accelerating proteomics holdings products enable leading academic researchers in the biopharmaceutical companies to gain an understanding of disease at the protein level rapidly and efficiently.

Proprietary technology proximity extension assay provides high throughput protein analysis.

The acquisition of OLED underscores the profound impact that proteomics is having as our customers continue to advance life Science research and precision medicine.

Marc Casper: We made strong progress in our growth strategy in Q3. As a reminder, our strategy consists of three pillars. High-impact innovation, our trusted partner status with customers, and our unparalleled commercial engine. Starting with innovation, it was another great quarter for the company. We launched a number of high-impact new products across our businesses that are further strengthening our industry leadership and providing our customers with new technologies to enable breakthroughs Let me start with a brief update on the groundbreaking thermoscientific astral, which we launched at the American Society of Mass Spectrometry in June.

This technology is highly complementary to our leading mass spectrometry and life Sciences platforms.

Uniquely positioned to rapidly bring this technology to customers, we expect to deliver $125 million and adjusted operating income synergies in year five.

Driven by revenue synergies and cost efficiencies.

We expect this business to be a mid teens revenue growth business for us well into the future.

Marc Casper: Demand has been very strong, and it's great to see these instruments being so quickly adopted by our customers for their protein discovery research. In the quarter, we launched the extent solution in Europe after receiving IVDR certification. It's the latest innovation from our protein diagnostics business, which, as you know, became part of Thermo Fisher with the acquisition of the binding side at the beginning of the year. Exant complements are leading portfolio of assays that help the diagnosis monitor of blood protein abnormalities related to multiple myeloma and other disorders.

The transaction is targeted to be closed by mid 2024 subject to customary closing conditions, including regulatory approvals.

So 2023 has been an active year of M&A that further strengths and thermo Fisher scientific for the future.

During the quarter, we continued to advance our environmental social and governance priorities. This included launching a collaboration with the National minority quality Forum, a not for profit research and education organization to help bring clinical research the historically underserved patient populations, who their alliance for representative clinical trials.

Marc Casper: In our bio-production business, we introduced the GIPCO CTF detachable dynabies, our next-generation dynabies platform to accelerate manufacturing of life-changing cell therapies, and in our electro-microscopy business, we launched the thermoscientific hydro-bioplasma focused ion beam, providing high-resolution imaging, along with a simplified workflow for cell biologists. And earlier this week, Time Magazine selected Thermo Fisher's pre-eclampsia test as one of times 2023 best inventions. As you may recall, this is the first and only immunosci to aid in the risk assessment and clinical management of pre-eclampsia, and it received FDA breakthrough designation and clearance earlier in the year.

The collaboration supports pharma and biotech customers in meeting regulatory expectations to enroll and retain patients and clinical trials will more fully reflect real world populations experiencing the disease or health condition being studied.

It also helps to enable our customers to meet U S food and drug administration requirements around diversity action plans.

In terms of our environmental sustainability efforts, we've officially surpassed our original goal to reduce greenhouse gas emissions by 30% by 2000 2030 as.

As we previously announced we've increased our target to a 50% reduction by 2030, and we're well on our way to achieving that goal.

I'm very proud of the way, we're making a difference not only by enabling our customer success, but also by creating a great work environment for our colleagues and to making a positive impact for society.

Marc Casper: Now turning to the trusted partner status we've earned with our customers. This unique relationship gives us early insights into our customers, unmet needs, and enables us to bring our industry-leading products, services, and expertise together in ways that no one else can. We continue to strengthen our capabilities to be an even stronger partner for our customers. As you know, we've had strong demand for our biologic, stroke, substance manufacturing capabilities. And during the quarter, we completed an expansion of our site in St. Louis, Missouri.

So to summarize our key takeaways from the third quarter.

We delivered strong operating performance in Q3, driven by our team's execution and the power of our PPI business system.

Given the more challenging macroeconomic environment, we're taking the right actions and appropriately managing the company.

And we're incredibly focused on delivering differentiated short term performance, while simultaneously strengthening our long term competitive position.

Marc Casper: This facility supports therapies for a wide range of diseases, including cancer, autoimmune conditions, and rare genetic disorders. It features our new thermoscientific high-performer dynodrive 5,000-liter single-use bioreactor, which is a significant advancement in single-use technology. The dynodrive offers better performance and is scalable to much larger volumes than previous generation bioreactors. We also further strengthen our clinical research offering by opening a facility in Ohio to produce sample collection kits for clinical trials. This enables us to deliver customized kits to our clients and provide greater supply change stability to support their trials.

Okay.

The attractive long term outlook for the life Sciences industry remains unchanged.

And we are uniquely positioned to help our customers navigate the current environment capture incremental opportunities and exit this period, an even stronger industry leader with a very bright future with that I'll now hand, the call over to our CFO Stephen Williamson Stephen.

Thanks, Mark and good morning, everyone. As you saw in our press release and as Mark just outlined while the macroeconomic environment became more challenging in the third quarter. We continued to deliver differentiated performance in Q3, we delivered 10 $6 billion of revenue, which included 1% core organic revenue growth, our PPI business system enabled us to generate.

Marc Casper: As always, our PPI business system and our mission-driven culture enabled our success store in the quarter. PPI engages and powers all of our colleagues to find a better way every day and enables us to improve quality productivity and customer legions while also helping us to navigate a dynamic environment. Department. I'm proud of our team's efforts which resulted in strong, operating margin expansion in the core. We continue to successfully execute our discipline capital deployment strategy, which is a combination of strategic M&A and returning capital to shareholders. It's been a very active year. As I mentioned earlier, we close the binding site and January the business is performing exceeding new well.

200 basis points of adjusted operating margin expansion.

And we delivered $5 69.

Of adjusted EPS, a 12% increase over Q3 last year.

We continue to successfully navigate the current environment.

Let me now provide you with some additional details on our performance beginning with our earnings results and as I mentioned, we delivered $5 69 of adjusted EPS in Q3, GAAP EPS in the quarter was $4 42.

On the top line reported revenue was 1% lower year over year. The components of our Q3 reported revenue included 3% lower organic revenue.

Marc Casper: During the quarter, we completed our acquisition of core avatars, a leading provider of regulatory grade, we will hold evidence for approved medical treatments and therapies. As a reminder, real-world evidence is the collection and use of data from patient health outcomes gathered through routine clinical care. This is a high growth market segment as pharmaceutical and biotechnology customers, as well as regulating bodies are increasingly looking to monitor and evaluate the safety of approved medicines and examine their effectiveness and value in the post approval setting. The business is not part of our clinical research business and it's off to a great start.

A 1% contribution from acquisitions and a tailwind of 1% from foreign exchange.

Turning to our organic revenue performance by geography, the organic growth rates by region are skewed by the pandemic related revenue in the current and prior year in Q3, North America declined mid single digits Europe grew in the low single digits Asia Pacific declined in the low single digits with China declining in the high single digits.

With respect to our operational performance adjusted operating income in the quarter increased 8% and adjusted operating margin was 24, 2% 200 basis points higher than Q3 last year.

Marc Casper: Shortly after the close to the quarter, we announced the agreement to acquire O-Link, a company that is accelerating proteomics. O-Link's products enable leading academic researchers and the biopharmaceutical companies to gain an understanding of disease at the protein level rapidly and efficiently. It's proprietary technology proximity extension assay provides high throughput protein analysis. The acquisition of O-Link underscores the profound impact that proteomics is having as our customers continue to advance life science research and precision medicine.

In the quarter, we delivered exceptionally strong productivity and achieve good price realization. This was partially offset by lower pandemic related revenue continued strategic investments and FX.

The strength of our productivity reflects the impact of our PPI business system is enabling us to manage our cost base appropriately given the macro conditions.

Total company adjusted gross margin in the quarter came in at 42% is 30 basis points higher than Q3 last year.

Moving on to the details of the P&L adjusted SG&A in the quarter was 14, 8% of revenue an improvement of 140 basis points over Q3 last year.

Marc Casper: The technology is highly complementary to our leading mass spectrometry and life sciences platforms and will uniquely position to rapidly bring this technology to customers. We expect to deliver $125 million in adjusted operating income synergies in year five driven by revenue synergies and cost efficiencies. We expect this business to be a mid-teens revenue growth business for us well into the future. The transaction is targeted to be closed by mid-2024 subject to customary closing conditions including regulatory approvals.

Total R&D expense was $320 million in Q3, reflecting our ongoing investments in high impact innovation R&D as a percent of our manufacturing revenue was six 7% in the quarter.

Looking at our results below the line for the quarter. Our net interest expense was $113 million, which is similar to Q3 last year.

Just the tax rate in the quarter was 10%, which is 180 basis points lower than Q3 last year, reflecting results about tax planning activities.

Marc Casper: So 2023 has been an active year of M&A that further strains and thermal fish are scientific for the future.

Average diluted shares were $388 million in Q3, approximately 7 million lower year over year, driven by share repurchases net of option dilution.

Marc Casper: So on the corner, we continue to advance our environmental social and governance priorities. This included launching a collaboration with the National Minority Quality Forum, a not-for-profit research and education organization to help bring clinical research to historically underserved patient populations through their alliance for representative clinical trials. The collaboration supports pharma and biotech customers in meeting regulatory expectations to enroll and retain patients in clinical trials, who more fully reflect real-world populations experiencing the disease or health condition being studied.

Turning to cash flow and the balance sheet year to date cash flow from operations was $4 7 billion.

Year to date free cash flow was $3 7 billion after investing $1 billion.

Of net capital expenditures.

During the quarter, we returned $136 million of capital to shareholders through dividends and we deployed just over $900 million of capital for the acquisition of core habitats.

We ended the quarter with $6 2 billion in cash and $35 3 billion of total debt and.

Our leverage ratio at the end of the quarter was three two times gross debt to adjusted EBITDA and two seven times on a net debt basis.

Marc Casper: It also helps to enable our customers to meet US wooden drug administration requirements around diversity action plans. In terms of our environmental sustainability efforts, we will officially surpass our original goal to reduce greenhouse gas emissions by 30% by 2030. As we previously announced, we've increased our target to a 50% reduction by 2030 and will well on a way to achieving that goal. Council. I'm very proud of the way we're making a difference, not only by enabling our customer success, but also by creating a great environment for our colleagues and making a positive impact for society.

In concluding my comments on our total company performance adjusted ROIC was 12%, reflecting the strong returns on investment that we're generating across the company.

So now I'll provide some color on the performance of our four business segments. Let me start with a couple of framing comments, let's.

With scale and margin profile about pandemic related revenue varies by segment and that revenue is higher than the prior year. So that does skew some of the reported segment growth rates and margins and we continue to execute strong pricing realization across all segments to address inflation.

Marc Casper: So to summarize our key takeaways from the third quarter, we delivered strong operating performance in Q3, driven by our team's execution and the power of our PPI business system. Given the more challenging macroeconomic environment, we're taking the right actions and appropriately managing the company. And we're incredibly focused on delivering differentiated short-term performance while simultaneously strengthening our long-term competitive position and outlook. The attractive long-term outlook for the life sciences industry remains unchanged. And we're uniquely positioned to help our customers navigate the current environment, capture incremental opportunities, and thanks to this period an even stronger industry leader with a very bright future.

Moving on to the segment details starting with life Sciences solutions.

Q3 reported revenue in this segment declined 18% and organic revenue was 19% lower than the prior year quarter. This was driven predominantly by the run off of a pandemic related revenue in this segment versus the year ago quarter.

Q3, adjusted operating income for life Science solutions decreased 16% and adjusted operating margin was 35, 9% up 80 basis points versus the prior year quarter.

During the quarter, we delivered exceptionally strong productivity and favorable FX.

Which was partially offset by unfavorable volume mix.

In the analytical instruments segment reported revenue increased 8% in Q3 and organic growth was also 8%.

Stephen Williamson: With that, I'm now handing the call over to our CFO, Stephen Williamson. Thanks, Mark. Good morning, everyone. As you saw in that press release, and as Mark just outlined, while the macroeconomic environment became more challenging in the third quarter, we continued to deliver differentiated performance. In Q3, we delivered $10.6 billion of revenue, which included 1% core organic revenue growth. Our PPI business system enabled us to generate 200 basis points of adjusted operating margin expansion, and we delivered $5.69 of adjusted EPS, a 12% increase over Q3 last year. We're continuing to successfully navigate the current environment.

The strong growth in this segment this quarter was led by electron microscopy business.

In this segment Q3, adjusted operating income increased 21% and adjusted operating margin was 26, 7% up 290 basis points year over year in.

In the quarter, we delivered very strong productivity and had strong volume pull through which is partially offset by FX and strategic investments.

Turning to specialty diagnostics in Q3 reported revenue increased 2% and organic revenue was 6% lower than the prior year quarter and Q3, we continued to see strong underlying growth in the core led by our immuno diagnostics microbiology and transplant diagnostics businesses.

Stephen Williamson: Let me now provide you with some additional details on our performance. Beginning with our earnings results, as I mentioned, we delivered $5.69 of adjusted EPS in Q3. Gap EPS in the quarter was $4.42. On the top line, reported revenue was 1% lower here over year. The components of our Q3 reported revenue included 3% lower organic revenue, a 1% contribution from acquisitions, and a tailwind of 1% from far and exchange.

This was offset by lower pandemic related revenue versus the year ago quarter.

Q3, adjusted operating income for specialty diagnostics increased 29% in the quarter and adjusted operating margin was 26, 1%, which is a 550 basis points higher than Q3 2022.

During the quarter, we delivered favorable volume mix and very strong productivity that was partially offset by the impact of lower COVID-19 testing volume and strategic investments.

Stephen Williamson: Turning to our organic revenue performance bi-geography, the organic growth rates by region are skewed by the pandemic-related revenue in the current and prior year. In Q3, North America declined mid-single digits, Europe grew in the low-single digits, Asia-Pacific declined in the low-single digits with China declining in the high-single digits. With respect to our operational performance, adjusted operating income in the quarter increased 8%, and adjusted operating margin was 24.2%, 200 basis points higher than Q3 last year.

Finally in the priority products and Biopharma services segment, Q3 reported revenue increased 3% and organic growth was 1% during.

During Q3 organic revenue growth in this segment was led by the pharma services business. In this segment Q3, adjusted operating income increased 29% and adjusted operating margin was 16, 4%, which is 340 basis points higher than Q3 2022 during the quarter, we delivered exceptionally strong productivity and favorable mix.

<unk>, which was partially offset by FX.

Stephen Williamson: In the quarter, we delivered exceptionally strong productivity and achieved good price realization. This was policy offset by lower pandemic-related revenue, continued strategic investments, and FX. The strength about productivity reflects the impact of our PPI business system. It's enabling us to manage our cost-based appropriately given the macro conditions. Total company adjusted growth margin in the quarter came in at 42%, 30 basis points higher than Q3 last year. Moving on to the details of the PNL, adjusted S-GNA in the quarter was 14.8% of revenue, an improvement of 140 basis points over Q3 last year.

Let me now turn to guidance as Mark outlined we're revising our full year 2023 guidance to reflect the more challenging macroeconomic environment.

A revised estimate for 2023 is revenue of $42 7 billion.

With core organic revenue growth of just under 1%.

And $21 50 of.

Of adjusted EPS.

Let me now provide you with some details behind the change in guidance versus the estimate we provided on our last earnings call.

Starting with revenue our revised guidance is $850 million lower than the prior outlook $200 million of this is driven by an increased headwind from FX.

Stephen Williamson: Research Year. Total R&D expense was $320 million in Q3 reflecting our ongoing investments in high impact innovation. R&D as a percent of our manufacturing revenue was 6.7% in the quarter. Looking at results below the line for the quarter, a net interest expense was $113 million which is similar to Q3 last year. I had just a tax rate in the quarter was 10%, which is a hundred and eighty basis points lower than Q3 last year reflecting results about tax planning activities. Average diluted shares were 388 million in Q3, approximately 7 million lower year-over-year driven by Sherry Purchase's net of option dilution.

We've increased our guide by $45 million to reflect the acquisitions of core <unk>.

On the rest of the change is due to a lower core revenue assumption.

We now see core organic growth for the year.

Just under 1%, which is a little less than 2% lower than the prior guide.

This is driven by the same factors that we've seen throughout the year the weak economic conditions in China and cautious spending in general across our customer base and.

And as we indicated during Q3 these factors increased an impact during the quarter.

And our assumption is that the conditions. We saw at the end of Q3 will continue throughout the remainder of the year and as a result, we now expect core market growth for our industry to be slightly negative for the year.

Stephen Williamson: Turning to cash flow in the balance sheet, yet today cash flow from operations was $4.7 billion, yet today free cash flow was $3.7 billion, after investing $1 billion of net capital expenditures. During the quarter we returned $136 million of capital to shareholder through dividends, and we deployed to say over $900 million of capital for the acquisition of core evidence. We entered the quarter with $6.2 billion in cash and $35.3 billion of total debt.

However, we continue to effectively navigate the macro dynamics and expect to continue to deliver differentiated core organic revenue growth for the year, despite the more challenging conditions.

Moving onto profitability the revised guidance assumes a pull through on the lower revenue of just over 40% and we now expect our adjusted operating margin to be 22, 9% for the year.

To use the PPI business system to manage our costs appropriately given the market conditions.

Stephen Williamson: Our leverage ratio at the end of the quarter was 3.2 times gross debt to adjusted EBITDA and 2.7 times on a net debt basis. And concluding my comments on our total company performance that just at ROIC was 12%, reflecting the stronger terms on investment that were generating across the company.

From an adjusted EPS standpoint, the revised guidance is 17, lower due to FX and 69 related to the change in core revenue. So we now expect to deliver $21 50.

Adjusted EPS in 2023, a strong result, given the challenging macro environment.

Stephen Williamson: So now I'll provide some color on the performance of our four business segments.

Stephen Williamson: Let me start with a couple of framing comments. The scale and margin profile of our pandemic related revenue varies by segment, and that revenue is higher in the prior year, so it does use some of the reported segment growth rates in margins. Let me continue to execute strong pricing realization across all segments to address inflation.

Let me now provide you with some additional details of the updated 2023 guidance.

We continue to assume that we will deliver three $300 million of testing revenue in 2023.

We expect the total vaccines and therapies related revenue will be one 6 billion less than the prior year, an impact of over 4% on a core organic revenue growth. This assumes were recognized $1 $3 billion of vaccine therapies revenue in 2023 $600 million of which is in a clinic.

Stephen Williamson: Moving on to the segment details starting with life sciences solutions. Q3 reported revenue in this segment declined 18% and organic revenue was 19% lower than the prior year quarter. This is driven predominantly by the runoff of our pandemic related revenue in the segment versus the year ago quarter. Q3 adjusted operating income for life science solutions decreased 16% and adjusted operating margin was 35.9%. Up 80 basis points versus the prior year quarter. During the quarter we delivered exactly strong productivity and had favorable FX, which was partially upset by unfavorable volume mix.

Research business.

Moving onto FX given recent rate changes, we're now assuming that FX will be a year over year headwind to revenue of approximately $100 million.

And in terms of adjusted EPS, We now expect FX to be a year over year headwind of 28, which is 17 more of a headwind than our previous guidance.

The binding site and <unk> acquisitions are performing well and we now assume that they'll contribute approximately $300 million to our reported revenue growth for the year.

Stephen Williamson: In the analytical instrument segment reported revenue increased 8% in Q3, and organic growth was also 8%. A strong growth in this segment this quarter was led by electron microscopy business. In this segment Q3 adjusted operating income increased 21% and adjusted operating margin was 26.7% up to 190 basis points a year over a year. In the quarter we delivered very strong productivity and had strong volume pull through which was partially upset by FX and strategic investments.

Below the line, we now expect just under $500 million of net interest expense in 2023, a slight increase reflecting the acquisition of core advertising.

We continue to assume that the adjusted tax rate for the 2023 will be 10%.

And we're now expecting net capital expenditures will be between one three and $1 5 billion.

And we now expect that free cash flow will be between $6, seven and $6 9 billion for the year.

In terms of capital deployment, our guidance includes $3 billion of share buybacks, which were already completed in January three 7 billion in acquisitions completed this year and $3 1 billion committed to the acquisition of <unk>, which we expect to close in 2024.

Stephen Williamson: Then especially diagnostics in Q3 reported revenue increased 2% and organic revenue was 6% lower than the prior year quarter. In Q3 we continue to see strong underlying growth in the core led by our munitagnostics microbiology and transplant diagnostics businesses. This is offset by low a pandemic related revenue versus the year ago.

We continue to assume that full year average diluted share count will be approximately 388 million shares and then we'll return approximately $540 million.

Stephen Williamson: Quatern. Q3 adjusted operating income for specialty diagnostics increased 29% in the quarter and adjusted operating margin was 26.1%, which is a 550 basis points higher than Q3 2022. During the quarter, we delivered favorable volume mix and very strong productivity. That was partially upset by the impact of lower COVID-19 testing volume and strategic investments.

Of capital to shareholders this year through dividends and a 17% increase over 2022.

So before I conclude my prepared remarks, I thought it'd be helpful to share some more detailed thoughts around how to frame 2024.

At this point in time, a good starting assumption is that our core organic revenue growth in 2024 is similar to 2023, approximately 1% growth.

Stephen Williamson: Finally, in the quarter, we delivered three percent and organic growth was 1%. During Q3, organic revenue growth in this segment was led by the farmer services business. In this segment, Q3 adjusted operating income increased 29%, and adjusted operating margin was 16.4%, which is 340 basis points higher than Q3 2022. During the quarter, we delivered exceptionally strong productivity and favorable mix, which is partially upset by FX.

With a proven growth strategy, we expect to continue to take share and that would mean market growth in 2020 full will be similar to 2023 with a market declining 1% to two points.

In terms of phasing of our core organic revenue growth, that's best to assume a more challenging first half and then moderate growth in the second half.

The pandemic related revenues, both testing and total vaccines and therapies unlikely to be around $300 million in 2024.

Stephen Williamson: Let me now turn to guidance.

Stephen Williamson: As Mark outlined, we're revising our full year 2023 guidance to reflect the more challenging macroeconomic environment. Our revised estimate for 2023 is revenue of $42.7 billion with core organic revenue growth of just under 1% and $21.50 of adjusted EPS. Let me now provide you with some details behind the change in guidance, versus the estimate we provided on our last earnings call. Starting with revenue, our revised guidance is $850 million lower than the prior outlook.

This is a headwind of approximately $1 3 billion or 3% of revenue.

M&A is expected to increase revenue of $175 million year over year. That's a combination of six months of <unk> and the inorganic portion of the core Abbott test revenue in 2024.

And based on current rates, we would expect FX to be a headwind to revenue in 2024 of approximately $375 million.

Just under 1%.

So wrapping all this together 2020 for revenue dollars will be very similar to 2023.

Stephen Williamson: $200 million of this is driven by an increased headwind from FX. We've increased our guide by $45 million to reflect the acquisitions of core evidence, and the rest of the changes due to our lower core revenue assumption. We now see core organic growth for the year of just under 1%, which is a little less than 2% lower than the prior guide. This is driven by the same factors that we've seen throughout the year, the weak economic conditions in China, and cautious spending in general across that customer base.

In terms of adjusted operating income dollars with this topline setup, we would expect to deliver similar adjusted operating income dollars to 2023.

We will continue to use the PPI business system to manage costs very carefully but also continued to make the right long term investments to enable us to continue to strengthen our industry leadership.

Strong underlying productivity and cost controls are expected to offset the runoff in the remaining pandemic revenue inflation and the normalization of incentive compensation across the company and appropriate investments in our colleagues.

Stephen Williamson: As we indicated during Q3, these factors increased an impact during the quarter, and our assumption is that the conditions we saw at the end of the year will continue throughout the remainder of the year. As a result, we now expect core market growth for our industry to be slightly negative for the year. However, we continue to effectively navigate the macro dynamics and expect to continue to deliver differentiated core organic revenue growth for the year despite the more challenging conditions.

Below the line the net the interest income benefit from a cash generation and an assumption of $3 billion of buybacks in 2024 with more than offset the impact of a slight increase in our tax rate to 10, 5%.

All of this would enable us to deliver around $21 75 of adjusted EPS for the year.

So the high level summary is that with these assumptions, we would expect 2024th for organic revenue growth to be similar to 2023.

Stephen Williamson: Moving on to profitability, the revised guidance assumes a pull through on the lower revenue of just over 40%. We now expect to adjust the operating margin to be 22.9% for the year. We continue to use the PPI business system to manage our costs appropriately given the market conditions. From an adjusted EPS standpoint, the revised guidance has 17 cents lower due to FX and 69 cents related to the changing core revenue. We now expect to deliver $21.50 of adjusted EPS in 2023, a strong result given the challenging macro environment.

And then a proven growth strategy and PPI business system would enable us to continue to manage the macro conditions and the runoff in pandemic revenue very effectively so we can deliver revenue and profitability similar to 2023 and a slight increase in adjusted EPS.

How should the market conditions to be better than I, just outlined our growth strategy and proven execution capabilities will enable us to deliver the upside benefit.

I look forward to providing you our formal guidance for 2024 on our next earnings call along with our usual supporting details for the year ahead at that point, we'll have the insight from our full year 2023, we'll have a better view on the macro conditions entering 2024.

Stephen Williamson: Let me now provide you with some additional details of the updated 2023 guidance. We continue to assume that we'll deliver $300 million of testing revenue in 2023. We expect the total vaccines and therapies related revenue will be $1.6 billion less than the prior year. An impact of over 4% on our core organic revenue. Growth. This assumes we'll recognize $1.3 billion of vaccine therapies revenue in 2023, $600 million of which is an act of clinical research business.

So in conclusion, we continue to navigate the environment really well delivering differentiated financials and further strengthening our industry leadership.

We remain really well positioned to capitalize on additional opportunities as market growth normalizes over time and.

And as we think about our cost base, we're really well positioned to drive strongly accretive growth going forward.

Now, let me turn the call back over to Rex.

Stephen Williamson: Moving on to FX, given recent rate changes, we're now assuming that FX will be a year of year headwind to revenue of approximately $100 million. In terms of just the EPS, we now expect FX to be a year of year headwind of 28 cents, which is 17 cents more of a headwind than our previous guidance. The binding sites in core-evertask acquisitions are performing well, and we now assume that they'll contribute approximately $300 million to our reported revenue growth for the year.

Operator, we're ready for the Q&A portion of the call.

Thanks, Keith we will now enter all Q&A session. As a reminder, if you'd like to ask a question. Please press star followed by one on Nintendo <unk>.

Pat in order to allow everyone in the queue and opportunity to address the Saturday session management team. Please limit your time on the call to one question and I need one follow up if you have any additional questions. Please return to the key Ameren parent ask a question. Please ensure that your device on Egypt lately.

Stephen Williamson: Below the line, we now expect just under $500 million of net interest expense in 2023, a slight increase reflecting the acquisition of core-evertask. We continue to assume that the adjusted tax rate for the 2023 will be 10% and we're now expecting net capital expenditures will be between $1.3 and $1.5 billion. And we now expect that free cash flow will be between $6.7 and $6.9 billion for the year. In terms of capital appointments, our guidance includes $3 billion to share buybacks, which were already completed in January, $3.7 billion in acquisitions completed this year, and $3.1 billion committed to the acquisition of O-Link, which we expect to close in 2024.

Our first question today comes from Jack Meehan from Nephron research.

Your line is now eight <unk>. Please proceed.

Good morning, and thank you for all the color.

Mark a bigger picture question.

Upon greater reflection, how much of your decision to raise the long term target to 7% to 9% do you think may have been based on the environment. We're in and was curious do you think it's prudent for investors to think of something lower than that in the medium term.

Yes, Jack Thanks for the question when I think about that.

The long term guidance or the long term targets alright.

Stephen Williamson: We continue to assume that full-year average salute to share count will be approximately $388 million shares, and that will return approximately $540 million of capital to share hold this year through dividends, at 17% increase over 2022.

What's underlying it is 4% to 6% growth right and I don't think Theres any controversy market call for dosing for some market I don't think is any controversy that we're going to grow meaningfully faster because if you look at the last 10 or 15 years, we've delivered superior organic growth and it keeps getting better and better relative to the market right. So the spread of two three.

Stephen Williamson: So before I conclude my prepared remarks, I thought it would be helpful to share some more detailed thoughts around how to frame 2024. At this point in time, a good starting assumption is that a core organic revenue growth in 2024 is similar to 2023, approximately 1% growth. With that proven growth strategy, we expect to continue to take share, and that would mean market growth in 2024 will be similar to 2023 with a market decline in one to two points.

It's better than that that's not a question raised by four to six you get to the seven to nine.

When I think about my 20 plus years in this industry thinking about what the historical growth is what the drivers are for the growth.

I feel a 4% to 6% long term market growth is actually the appropriate number that the things that the industry are going through now.

Do not change my view that the long term health of this industry is exceptionally bright.

Stephen Williamson: In terms of phasing of our core organic revenue growth, it's best to assume a more challenging first half, and then moderate growth in the second half. The pandemic-related revenues, both testing and total vaccines and therapies, are likely to be around $300 million in 2024. This is a headwind of approximately $1.3 billion or 3% of revenue. M&A has expected to increase revenue $175 million year over year, as the combination of six months of O-Link and the inorganic portion of core-evertaste revenue in 2024.

And that you will see that return and I can't call when exactly that returns, but what I can say is that the unmet health care needs and all of the drivers that we talked about at our analyst day.

We remain extraordinarily bright for the future. So thank you Chuck.

Thanks, and then maybe as a follow up.

The deterioration kind of in the market, we've seen since the second quarter earnings or even early September.

What are you hearing from customers like as you try and diagnose what's happening here and just.

Stephen Williamson: And based on current rates, we'd expect FX to be a headwind to revenue in 2024, of approximately $375 million just under 1%. So wrapping all this together, 2024 revenue dollars will be very similar to 2023. In terms of adjusted operating income dollars, with this top-line setup, we would expect to deliver similar adjusted operating income dollars to 2023. We'll continue to use the PPI business system to manage costs very carefully, but also continue to make the right long-term investments to enable us to continue to strengthen our industry leadership.

What are your thoughts on kind of the recent increase in the 10 year.

How does that impact kind of the pace of the recovery as you see it.

Yes, so I've been out with customers as you know I.

I do that a lot I've been out on a definitely.

Out there with our customer towards both in Europe, and the U S earlier in the quarter I was in China. So.

<unk>.

When I think about what our customers are saying they are actually very bullish on the on the mid to long term licenses are incredible opportunities for us what I would say is short term.

Stephen Williamson: Strongland Align Productivity and Cost Controls are expected to offset the runoff and the remaining pandemic revenue, inflation and the normalization of incentive compensation across the company and appropriate investment in our colleagues. Below the line in that the interest of income benefit from our cash generation and an assumption of $3 billion of buybacks in 2024 would more than offset the impact of a slight increase in our tax rate to 10.5%. All of this would enable us to deliver around $21.75 of adjusted EPS for the year.

If you're if you're visiting a smaller biotech customer.

Seeing his concerns about when the when the funding environment is going to improve so there's a level of caution and.

Think thats generally across the customer base as customers are being.

Cautious after.

A very robust pandemic period, but long term and the excitement and customers looking forward to the future with us.

Premium pasta.

Anything on them and give them long term interest rates.

Think about the long term interest rate I think from a funding standpoint.

Stephen Williamson: So the high level summary is that with these assumptions, we'd expect 2024 organic revenue growth to be similar to 2023. And that our proven growth strategy and PPI business system would enable us to continue to manage the macro conditions and the runoff in pandemic revenue very effectively. So we can deliver revenue and profitability similar to 2023 and a slight increase in adjusted EPS. Now should the market conditions be better than I just outlined, our growth strategy improve and execution capabilities will enable us to deliver the upside benefit.

I think there's a spread between interest rates and then what the kind of return where people are going to get on an investment in <unk>.

Stephen Williamson: I look forward to providing you our formal guidance for 2024 on our next earnings call along with our usual supporting details for the year ahead. At that point, we'll have the insight from a full year of 2023. We'll have a better view on the macro conditions entering 2024.

The valuation expectations moderate for Frac customers that I think the funding will start flowing Bachelor going forward the timing of that will be played out but.

The return profile and our successful investment in biotech is still incredibly.

<unk> so.

Long term that will moderate appropriately thanks.

Thanks sure.

Thank you.

Thank you Chad. Our next question comes from Dan Brennan from TD Cohen, Dan. Your line is now open. Please go ahead.

Thank you thanks for the questions guys.

Maybe mark and Steve Stephen excuse me.

It's somewhat hard to reconcile just the magnitude of this end market weakness.

Stephen Williamson: So in conclusion, we're continuing to navigate the environment really well, delivering differentiative financials and further strengthening our industry leadership. We remain really well positioned to capitalize on additional opportunities as market growth normalizes over time. And as we think about our cost base, we're really well positioned to drive strongly accreted growth going forward.

Just given the view towards the structural attractiveness.

The customer drivers. So maybe could you just give us a lens on this outlook for 'twenty four maybe first for Mike or geographic perspective, China, how much of is that a driver towards like other regions and then b it would be great to us alone about like within Biopharma Your largest customer base, maybe some of the underlying factors that kind of.

Raffaio Zahada: Now let me turn the call back over to Rhett.

Ellen: Operator, we're ready for the Q&A portion of the call. Thank you. We will now enter our Q&A session. As a reminder, if you'd like to ask a question, please press star followed by one on the telephone keypad. In order to allow everyone in the Q&A opportunity to address the FEMO Fisher Management team, please limit your time on the call to one question and only one follow up. If you have any additional questions, please return to the Q. And when preparing to ask a question, please ensure that your device is unmuted locally.

Point to this very weak growth bioprocess.

Pharma R&D Mark you just mentioned pre commercial biotechs, just give us a little more color on what's driving.

The real.

Kind of contracted growth outlook.

Yes, so Dan thanks for the question.

I think the way that Stephen and I thought about giving an early view into 2024.

It is not based on US having finished our operating plan process, which we do in December and then when we actually lay out guidance, we do it based on how did the year finish.

Jack Meehan: Our first question today comes from Jack Neon from their from research. Jack, the line is now open. Please proceed.

Marc Casper: Good morning and thank you for all the color. Mark, a bigger picture question, you know, upon greater reflection, how much of your decision to raise the long term target to 79% do you think may have been based on the environment we were in and was curious, do you think it's prudent for investors to think it's something lower than that? And the medium term? Yeah, Jack, thanks for the question. When I think about the long term guidance or long term targets, right?

All of the details by business by geography, and then we figure out the details we took the benefit of each of US having 20 plus years of experience in the industry looking at the market conditions that we see today and basically went through the assumptions of how could 2024 play out based on what we know today right. So so this is not.

A bottoms up view by country by geography by business unit, but rather.

Based on experience and based on what we're seeing so when I think about for US next year.

Marc Casper: What's underlying it is 4% to 6% growth, right? I don't think there's any controversy, a market goal, 4% to 6% market. I don't think there's any controversy that we're going to go meaningfully faster because if you look at the last 10 or 15 years, we've delivered superior organic growth and it keeps getting better and better relative to the market. Right? So the spread of, you know, two, three points better than that, that that's not in question. Right? So if 4% to 6% you get to the 7%. 2009.

Alright, we tried to give you an incredible clarity about what COVID-19 in our numbers right. So we're expecting a run off of $1 $3 billion of Covid related revenue in 2024 that would leave $300 million.

Our revenue in 2024 of which we have pretty good line of sight to what those activity right. So that's the first assumption and then the second assumption is effectively what's going on in the base business, maybe excluding the COVID-19 related business.

Marc Casper: When I think about my 20 plus years in this industry, thinking about what the historical growth is, what the drivers are for the growth, I feel 4 to 6% long term market growth is actually the appropriate number that the things that the industry are going through now do not change my view that the long term health of this industry is exceptionally bright and that you'll see that return and I can't call when exactly that returns. But what I can say is that the unmet health care needs and all the drivers that we talked about on our analyst day remain, you know, extraordinarily bright for the future.

That should be a little bit over 3% growth right. So if you think of those two factors. That's how you get to a core number of one remember that testing as part of the decline. So so that's the set of assumptions. So then there is another one so think about it which is comparisons are all doing well.

We're going to lock the customer caution different businesses at different points in time, but.

First half we will have more difficult comparisons haven't fully seen the effect of caution in the second half you actually get to more back to kind of moderate growth in that period of time, just based on that factor and then we looked at some of our businesses like our instrument business, which had the benefit this year of the disruptions from supply chain.

Jack Meehan: So thank you, Jack. Thanks.

Marc Casper: And then maybe as a follow-up, the deterioration kind of in the market we've seen some second quarter earnings or even early September, what are you hearing from customers like as you try and diagnose what's happening here and just what are your thoughts on kind of the recent increase in the 10 year, you know, how does that impact kind of the pace the recovery as you see it. Yeah, so I've been out with customers, as you know, I do that a lot.

In 2021, and 2022, when we were able to.

Catch up on orders that need to be shipped and that gave us a little bit of a benefit of growth. This year of which that obviously doesn't repeat next year, we factored all of that in and we said core is pretty similar to what he is next year, we look forward to actually doing the detailed guidance.

Marc Casper: I've been out on a definitely out out there with our customer tour both in Europe and the US and earlier in the quarter I was in China. So when I think about what our customers are saying, they're actually very bullish on the on the mid to long term. So there's quite a lot of opportunities for us. You know, what I would say is short-term, you know, if you're visiting a smaller biotech customer, you know, what you're seeing is, you know, concerns about when the when the funding environment is going to improve.

At the end of January early February when we have our earnings call and we will have all of our puts and takes and be a lot smaller, but we wanted our analyst community to be aligned with what we're seeing today, because there's quite a big disconnect in.

And the numbers that are out there for 2024 relative to the numbers that we articulated today.

Great. Thanks, Marc maybe.

Marc Casper: So there's a level of caution. And I think that's generally across the customer basis customers are being, you know, cautious after, you know, a very robust pandemic period. Right. But long term and the excitement and customers, you know, looking forward to the future with us.

Maybe just a follow on just on Biopharma.

Oh, sorry about that.

Maybe just to follow up on Biopharma since it is your biggest customer base in such a key driver could you just give us a little bit of a window to maybe what youre seeing in Q3 kind of how you're thinking about Q4 is maybe a jumping off point for 'twenty four.

Marc Casper: Extremely positive. Anything on the major on term interest rate. I don't think about the long term interest rate. I think from a funding standpoint, I think there's a spread between interest rates and then what kind of return will people are going to get on an investment and as the valuation expectations moderate for our customers that I think the funding will start flowing that are going forward. The timing of that will be played out. But the return profile and the successful investment environment that I could still incredibly compelling. So long term, that will moderate appropriately. Thanks, sir.

Large pharma R&D spending.

Jack Meehan: Thank you.

Process PPD.

Give us some flavor on the <unk>.

Key customer segments, and kind of what the trends look like right now and.

That'll give us some vantage point for how we think about 'twenty four there as well thank you.

Dan I think your fellow analysts are throwing tomatoes at building today.

19 questions in that one.

I'll start at a high level and we believe some of this for for others.

<unk>.

Let me break to the pharma biopharma into what revenue was in Q3, and then a little bit of some of the underlying dynamics actually the revenue in the quarter was incredibly similar to the prior quarter alright in terms of how.

Jack Meehan: Thank you, Jack.

Daniel Brennan: Our next question comes from Dan Brennan from TD Cohen.

Daniel Brennan: Daniel is not always pleased. Go ahead. Thank you. Thanks for the questions, guys. Maybe Mark and Steve Steven, excuse me. You know, it's somewhat hard to reconcile. Just the magnitude of this end market weakness, just given the view towards the structural attractiveness of the customer drivers. So maybe could you just give us a lens on this outlook for 24 maybe first from like a geographic perspective, China, how much of is that a driver towards other regions and then be.

Or how we actually performed we declined 1%.

And looking at that.

On the long term outlook is strong we talked about an earlier question.

Effectively customer caution increased a bit youll see that more pronounced in biotech and pharma, what you're seeing across the customer set that's more of a forward looking look I think the thing Thats, probably as you know.

Most relevant and why we think about our fourth quarter. The way we do one of the things that we assumed in our previous guidance was that in our bio processing business that orders would stabilize and start to normalize in the third quarter.

Daniel Brennan: It'd be great to learn about like, you know, within bio farming, your largest customer base, maybe somebody underlying factors that, you know, kind of pointed is very weak growth by a process. Farma R&D, Mark, you just mentioned pre commercial biotech. Just give us a little more color on what's driving, you know, the real, you know, kind of contracted growth outlook. Look. Yeah, so Dan, thanks for the question. I think the way that Stephen and I thought about giving an early view to 2024, you know, is not based on us having finished our operating plan process, which we do in December.

We did not see that right. So if you say, what's the single biggest driver of the same factors in Q4 versus what we talked about really is borrower production. We didn't see that normalization of orders in general that business operates on a roughly a 13 week lead time. So if you don't see the orders in Q3, youre not going to see the revenue.

Daniel Brennan: And then when we actually lay out guidance, we do it based on how to the year finish, you know, all of the details by business, by geography. And then we figure out the details. We took the benefit of each of us having 20 plus years of experience in the industry, looking at the market conditions that we see today, and basically went through the assumptions of how could 2024 play out based on what we know today, right?

Step up in Q4, so hopefully that's helpful. In terms of the framing I'm sure I'll get some of the other ones in future offerings.

Thank you Dan. Our next question comes from Derik de Bruin from Bank of America. Derrick. Your line is now open. Please go ahead.

Hi, Thank you and good morning, Thanks for taking the question Hey, Mark.

You should as typically havent called out.

<unk> impact.

TBD.

Pharma services business in the past can you just sort of clarify what that was in 'twenty, two and 'twenty. Three overall, so we can do the number and also staying on that segment.

Daniel Brennan: So, so this is not a bottoms up view by country, by geography, and by, you know, company business union, but rather, you know, based on experience and based on what we're seeing. So, when I think about for us next year, right, we try to give you incredible clarity about what's COVID in our numbers, right? So, we're expecting a runoff of $1.3 billion of COVID-related revenue in 2024. That would leave $300 million of revenue in 2024, which we have pretty good line of sight to what those activity is, right?

Pfizer and <unk> are big customers of yours, they both sort of announced some R&D cuts how should we sort of think about how that flows through the business and I guess is there any sort of way.

Vaccine revenues that are in that business, but any sort of like take or pays that has sort of been in there. So it's a lot on that but I'd like to start there.

Yes.

Great question so.

Let's talk about clinical research one level above and then ill.

Daniel Brennan: So, that's the first assumption. And then the second assumption is, you know, effectively what's going on in the base business, meaning excluding the COVID-related business. And that should be a little bit over 3% growth, right? So, if you think of those two factors, that's how you get to a core number of one, remember the testing is part of the decline. So, that's a set of assumptions. So, then there's another lens to think about it, which is comparisons, right?

Given some of the answers to the question you have right. So we are almost at the two year anniversary of the acquisition of PPD, which closed in December of 2021.

Business is doing great right and it's been terrific acquisition that is a terrific acquisition with a bright future.

If you think about what the moment in time was in December of 2021.

<unk> had done a great job of growing its core sort of normal business and played a leading role in.

Daniel Brennan: Or that we're going to lack the customer caution, different businesses at different points in time. But, you know, the first half will have more difficult comparisons, haven't fully seen the effect of caution. The second half, you actually get to more, you back to kind of moderate growth in that period of time just based on that factor. And then we looked at some of our businesses like our instrument business, which had the benefit this year of the disruptions from supply chain in 2021 and 2022.

Supporting the clinical trials for vaccines and therapies, just phenomenally relevant set of capabilities, which is part of the reason we knew how great. The business wasn't how respected it wasn't in the industry.

Since our ownership we've modeled in that this would be.

A declining portion of the business, it's actually been a headwind through all of our ownership on core organic growth rates. So.

Daniel Brennan: And we were able to, you know, catch up on orders that need to be shipped. And that gave us a little bit of the benefit of growth this year, of which that obviously doesn't repeat next year. We factor all of that in. And we said, you know, core is pretty similar to what it is next year. We look forward to actually doing the detailed guidance, you know, at the end of January or early February, when we have our earnings call and we'll have all of our puts and takes and be a lot smarter. But we want our analyst community to be aligned with what we're seeing today because there's quite a big disconnect in the numbers that are out there for 2024 relative to the numbers that we articulated today.

If I think about <unk>.

Organic was actually been higher.

Then if we didn't include it but our view was this business is end market growth was really kind of we're just going to grow through it and it was factored into our guidance, obviously as customer caution has increased.

In pharmaceutical and biotech the rates of growth in our non coal business slows and we wanted to ensure that our investors understood that that was actually quite healthy, but we're going through the run off on vaccines and therapies to give you the magnitude of the number what is embedded in our 2023.

Marc Casper: Great. Thanks, Mark. Maybe just a follow up to some biopharmus since it, I'm sorry about that. Maybe it's a follow up on biopharmus since it is your biggest customer base and such a cute driver. Could you just give us a little bit of a window, just maybe what you're seeing in Q3 kind of how you think about Q4 is maybe a jumping off point for 24, you know, large pharma R&D spending, bio process, you know, PPD, can you give us some flavor on the, you know, your key customer segments and kind of what the trends look like right now and, you know, that'll give us some vantage point for how we think about 24 there as well.

<unk> is a 600 million dollar decline in revenue for vaccines and therapies and it also happens to be $600 million of activity in the year. So that's this year and as opposed to sort of take or pay or those things clinical trials are different.

You have patients enrolled and go through it so that revenue will run off in an orderly fashion over the next couple of years in the outlook that we gave.

$300 million of total revenue for all pandemic related some of that most of it is actually that work in clinical research there is a little bit of take or pay in pharma services.

Marc Casper: Thank you. Yeah, and I think your fellow analysts are throwing tomatoes at your building today, asking 19 questions in that one, but I'll start at a high level and leave some of this for others. Let me break the format into what revenue was in Q3 and then a little bit of some of the underlying dynamics. Actually, the revenue in a quarter was incredibly similar to the prior quarter, in terms of how we actually performed.

Nominal amount.

<unk> testing so hopefully that gives you a good sense of the dynamic there.

So if you just think about underlying growth of.

The core PPD business, just sort of like what's your embedded number for this year and sort of like the use of working for next year, just do something said Theres just a lot of variables I think just some clarity would help.

Marc Casper: We declined 1% and looking at that, the long-term outlook here is strong. We talked about that in an earlier question. Effectively customer caution increased a bit. You see that more pronounced and biotech than form of what you see across the customer set. That's more of a forward-looking look. I think the thing that probably is most relevant and why we think about our fourth quarter the way we do, one of the things that we assumed in our previous guidance was that in our bioprocessing business, that orders would stabilize, start to normalize in the third quarter, we did not see that.

Yes, so obviously, we'll get into some of that we don't even do it by business unit in our guidance, but I can give you sort of direction of how to think about it.

What we have said at the time of the acquisition and what we've said consistently.

Is the long term growth expectation for this business is high single digits plus the benefit of synergies.

Marc Casper: What's the single biggest driver of the same factors in Q4 versus what we talked about? Really is bioproduction. We didn't see that normalization of orders. In general, that business operates on a roughly a 13-week lead time. If you don't see the orders in Q3, you're not going to see the revenue step up in Q4. Hopefully, that's helpful in terms of the framing. I'm sure I'll get some of the other ones in future questions. Thank you, Dan.

And that Hasnt changed in terms of the long term our assumption has been that it would step down from the 20% and then and then sort of double digit growth to that and that actually will step down below that and bounce back up just on the math of the Covid.

The COVID-19 activity run off over the next year or so so hopefully that helps in terms of how to think about modeling it.

Yes, Thanks, Dennis one more if I can.

Thank you.

Next question comes from Rachel Boss from Jpmorgan your.

Your line is now open. Please go ahead.

Great. Good morning, Thanks for taking the question.

I appreciate all the color that you've given us today on 2024 assets for two areas that I wanted to follow up on and third how do you see China playing out next year at this point with growth in the region, but any reasonable in 2024 hour, we can be looking at declines.

Derek Bruin: Our next question comes from Derek, to belong from Bank of America. Derek, your line is now open. Please go ahead. Hi, thank you, and good morning. Thanks for taking the question. Mark, you just typically haven't called out the COVID impact to the PPD, the bioproamer services business in the past. Can you just sort of like clarify what that was in 22 and 23 overall so we can do the number and also stain on that segment.

You've noted that 2024 is also going to be more of a back half weighted story, even given those market dynamics.

Walk us through the legacy is if a step up that you are expecting between the first half and second half and how much of that is really going to be driven by easier comps in the back half versus an expected rebound in the market.

So Rachel Thanks, let me start with China.

And I think it's really relevant for.

Derek Bruin: Pfizer and Moderna are big customers of yours. They both announced some R&D cuts. How should we sort of think about how that flows through the business? And I guess is there any sort of like vaccine revenues that are in that business where any sort of like takeer pays that has sort of been in there? Sorry. I know there's a lot on that, but let's just start there.

<unk> communities is understand our view on what's going on in China right. So first of all it was great to return to China, which I did in August.

I actually came away.

With.

In a way more encouraged.

On the long term so let me, let me give you a little bit more detail on it.

Marc Casper: Yeah, so there are great questions. So let's talk about clinical research, one level above and then I'll give you some of the answers to the question you have. Right. So we are almost at the two year anniversary of the acquisition of PPD, which closed in November of 2021. Business is doing great. Right. And it's been terrific acquisition. It is a terrific acquisition with a bright future. If you think about what the moment in time was in December of 2021, PPD had done a great job of growing its core sort of normal business and played a leading role in supporting the clinical trials for vaccines and therapies, just phenomenally relevant set of capabilities, which is part of the reason we knew how great the business was and how respected it wasn't.

I went to China with two different hats.

One is the chair of the U S China business Council.

Where I had the opportunity to interact with.

Senior members of the Chinese government, including the Premier.

And then I also did my normal thing of being CEO of Thermo Fisher scientific and had the opportunity to see our colleagues.

<unk> sites and see a lot of customers during that process. So this is what I came away with from my visit.

<unk> is definitely challenged.

And the conditions are worsening home, we saw that worsening.

During the quarter.

The government is actively working to boost business confidence and create a stronger environment for foreign investment so.

When I think about the kind of the macro picture short term definitely challenged from a macro economy.

Marc Casper: Industry. Since our ownership, we modeled in that this would be a declining portion of the business. It's actually been a headwind through all of our ownership on core organic growth, right? So, you know, if I think about or organic with actually been fire, you know, then if we didn't include it, but our view was this business's end market growth was really good and we're just going to grow through it and it was factored into our guidance.

I was pleasantly surprised that.

A real focus on a better environment for foreign companies, which bodes well for the future.

When I think about.

The outlook here, we definitely saw the impact of the declining economy in the results and we would expect that that will continue.

And we can't predict exactly when the market will do but we know that the comparisons get easier in the second half for for China as we lap some of the lump sum of the Comparables will get more challenging comparables when I think about phasing for the year and all of that and all of that stuff.

Marc Casper: Obviously, as customer caution has increased in pharmaceutical and biotech, the rates of growth in our non-COVID business flows and we wanted to ensure that our investors understood that that was actually quite healthy, but we're going through the runoff on vaccines and therapies to give you the magnitude of the number. What is embedded in our 2023 is a $600 million decline in revenue for vaccines and therapies and it also happens to be $600 million of activity in the year.

Look forward to doing that in.

In the beginning of 2024, yes, but breakthrough that kind of set up and I put it in the prepared remarks is kind of a mirror image of this year.

The starting point with kind of more challenging in the first half and then modest growth in the second half.

Thanks Rachel.

And then.

And then if I can squeeze in one more just on instrumentation like a bright spot this quarter and 8% growth and you've noted that you're over indexed to instrumentation or China and you've also highlighted some of the incremental weakness. There. So can you just walk us through what exactly youre seeing that portfolio, what would the instrument growth in China versus rest of World and then how should we think about that setup for instrumentation.

Marc Casper: So, that's this year and as opposed to sort of take or pay or those things, clinical trials are different. Like, you have patients enrolled, you go through it, so that revenue will run off in an orderly fashion over the next couple of years. In the outlook that we gave of $300 million of total revenue for all pandemic related, some of that, most of it is actually that work in clinical research. There's a little bit of take or pay in pharmaceutical services and nominal amount of testing, so hopefully that gives you a good sense of the dynamic there.

Youre going to see some of these difficult comps from the first three quarters.

So our policy of a pretty high level.

Awesome quarter in analytical instruments, 8% growth team is doing a good job.

Our electron microscopy business really performing extremely well.

And great to see the uptake on Astral, which is all breakthrough mass spectrometer, which we launched in June. So those are the highlights our guidance.

Marc Casper: Right, so if you just think about underlying growth of the core PVD business, just sort of like what's your embedded number for this year and sort of like working with them for next year, just so that there's just a lot of variables, I think, just some clarity would help. Yeah, so obviously we'll get into some of that. We don't even do a lot of business here in our guidance, but I can give you a sort of direction how to think about it.

For this year.

In our framing for next year reflects the customer caution and the non repeat of some of the.

Walking through the disruption of the pandemic on supply chain. So that's embedded in the outlook for the year and then Rachel just them they.

Marc Casper: What we have said at the time of the acquisition and what we've said consistently is the long-term growth expectation for this business is high single digits plus the benefit of synergies, and that isn't changed in terms of the long-term. Our assumption has been that it would step down from the 20% and then sort of double digit growth to that, and then actually we'll step down below that and bounce back up just on the map of the COVID, you know, the COVID activity run off over the next year or so. So hopefully that helps in terms of how to think about modeling it.

Additional kind of weakness we saw in China in Q3.

Some of that came through in revenue in Q3, but it's going to be more incentive revenue in Q4 because of the lag in terms of bookings profile for an instrumentation business. So thats part of the dynamic as to why Q4 is more impacted by the exchange profile that we saw in China.

Thanks Rachel.

Thank you as a reminder, please limit your time on the call to one question and one follow up question. Our next question comes from Puneet <unk> from Leerink partners.

Your line is now open. Please go ahead.

Yes, thanks Mark.

Derek Bruin: Yeah, thanks, Derek, and it's one more if I can. Thanks. Thank you.

Thanks for taking the questions al.

Two of my questions into one.

First of all.

Rachel Olson: Our next question comes from Rachel Vasantel from JP Morgan. Rachel, so I appreciate all the color that you've given us today on 2024. It's for two areas that I wanted to follow it up on.

Largely on M&A.

Given the environment.

Right now.

The type of deals that youre doing the type of valuations you're doing doing ad.

Could you, maybe just give us a sense of what youre seeing out there obviously all link.

Rachel Olson: First, how do you see China playing out next year? At this point, it grows in the region. It's going to be reasonable in 2024. We're going to be looking at the clients. And then you've noted that 2024 is also going to be more of a back half weighted story, really given those market dynamics. So if you walk us through the magnitude, it's a step up that you're expecting between the first half and second half.

Prior to that binding site and quarter over to US is that the type of sort of mid size deals that we should continue to expect here.

And the opportunity base that you are seeing in M&A and within the proteomics franchise now with successful arbitrage franchise over the last 15 plus years.

Rachel Olson: And how much of that is really going to be driven by easier comp from the back half versus an expected rebound in the market. So, Rachel, thanks. Let me start with China, and I think it's really relevant for the community to understand our view on what's going on in China, right? So, first of all, it was great to return to China, which I did in August. And I actually came away, you know, with, in a way more encouraged on the long term.

Combining that with.

The window link Mark maybe at a high level could you provide us your love for lack of a better word from vision on.

Proteomics.

But being a sort of a.

Tough market this year and next year.

Rachel Olson: So, let me give you a little bit more detail on it. You know, I went to China, with two different hats. One is the chair of the U.S. China Business Council, where I had the opportunity to interact with, you know, senior members of the Chinese government, including the premier. And then I also did my normal thing of being CEO, Thermo Fisher Scientific, and had the opportunity to see our colleagues, you know, visit sites and see a lot of customers during that process.

Yes, so plenty thanks for the question.

And.

So.

When I think about.

The M&A for this year or M&A, even in general right.

The criteria that we use is M&A, that's going to be highly valued by our customers.

And our strategic position generate strong returns for our shareholders Alright, and you look at what the different opportunities are and you think about the different periods of time.

Where it's going to skew in your favor and this year.

With a more volatile macro we have been able to add three nominal businesses alright in terms of strengthening the company with incredible growth prospects really good return profiles right. So it doesn't mean that next year's will look exactly like this over years, where you can buy companies that are <unk>.

Rachel Olson: So, this is what I came away with from my visit. Economy is definitely challenged, you know, and the conditions are worsening. We saw that worsening during the quarter. The government is actively working to boost business confidence and create a stronger environment for foreign investment. So, when I think about the kind of the macro picture, short term, definitely challenge from a macro economy. I was pleasantly surprised that, you know, a real focus on a better environment for foreign companies, which felt well for the future.

Really more of a balance of cost and revenue growth in those different things and different aspects of it but this year to be able to get the binding site core of its awesome. All link it's fantastic and when I think about <unk>. This is our first opportunity given that we had announced it during a blackout period.

It's a just a terrific fit right in and you think about it as a leader and a business that has gone through that phase of being well adopted by it. So the technology risk isn't here anymore, but it hasnt globally commercialized it hasnt reached nearly its full potential and increase.

Rachel Olson: When I think about, you know, the outlook here, we definitely saw the impact of the declining economy in the results, and we would expect that that will continue. And we can't predict exactly when the market will do, but we know that the comparisons get easier in the second half for, you know, for China as we lap some of the, lap some of the compables for the more challenging compables. When I think about facing for the year and all of that and all of that stuff, we'll look forward to doing that in, in the beginning of 2024.

<unk> complementary to our leading position in mass spectrometry in proteomics and puneet, thanks for reminding others about our <unk>.

15 year, plus track record of that will be trapped astro being the next.

Big many year run in the combination there plus or link and the fact that we have a leading position in the life Sciences instrumentation, which are very relevant in terms of two PC also these products as well really exciting.

Rachel Olson: Yeah, but the ratio they're going to set up what I put it in for padrimox is kind of a mirror image of this year as a starting point, kind of more challenging in the first half, and then what is growth in the second half. Thanks, Rachel.

Marc Casper: And then, and then if I could squeeze in one more just on instrumentation, that was a great spot this quarter at 8% growth. And you've noted that you're over indexed to instrumentation in China, and you've also, you know, highlighted some of the incremental weakness there. So can you just walk us through what exactly you're seeing not portfolio, what was instrument growth in China versus rest of world. And then how should we think about that setup for instrumentation next year, given you're going to see some of these difficult comp from the first three quarters.

They are a leader in their field and we're excited to help bring that to the.

Customer base in an accelerated fashion and when we look to the future. We expect this to be a long term.

Mid teens plus growth business.

And be able to generate really significant.

Adjusted operating income synergies driven by that accelerated revenue growth right on top of that to a $125 million of earnings that come from the synergies and that's going to generate double digit returns for shareholders. So super exciting time.

Marc Casper: So part of the pretty high level awesome quarter and analytical instrument is 8% growth teams doing a good job. Our lecture on my cross group business really performing extremely well and great to see the, you know, the uptake on Astral, which is all breakthrough mass spectrometer, which we launched in June. So those are the highlights are guidance, you know, you know, for this year and are framing for next year will flex the customer caution and the non repeat of some of the working through the disruptions of the pandemic on supply chain.

And we will continue to be outstanding stewards of our shareholders' capital.

Great. Thank you.

Thanks.

Thank you. Our next question comes from Ethan <unk> from Bernstein.

Your line is now open. Please proceed.

Hi, there good morning, and thanks for the question.

I'd love to ask about your lab products and Biopharma services unit, so the operating margin there.

Alright.

Marc Casper: So that's embedded in the outlook for the year. And then racial just some of the kind of the additional kind of weakness we saw in China in Q3. Some of that came through in revenue in Q3, but it's going to be more incentive revenue Q4 to the lag in terms of booking profile for an instrumentation business. So that's part of that dynamic is why Q4 is more more impacted by the change profile. We're in China. Thanks, Rachel. Thank you.

And at 16% was higher than any point in the past.

And when you talk about the puts and takes there you called out productivity and mix.

Positive drivers. So just two questions. There one on mix if that was the positive driver does that actually mean that sales are really low margin consumables were down other peer companies have talked about challenges there and brought down guidance in general lab product. So can you talk a little bit about the.

Dynamics.

Ellen: As a reminder, please limit your time on the call to one question and one follow-up question.

And then secondly on productivity gain what is driving that and are those going to be sustainable and recurring over time.

Puneet Souda: Our next question comes from Puneet, Souda, from Learing Partners. Puneet, your line is now open. Please go ahead. Yeah, thanks Mark. Thanks for taking the questions. I'll wrap two of my questions into one. First, largely on M&A. I have given an environment right now. The type of deals that you're doing, the type of valuations you're doing at. Could you maybe just give us a sense of what you're seeing out there. Obviously, all-link, prior to that binding size and core of the test, is that the type of sort of mid-sized deals that we should continue to expect here. And the opportunity base that you are seeing in M&A. And within the protein biomext franchise, now with a successful orbitraft franchise of last 15 plus years, combining that with O-link.

So thanks for the thanks for the question so when I think about that.

Margin dynamic in that segment.

The mix is it when.

When you think about where the more challenging environment is in terms of customer caution.

And China.

That impacts the lab products business.

And then the wider customer caution also impacts our channel business, so relative to the to the other businesses in that segment.

The mixed profile comes from Vincent productivity is about we've been right sizing the cost base within our lab products business and given the volume change so thats, where the majority of that is and then just.

Good spending wisely across the whole business, but those are probably the two main factors to call out.

Thanks, Great. Thanks, a lot.

Thanks Keith.

Later, we have time for one more question.

Marc Casper: Mark, maybe at a high level, could you provide us your left or lack of better work or vision on proteomics despite being a sort of a tough market this year and next year? Yeah, so Puneet, thanks for the question. And so, when I think about the M&A for this year, M&A, even in general, right, the criteria that we use, right, is M&A that's going to be highly valued by our customers, strengthen our strategic position, generate strong returns for our shareholders, right.

Perfect. We will take our last question today from Dan Leonard from UBS.

Your line is now open. Please go ahead.

Great. Thank you for the time and really appreciate you sharing all those framing thoughts for 2024.

A couple of additional follow ups on that but I'll keep it to one.

I know, it's not a bottoms up view, but I'm curious, how you're thinking about the inventory effect either for your business or the market in 2024.

In those areas, where there's been inventory burn down in 2023, whether it be in bio production or the channels business or wherever you are seeing it.

What do you think is a reasonable assumption for 2024 is it reasonable to assume the burn down concludes and demand can match customer usage, just any high level thoughts. Thank you.

Marc Casper: And you look at what the different opportunities are and you think about it in different periods of time. And where it's going to skew in your favor. And this year, with a more volatile macro, we've been able to add three phenomenal businesses, right, in terms of strengthening the company with incredible growth prospects, really good return profiles, right. So, right, that doesn't mean that next year's a look exactly like this are years where, you know, you can buy companies that are really more of a balance of cost and revenue growth and those different things and different aspects of it.

So I.

Good question.

Think about.

The <unk>.

Primarily a barrel production.

Sure and I don't think anyone is smart enough to know exactly which quarter, but during 2020 for two I think that we will get back to orders matching revenue at some point during the year, yes, So I think that will be smarter.

Marc Casper: But this year, to be able to get the binding site core of the trust and whole link, it's fantastic. And when I think about O-link, which is our first opportunity given that we had announced it during a block out period. And it's just a terrific fit, right. And you think about the leader in a business that has gone through that phase of being well adopted, right. So the technology risk isn't here anymore, but it hasn't globally commercialized.

With the benefit of another three months of time to see what our view is on 2024, but I don't think we will be talking throughout the year about inventory reduction and the customer because there is activity that's going on currently that's consuming the inventory that's out there.

Great. So let me bring to <unk>.

Quick wrap up for the call.

Thank you for joining us today.

We're very well positioned to continue to deliver differentiated performance.

Marc Casper: It hasn't reached nearly its full potential and incredibly complementary to our leading position in mass spectrometry and proteomics. And we need thanks for reminding others about, you know, our 15 year plus track record or the orbit trap, astral being the next big many year run and the combination there, plus O-link, and the fact that we have a leading position in the life sciences instrumentation, which are very relevant in terms of two PC off of these products as well, really exciting.

And as always thank you for your support of Thermo Fisher scientific we look forward to updating you in the new year.

That concludes today's conference perfect. Thank you very much for joining you may now disconnect. Your line have a great rest of your day.

[music].

Yes.

Marc Casper: You know, they are leader in their field and we're excited to help bring that to the customer base in an accelerated fashion. And when we look to the future, you know, we expect this to be a long term, you know, mid teens plus growth business. And be able to generate really significant, you know, adjusted operating income synergies driven by that accelerate revenue growth on top of that to $125 million of earnings that come from the year five synergies and that's going to generate double digital returns for the shareholders. So super exciting time. And you know, we'll continue to be outstanding stewards of our shareholders cap. Thank you.

Eve Burstein: Our next question comes from Eve Ben, Seen from Ben, Seen, Eve Yolanda Snell, OCC, proceed. Hi there. Good morning and thanks a lot for the question. I'd love to ask about your lab products and biopharmus services, this unit. So the operating margin there was up right at 16% it was higher than any point in the past. And when you talk about the puts and takes there, you called out productivity and mix as some of the positive drivers.

Eve Burstein: So just two questions there. One, on mix, if that was a positive driver, does that actually mean that sales as some of your really low margin consumables were down. Other peer companies have talked about challenges there and brought down guidance in general lab products. So can you talk a little bit about those dynamics and then secondly, on productivity gain, what is driving that and are those going to be sustainable and recurring over time?

Eve Burstein: Yes, so thanks for the thanks for the question. So when I think about the the margin dynamic in that segment, yeah, mixes, when you think about where the more challenging environment is in terms of customer caution and China, that impacts the lab products business. And then the wider customer caution also impacts our channel business. So relative to the other business in that segment, that's where the mixed profile comes from. In terms of productivity is about we've been right sizing the car space within our lab products business and given the volume change. So that's where the majority of that is and then just good spending wisely across the whole business, but there's probably the two main sites to go out. Thank you. Great, thanks a lot. Thank you.

Dan Bennett: And operator, we have time for one more question. Perfect, we'll take our last question today from Dan Bennett from UBS.

Dan Bennett: Dan, your line is now way from deep go ahead. Great, thank you for the time and really appreciate you sharing all those framing thoughts for 2024. I have a couple additional follow-ups on that, but I'll keep it to one. I know it's not a bottoms-up view, but I'm curious how you're thinking about the inventory effect, either for your business or the market in 2024. In those areas where there's been inventory burned down in 2023, whether it be in bio production or the channel's business or wherever you're seeing it, what do you think the reasonable assumption for 2024? Is it reasonable to assume the burned down concludes and demand can match customer usage just any high-level thoughts?

Marc Casper: Thank you. So good question Dan. When I think about, you know, it's primarily a bio production story and I don't think anyone is smart enough to know exactly which quarter, but during 2024, do I think that we will get back to orders matching revenue at some point during the year? Yeah, so I think that will be smarter, you know, with the benefit of another three months of time to see where our view is on 2024, but I don't think we'll be talking throughout the year about, you know, inventory reduction and customer set, because there's activity that's just going on currently, that's just assuming the inventory that's.., out there.

Marc Casper: Great, so let me bring to just a quick wrap up for the call. Thank you for joining us today. We're very well positioned to continue to deliver differentiated performance. And as always, thank you for your support at Thermo Fisher Scientific.

Marc Casper: We look forward to updating you in the new year.

Ellen: That concludes today's conference for everybody. Thank you very much for joining.

Ellen: You may now disconnect your line. Have a great rest of your day.