Q2 2025 Danaher Corp Earnings Call
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Please stand by your program is about to begin if you need audio assistance during today's program. Please press star zero. My name is Margot and I'll be your conference facilitator this morning. At this time, I'd like to welcome everyone to Dan her corporation's second quarter 2025 earnings result conference call all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, then the number 1 on your telephone keypad. If you'd like to withdraw your question, please press star, then the number 2 on your telephone keypad. I will now turn the call over to John Bedford, vice president of investor relations. Mr. Beford, you may begin your conference
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A replay of this call will also be available until August 5th, 2025.
During the presentation, we will describe CERN of the more significant factors that impacted year-over-year performance.
Our form 10 q and the supplemental materials, describe additional factors that impacted year-over-year performance.
unless otherwise noted,
All references in these remarks and supplemental materials to companies specific Financial metrics relate to the second quarter of 2025.
And all references to period to period, increases or decreases in financial metrics.
Our year-over-year.
We may also describe certain products and devices, which have applications submitted and pending for certain regulatory approvals.
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During the call.
We will make forward-looking statements within the meaning of the federal Securities laws, including statements regarding events, or developments that we believe or anticipate will or may occur in the future.
These forward-looking statements are subject to a number of risks and uncertainties including those set forth in our SCC filings.
and actual results might differ, materially from any 4 looking statements that we make today
These 4 looking statements speak only as of the date that they are made.
And we do not assume any obligation to update any 4 looking statements except as required by law.
And with that, I'd like to turn the call over to Reiner.
Call today.
Reiner: Now, before we get into the details of the quarter, I'd like to touch briefly on the announcement. We made this morning regarding our CFO succession plan,
Speaker Change: As I'm sure many of you saw, we announced that Matt Gino the current group CFO of our life sciences, Innovation group, and vice president of corporate fpna, will succeed. Matt McGrew as Chief Financial Officer of dehner at the end of February 2026,
As we've done with past transitions, Matt McGrew will continue on as an Executive Vice President as he begins his gradual path to retirement.
Matt, it's been a privilege working with you for more than 2 decades. We've all benefited from your outstanding Financial leadership. Your thoughtful guidance and trusted partnership.
Speaker Change: Since stepping into the CFO role and 2019. You've helped guide danaher through pivotal moments including launching in Vista and ralto as public companies.
Speaker Change: The acquisition of sativa.
And the challenges of the pandemic.
Speaker Change: All while, developing an exceptional, internal Finance Talent pipeline.
Matt danaher simply would not be the company. It is today without your leadership strategic vision and humility.
Speaker Change: Thanks, buddy for everything.
Now, many of, you know, Matt Gino from his time as vice president of investor relations.
Speaker Change: Matt has had a number of important roles during his past 12 years with danaher.
Speaker Change: And throughout Matt's time at Dan her, he has gained extensive experience in several key areas, including investor relations fpna.
Mergers and Acquisitions talent development. And most recently operational experience as group CFO.
He has consistently, demonstrated exceptional leadership and has played a central role in shaping our financial strategy and portfolio evolution.
Speaker Change: I know he'll be an outstanding CFO as we continue to grow Dana her into 1 of the most respected Science and Technology leaders.
We look forward to helping him transition to his important role at the end of February 2026.
Speaker Change: so, with that,
Speaker Change: Let's get to our results.
Our team strong execution with the Dan her business system drove, solid second quarter results, in what remains a dynamic operating environment.
Strong growth in our bio processing business paired with disciplined cost management, enabled us to exceed, both our adjusted operating profit margin and cash flow expectations for the quarter.
While global trade tensions have led to some uncertainty market conditions in the second quarter were generally consistent with what we saw in the first quarter.
Speaker Change: in Pharma Global Production of monoclonal antibodies where the majority of our exposure lies remained robust and we continue to see a modest recovery in Pharma R&D spending
Speaker Change: academic and government demand remains soft as expected with ongoing uncertainty around research funding.
Speaker Change: Clinical Diagnostics and applied markets, meanwhile remains stable.
Speaker Change: now, while the macro environment remains fluid, where intensely focused on what we can control,
And that's to continue delivering for our customers Associates and shareholders.
Speaker Change: Now, our team has done a nice job running the DBS. Playbook to offset cost pressures from tariffs.
Speaker Change: Deliver meaningful productivity, gains and turn challenges into opportunities.
Speaker Change: At the same time.
We're taking thoughtful actions to protect our financial and competitive positioning including addressing structural costs while continuing to invest in Innovation for the long term.
Speaker Change: Our second quarter results, also highlight the strength and resilience of our portfolio. We're well, positioned and attractive and markets driven largely by non-discretionary Healthcare needs and supported by strong secular growth drivers.
Speaker Change: Our businesses, share a common set of relatively durable. High recurring Revenue business models with the majority of our revenues being consumables that are specified into regulated, manufacturing processes or specific to the equipment that we Supply.
On top of this, our strong balance sheet and free cash flow generation positions as well to further enhance our portfolio going forward.
With that, let's take a closer look at our second quarter 2025 results.
Speaker Change: Sales were 5.9 billion dollars in the second quarter. And we delivered 1.5% core Revenue growth.
Speaker Change: Geographically core revenues and developed markets were up low single digits with North America up slightly and a high single digit increase in Western Europe.
Speaker Change: For revenues and high growth markets were flat overall.
Speaker Change: A solid performance outside of China was offset by a mid single digit decline in China.
growth in our biotechnology and Life Sciences businesses in China was more than offset by declines and Diagnostics, due to volume based procurement and reimbursement changes implemented in late 2024
Speaker Change: Our gross profit margin for the second quarter was 59.3%.
Speaker Change: Our adjusted operating profit margin of 27.3% was flat year-over-year. As the favorable impact of higher volume leveraged product. Mix and disciplines cost management were offset by productivity Investments to reduce our structural costs.
Adjusted diluted net earnings for common share of $1.80 or up approximately 5% year-over-year. We generated 1.1 billion dollars of free cash flow in the quarter and 2.2 billion dollars in the first half of the year.
Resulting in a year-to-date free. Cash flow to net income, conversion ratio of 143%.
Speaker Change: Now, as I mentioned earlier, we're continuing to make significant investments in long-term growth initiatives across dehner in the second quarter alone. Those Investments translated into several important, new product and Technology launches each reinforcing our long-term competitive position, while delivering meaningful benefits to our customers.
Speaker Change: Let me highlight a few of these key introductions and how they're designed to help customers improve quality and yield reduce costs and bring new therapies and diagnostic tests to Market more efficiently.
Speaker Change: In biotechnology citiva expanded its comprehensive purification portfolio with the launch of 2. New protein, a resins
Speaker Change: Map, select sure 70 and map, select Prisma X. Each stage of drug development, presents unique purification needs. And these resins are designed to offer cost-effective solutions for pre-clinical and clinical production without compromising on quality,
Speaker Change: They also underscore essays commitment to delivering innovative solutions to help customers reduce manufacturing costs, increase flexibility and maintain the high performance standards. They expect across all stages of the drug development process.
Speaker Change: Now Life Sciences, scax reinforced their leadership position in Mass spectrometry with the introduction of the Xeno to 8600 at June's American Society of mass spectrometry meeting.
Speaker Change: The Xeno toss, 8600 expands Sciences high, resolution Mass spectrometry footprint and delivers tangible performance improvements across proteomics, lipidomics, metabolomics, and small molecule workflows.
The 8600 offers competitive, molecular identification and Superior quantification compared to other leading high-end platforms helping scientists.
Speaker Change: Better understand molecular structures and measure more Targets in complex samples with greater speed and confidence with the ultimate goal of accelerating drug development times.
Speaker Change: And in Diagnostics, we announced the new partnership with astroica to develop diagnostic tools that help clinicians identify which patients are most likely to benefit from Precision medicine treatments.
Speaker Change: this collaboration is leveraging the newly launched danhurst centers for enabling Precision medicine to support a more streamlined end-to-end development process,
Speaker Change: The first product in development uses Technologies from Leica bio systems with a focus on digital and computational pathology, including AI, assisted algorithms to improve diagnosis and enable more targeted therapy decisions.
Speaker Change: So now, let's take a closer look at our results across support folio and give you some color on what we're seeing in our end markets today.
Speaker Change: Single digits.
Speaker Change: In bioprocessing.
Speaker Change: We were pleased to see the positive Trends in our order book continue through the second quarter.
Speaker Change: Revenue growth was led by low double-digit growth and consumables with particularly robust demand for commercialized Therapies.
Speaker Change: Equipment declined as expected as customers, continue to absorb capacity added over the past several years and global trade, uncertainty contributed to delays in some larger capital investment decisions.
in addition to strong, demand for commercial production, the number of therapies and development and clinical trials, remains robust
Monoc antibodies, which comprise more than 75% of our bio processing revenues Remain. The largest investment area for our customers and there is a healthy pipeline of new molecules and development
Speaker Change: At the same time by a similar development and production and demand for our Solutions, our increasing, as patents on high volume therapies expire making life-saving treatments, more accessible and driving broader. Adoption.
With our comprehensive portfolio and an innovation engine geared towards increasing yields and enhancing manufacturing efficiencies. We're well positioned to support our customers, as they Advance these therapies through development and into commercial production,
the strength of the development pipeline paired with consistent growth in commercial production. Also reinforces our conviction in the high single digit. Long-term growth outlook for our leading bioprocessing franchise.
Speaker Change: now, turning to our life sciences segment, core Revenue decreased by 2.5%
Core Revenue in our life. Sciences, instrument businesses, collectively declined, low single digits in the quarter.
Looking across our end markets clinical and applied markets held up, well globally, while demand from academic and government customers remained weak.
Speaker Change: As I mentioned earlier, we continued to see modest recovery in Farmer spending with revenue from these customers, growing in the quarter.
Speaker Change: In China, we saw an improvement in demand at stimulus related funding, translated into new customer orders and Revenue.
Speaker Change: 4 Revenue in our genomics, consumables business declined, in the quarter, driven by lower demand for plasmids. And mRNA from 2 of our larger customers along with funding pressure across early stage, biotech and academic research customers.
Speaker Change: Now, you likely saw IDT and aldevron in the headlines, this quarter for their groundbreaking role in helping develop the world's first on demand mRNA based personalized invivo, Christopher therapy.
This is achievement marks, a major milestone for invivo, crispr based therapies and serves. As a powerful example of how our genomics businesses are helping Advance the future of personalized medicine.
now, moving to our diagnostic segment, core Revenue increased 2%
Speaker Change: For Revenue in our clinical Diagnostics businesses was up low. Single digits with mid single digit growth outside of China.
Beckman, Coulter Diagnostics. Led the way with high single-digit growth outside of China and notable strengths in instrumentation. This marks, beckman's, fourth consecutive quarter of mid single digit, or better core growth outside of China.
Speaker Change: And is a direct result of good traction from recent Innovations such as the dxc 500i integrated clinical chemistry and amuno an immunoassay. Analyzer
And the dxi 9000 high resolution immunoassay, analyzer and continued, momentum in commercial execution.
In molecular Diagnostics sessions. Respiratory Revenue was modestly better than expected. Those slightly below prior year levels.
Speaker Change: Sephi core, non-respiratory Revenue, grew, double digits, including double digit or better growth in Sexual Health neurology and Hospital. Acquired infections. This sustained growth in non-respiratory Revenue reflects increasing menu adoption and system utilization across our installed base along with continued strengths from newer assays. Such as the multiplex vaginitis panel, which grew over 75%.
Speaker Change: In the US, this quarter.
Speaker Change: And integrated delivery networks that are standardizing testing on the gene, export expert platform.
As these customers look to allocate resources more efficiently, sepi's point of care molecular, testing is proving increasingly valuable helping deliver greater efficiency through fewer total tests.
Higher rates of correct treatment and ultimately lower overall treatment costs compared to other testing strategies.
Speaker Change: So with that, now let's frame how we're thinking about the third quarter.
And the full year 2025.
For the full year 2025, we continue to expect core Revenue growth of approximately 3%.
Speaker Change: Additionally, we're raising our full year, adjusted diluted net, EPS guidance to a range of $7.70 to $7.80 versus our previous range of $7.60 to $7.75.
In the third quarter, we expect core Revenue to grow in the low single digit percent range. And additionally, we expect the third quarter adjusted operating profit margin of approximately 25.5%
Speaker Change: So, to wrap up.
Speaker Change: We're encouraged by the momentum. We've generated in the first half of the Year particularly in our bio processing business. Our teams focused execution and a dynamic operating environment enabled us to deliver Financial results ahead of our expectations while advancing solutions that are at the Forefront of improving patient and Healthcare outcomes.
Speaker Change: Our solid second quarter results, also underscore the unique positioning of our portfolio.
Our businesses are well positioned and and markets with long-term secular growth drivers and our businesses. And our business models are resilient with more than 80% of our sales today, comprised of consumables and service Revenue which is typically highly recurring.
At the same time, the strength of our balance sheet and financial position allows us to invest for the future.
Speaker Change: Both organically and through strategic Capital deployment to further. Enhance our long-term competitive advantages.
Speaker Change: So looking ahead, we remain focused on what we can control and what has been become a more complex macro environment. Since the start of the year, we believe the combination of our talented team. The differentiation of our portfolio and our strong financial profile. All powered, by the danaher business system will enable us to continue delivering strong results for the remainder of 2025 and Beyond.
Speaker Change: So with that, I'll turn the call back over to John.
Thank you, Riner.
Speaker Change: Operator, that concludes our formal comments. We're now ready for questions.
Operator: Thank you as a reminder, ladies and gentlemen, if you would like to ask a question, please press star then the number 1 on your telephone keypad. You may remove yourself from the Queue at any time by pressing star 2 once again, that is star 1 to ask a question. We'll take our first question from Michael rayon, with Bank of America, please go ahead.
Michael rayon: Uh, thanks for taking the question, guys. And I want to be the first to congratulate, um, both mats, um, on current and future. Um,
Speaker Change: Uh roles um been great working with both of you and look forward to it. Um Ryan I want to start on um, just
I want to start on the order Trends uh commentary real quick on on bioprocess. You you had some really positive commentary in terms of positive Trends in the order book continuing. Um especially in the consumables was wondering if you could dive into that a little bit more in terms of, you know what, the book to bill was, whether you saw orders Excel right from the first quarter. Um, just sort of expectations for order Trends in the third quarter um or or any color you can provide Maybe by um by biotech versus Farm. Not just any additional color. You can provide on Bayou process Trends. Thanks.
Speaker Change: Thanks Mike. Good morning and uh let me put the uh, order uh Trend, um, right into the contacts here, of some of our comments. I I think first. It's important to note that our biotechnology segment consists of 2. Businesses 1 is the bio processing business, which is the 6 billion annual revenue business that, that you were just asking about. And then the other is the Discovery and medical business, which is a 1 billion dollar business, uh, and that business, the discovery and medical behaves, uh, a lot more like a life science tools business. Now, to your point here, let's talk about bioprocessing and and work through uh to the orders uh, development here. So first of all, the performance and Trends in Q2 are very consistent with what we saw in q1,
Speaker Change: Really driven by commercial demand and large Pharma cdmo customers.
Speaker Change: Smaller customers while they were stable are still below historical Trends or historical levels.
Now, equipment remains below those historical Trends, uh, with funnels improving. So we're seeing better funnel activity, but we continue to see order, delays with trade policy, creating some incremental noise here and probably slowing, uh, some decision-making. Now, overall, our book to bill was consistent with prior quarters and around 1, with some lumpiness, in equipment orders.
Speaker Change: And overall orders activity in the first half and second quarter are fully supportive of a high, single digit core growth uh, in the second half.
So, if you put all that together here and and I think it's important to also comment on the top line performance here, which continues to drive strong profitability with fall through of over 50% and bioprocessing in the first half. So, when you put all that together, um, we're really encouraged by the strong first half.
We expect high single-digit growth in the second half of the year.
Speaker Change: And all this reaffirms our beliefs that bioprocessing is a high single-digit, grower.
Speaker Change: Both in 2025 and the long term.
Speaker Change: Okay. Thanks. Um, and I want to touch on something. You also brought up a couple times, you mentioned global trade tensions, a few times, the prepared remarks. You just touched on it in your prior answer. Um, if you could expand on that where you're seeing it, is it um, sort of what regions geographically and also, what customer segments. Whether it's Pharma or some of the more, um, industrial or applied markets, um, is it pausing of orders? Is it cancellations of orders? Is it delays of new orders? Sort of, how are you seeing those Dynamics play out? And do you expect a recovery in that or Improvement in that? Um, as we go through the rest of the year? And we have um, sort of continued discussion on the Tariff front
Speaker Change: So, Mike, I mean, I think there's a general overlay here of trade uncertainty, as it relates to how the tariffs will play out. If we think about the different, uh, end markets in Pharma, certainly, as we've pointed out, this Market continues to grow, over time, there is going to be a need for capacity expansions, and now Pharma companies have to ask themselves, the critical question as to, where they're going to build that new that new capacity, and of course, that's hard to do. If you don't know yet, what the Tariff situation, ultimately plays out to be, but we would expect that that
Overhang here clears here, uh, certainly in the next, you know, 6 to 12 months that's certainly our planning assumptions. So uh, that is an overly on Pharma as it relates to the applied and clinical markets, I think uh that's less of a factor. So clinical markets, we see volumes uh remaining fairly consistent uh capacity increases uh are uh more incremental in that regard and as it relates to applied markets, I would say the same thing.
Speaker Change: Great, thanks. I'll be there.
Doug Schnickel: And we'll next go to Doug schnickel with wolf research. Please go ahead.
Doug Schnickel: Uh good morning um Matt and Matt congrats and thanks for all the help. Um, and uh, thanks for the brawler team for uh, giving us some time this morning. So uh, I just want to talk about bio processing a little bit more, um and I I really just want to clarify your bio processing assumptions that are embedded into guidance. So first you had previously told us to expect High single digit, bio processing, Revenue growth for the year. Is that still the case second, you got 2 and a half points of price in the biotech segment in Q2, what is your assumption for pricing? Um, for the second half within the segment and what is that imply regarding volume pacing and then third really more to the point. It seems like you may have increased bio processing.
And guidance while reducing um DNM assumptions uh and you kind of reference this in your response to Mike I just want to see if that's the case. Thank you.
Called the first half 1 and a half 2% kind of price is what we saw in the segment.
Doug Schnickel: I think we're probably going to do roughly the same. Maybe a little bit better here in the second half from a price perspective in the segment. Um, and so from a volume pacing perspective, which I believe you, uh, you asked about as well, you know, we really, you know, we will see Q2 kind of step down in Q3 very traditional for us, to have a kind of a volume step down in Q3, uh, you know, we do some, uh, some work on some of our plants and we, we typically Q3 as our lowest volume, uh, quarter and you see that both in in, uh, you see it really in the margins, too. You'll at, um, in BIO processing Q2 to Q3. But then you step right back up Q4 is our best best quarter in BIO processing. So I would expect to see the same kind of cadence on that.
Doug Schnickel: Um, and then lastly.
I, I think it was on uh, you know, just sort of maintaining the full margin or the full guide for the year on the segment. Um, I think that's right. I think on the margin, you're probably a little bit lower at DNM, uh, but we're probably a little bit better here in BIO processing and that 6 billion piece. So again, it's on the margin, you know, it's not huge but we are, we would maintain the, the, uh, the guide for uh, for the full year for the segment, a little better in BIO processing. Maybe a touch worse in in DNM. And as Ryder said that, that DNM piece is it's very different than bioprocessing and kind of Acts almost like a, a life science, tools business, to some degree.
Doug Schnickel: Great. Thank you.
Scott Davis: And next, we'll go to Scott Davis, with melia's research, please go ahead.
Scott Davis: Okay, good morning guys, and I'll, uh, echo my congrats, uh, Ryder. You're lucky to have 2, uh, 2 rock stars uh, with you there.
Um 3, including John. Sorry Jon.
Totally agree. Totally agree. Thanks Scott. Um, hey uh, just first just to clarify. Something is is the structural cost out part of the story. Is that is that uh, behind us now?
Yeah, I mean I think it's it we feel very comfortable and confident that we are going to get all of that uh 150 million.
Scott Davis: I think we probably got about half already Scott and the other half will come as we work through the second half. Its but I I feel very comfortable with that.
Okay. Um, and and I'm actually just kind of curious your view here. I mean early stage biotech, uh, and just trying to get a sense of what you think the this is going to how this is going to play out in the next, you know, couple years. But is this a case of where kind of, you know, AI spend is crowding out perhaps some of the opportunities.
Scott Davis: Um, is there pen up demand here? I mean, just kind of, you know, are we still going to be talking about this in 12 months? I guess is my question and I'm just kind of curious how you guys view the market.
Scott Davis: I, I would, I would say that if we just look where we are today, biotech is at lower activity levels. But but stable,
um, you know, the investment environment has been tough here with, uh, with the amount of, uh, Venture Capital that goes into these biotech slowing. And, and those that are already out there, really needing to focus on those therapeutic programs that show the best data. Uh, and I think that is representative of what has been going on here, more generally in the sector that, uh, the enormous wave of investment that we saw during and, and just after the pandemic has has waned. And the, the market is now finding its footing. Um, now as it relates to AI, we really see that ultimately as a Tailwind because we see then less money being spent on getting to, uh, compound ideas. If you will and more money being spent taking great ideas, which have been validated in silico, as they say, uh, through the development pipeline, ultimately driving more manufacturers,
Scott Davis: And commercialized therapies and of course that's where our business is where we um have the most volume, of course, the most share. Uh and so we view this really positively but we have to say that we're at a low activity level currently in the discovery phase of of the biotech Market.
Scott Davis: Okay, good color. All right. I'll pass it on congrats again. Uh, Matt and Matt,
Scott Davis: Thanks. Thanks Scott.
Next, we'll go to Tao Peterson with Jeffrey's. Please go ahead.
Scott Davis: Good morning, Jaco. Hey, thanks. Good morning. Um, want to probe a little bit on the guide so you're not slowing through the entire EPS beat. I'm just curious. You know, if there are areas of maybe incremental caution in the back, half of the year and then on 4 key, specifically you've got to step up and and Life Sciences. I think kind of ramping to mid to high single digits. In the comps, there are more difficult. So just curious, if you can get us more comfortable with that in particular, is that, you know, contributions from the new scax launches at azoms.
Speaker Change: About some of like you said some of the, the, the new stuff that's out there. Um, but maybe I'll, I'll take the first question, which is sort of, on, on the guide and the flow through. So um, you know, maybe I'm kind of sort of thinking about the guide like this. So we got off to a pretty good start in the first half. Um, both on on, you know, the cost actions. Like, I, I, I said to Scott earlier, I feel very comfortable where we are on those. Um, we had a little bit better FX as well, probably, you know, FX was maybe a nickel better for us. And like I said, I think we get the full cost actions which is probably you know 15 cents or so and so you know I kind of look at that say 20 cents and that's what we flowed through to the full year. So all the cost actions and the better first half epics. So we started in January, we'd call it you know, 760% on top of that. And and that's how you get to kind of the high end of the range. Now, at 78
Speaker Change: So but there are 2 other things here that um I think you're right, we have not flowed through fully and I think maybe the easiest way to think about it is 1 we had a good start in respiratory in q1 and Q2.
Speaker Change: And 2 FX in the second half, that's going to be much more favorable than we thought in January. And so I think the combination of those 2 maybe probably another 15 20 cents that has not flowed through and the reason we haven't flowed it through is 1. We're going to maintain the full full year. Respiratory guide at 1.7 billion to see how that plays out in Q3 and Q4. You know, you know, that that is a a variable number. And that FX is the same right? That could fluctuate and come back that has made a significant movement since January and you know, that could very well come back. And so we've decided now,
Speaker Change: Hold back on respirator, hold back on the second half FX and just kind of see, see what happens especially in a pretty Dynamic uh, you know, policy and operating environment. Just felt like uh, you know, we we'll we'll sit and see how things play out before we uh commit to that final 1520 cents.
Speaker Change: Yeah. And to the second part Tau, I mean, what we're really saying is the first half and, and the life science. Uh, segment was, was download singles. We expect the full year to be flat. So the second half needs to be up positive, low singles.
Speaker Change: And uh what we're really seeing their um is the impact of 3 factors. The first is and and, and we're actually not assuming a significantly improved activity, level. So in genomics, we expect to see better comps uh, as an example. So in China, uh, we're seeing it's incrementally firmer with some stimulus, uh dollars following through, and then as you suggested, we have a number of new products. Uh, introductions that are gaining Traction in our funnels here in the first half, including syx, uh, and Beckman Coulter, Life Sciences, uh, and some others. And so we expect those to gain traction here in the second half.
Speaker Change: Maybe to put some numbers around it for you. Tao you're you're sort of that's step up from 1, half to 2 half to go from down. Low single to up low single and Life Sciences. Call it 150 million bucks. Roughly and I think if you, if you are kind of trying to bridge that I would say that genomics. Again, remember the first half, we had those 2. Large customers really fall off. I think that's probably a third of it.
I would say that we are assuming China, especially China and tools with some comps easier comps and a better funding environment is another third of it. And then lastly you know new products and kind of other things is is the final third. So you know, a third, a third, a third between China genomics, new products, other that's sort of what we're assuming in a baked into the model from the step up uh from 1/2 to 2/2 of roughly 150 million.
Speaker Change: Okay, that that's helpful. And then 1 quick follow-up. It sounds like you're not flagging. Any incremental headwinds on on volume based procurement? You know, obviously 1 of your peers did last week, maybe just give get us comfortable that you know that's not a lingering issue that could get worse.
Speaker Change: so,
Speaker Change: In China, volume-based procurement and and the reimbursement changes was essentially what we thought in in Q2. Uh, and for the first half of the year, in fact, volume
Speaker Change: Volume was consistent with q1 and our expectations. So there's really no change to our expectations of 150 million adverse impact from volume based procurement in 2025.
Speaker Change: Now, under the hood there, there there's been some recent policy changes, um, which largely did not affect us because uh, they're really geared to different aspects of the testing menu which, which we actually don't have. So it's possible that that different companies experience different things here. But for us, uh, we we saw the quarter, develop as expected volumes were consistent with q1, um, and we don't have a different perspective on 150 million dollars here for the year on volume based procurement.
Speaker Change: That's helpful. Thank you.
Speaker Change: Thanks Tao.
Speaker Change: Next, we'll go to Vijay Kumar with evercore, please, go ahead.
Vijay Kumar: Morning, good. Good morning. And thank you for taking my question. Uh, congrats to both Gina and laru maybe 1 on a biotech for you. Uh, Rhino guidance 7% was maintained, um, you know, you look at your second quarter and third quarter assumptions here for 6%. Uh, implied growth to Q4 should actually, you know, High signals, maybe 8, 9% Ash.
What, what, what, what is the guy that's human for Q4 acceleration and biotech? Is that
Is that maybe China coming back small by a farmer coming back or maybe extra from turning around.
Vijay Kumar: No. I I would I I mean I think I would say that we've got high single digit core for both Q3 and Q4, I don't know that there's any real material changes that we have tried to bake in by a certain geography or or in, you know, equipment or anything like that. I would say. It's we're just assuming a, a fairly steady environment, which is, you know, we've seen really good. You know, double digit type growth out of consumables equipment has been pretty muted and we expect that to continue here, throughout the back half of the year, um, you know, as we
Speaker Change: Because we worked through. So I don't I don't think it's a massive
Uh, change for us? Yeah, this is not about a step up in activity level. This is just the normal seasonality. BJ that you see, uh, with Q3 being sort of the lowest level of activity and bioprocessing and some other markets as well. And then as the fourth quarter, uh, kicks in, that's, that's always been and and continues to be the largest quarter for us from an activity level.
Let me start, then maybe my follow-up sort of related. Uh, question here was, was there any pull forward either enough academic channels or, uh, biofarma channels? That can, you know, that question comes up, um, you know, because of tariffs was there any customer of changing customer Behavior?
and I think,
Given all of these macro situations, right? Is, this is this bio person sort of high singles. Is this now, a sustainable number or or, um, is macro still, or sort of an overhang when you think about 26,
so BJ we, uh,
Speaker Change: We haven't seen any meaningful pull forward. We just haven't. We're, we're often asked and and uh, our numbers and our surveys and our customer conversations. Uh, don't indicate that we we think uh, the bio processing Market.
Speaker Change: As for years, uh, and the activity levels continue to confirm that this is a high single-digit growth, Mark market, and that'll continue now, uh, as it relates, uh, to, uh 2026, we obviously have still half a year ahead of us. Uh, in what is a pretty Dynamic operating environment.
Speaker Change: With, you know, some questions that still need to be answered as I spoke to earlier. Uh, but it is our plan to provide some preliminary thoughts on 2026 for Dan her overall.
During our October earnings call.
So, we just want to see here how, uh, the third quarter plays out and then in October to October, we'll give you our preliminary thoughts on 26.
That's helpful. Thank you guys.
Thanks BJ.
Speaker Change: Next, we'll go to pseudo with Lee rink Partners. Please go ahead.
Lee: Yeah. Hi.
Speaker Change: Hi. Thanks. Thanks, Ryan and Matt. Matt, my congrats. Also, um, uh just wondering um, um. I know you talked about tariffs, but just I wanted to clarify, uh, you previously sized at about 350 million in tariff costs with room, to mitigate why supply chain and optimization. Um, can you talk us? Uh, talk to us about the updated number there. And, uh, just given the inter-quarter changes with us, China, trade policy and the 145th, uh, tariffs going to now 30%.
Adding all the tariffs and we only plan on offsetting them. If we have to pay it we will try and pass that along somehow someway. But if we don't pay it, we're not going to try and pass it off. So that was a net neutral event for us in China.
Speaker Change: Got it. Uh, thanks man. Uh, and then, uh, just briefly on a question that is on minds of investors just given the um, uh, impact that has happened in the gene therapy. Market, 1 of your customers have seen uh, suspension of their uh, therapies from FDA on safety. Concerns. The question is, how broad is the exposure to Gene therapies? And I totally recognize that, you know, Innovation doesn't come by the risk, uh, um, without risk. So, um, just how are you thinking about, um, this uh, risk overall and the aav, um, exposure that you have with respect to Alderaan, and also your uh, the essay, um, the segment as well? Thank you.
Speaker Change: Well, gene therapy. Um, So aav based gene therapy as you were just suggesting is is really in the earning early Innings panait and and uh, this is um, going to have uh, you know, it's it's vosol 2 steps forward, 1 step back, of course, what we're we just saw here in the news is uh, is a step back but it's not to say that that therapy. Um uh is not um, a a very interesting and and important uh, alternative here for all kinds of different uh disease.
Speaker Change: Uh, forms that that are out there so specifically some genetic diseases. So I think as we think of the broader picture uh genomics um is in the early Innings and has the potential to be um a exciting uh and effective uh treatment regimen.
Now uh as we think about, you know, our own exposure here, across dehner, we're we're we're not talking about more than a couple hundred dollars, keeping in mind. We're a protein house here with, you know, really 85% of we do uh, focused on proteins. And of course, that's a well-established market and that's what drives, um, our business and our earnings. Now, um, we typically, uh, talk about these things, um, more narrowly. But if we think about our guidance, and you mentioned Sarepta here in Alderaan, um,
Speaker Change: you know, our guidance and and the market is essentially playing out as we expected. But the Alderaan serepta Revenue, we expect to be 30 million dollars for the full year, um, within with a minimal contribution here in the second half. So so our guide contemplated, uh, and did not, uh, expect um, significant Revenue contribution, uh, from that particular therapy.
Speaker Change: Got it helpful. All right. Thank you.
Thanks Bernie.
Speaker Change: Thank you, and next, we'll go to Dan Leonard with UBS. Please go ahead.
Speaker Change: Morning Dan. I think. Good morning.
Speaker Change: I was hoping Reiner that you could elaborate on Trends in China outside of Diagnostics, you know, is that business um turning a corner and if you could elaborate further because you touched on it briefly a few times and and the prepared remarks
Speaker Change: So, our our China business outside of Diagnostics has been firming up. Uh, the the bio processing business, uh, has shown a slight growth here, uh, in the quarter. Uh, and we see the biotech and Pharma Market there showing, uh, some uh, more solid activity levels. Uh, so we do see that in BIO processing as we think of life science tools, uh, we did see more stimulus activity.
Speaker Change: And that flowing through, not just the orders and the revenues. It's, it's still not at normal activity levels, but we do see it forming, uh, firming up. So we're encouraged by what we see here. Um, for those 2 businesses and uh, that's reflected here in our second half view. Uh, you'll recall Tao's question here. Uh, the firming up of of China in life science tools, uh is a part of that.
Speaker Change: Uh, thank you and just a clarification. Question for Matt McGrew. Matt, did I hear you correctly that at current foreign foreign exchange rates that your guide would be 15 cents higher?
Matt McGrew: With uh rent both the respiratory and the current FX probably 15 20 cents. I'm not sure I'd say that the guides are but that's that's what the math would imply that we have not if you would not flowed through
Matt McGrew: Between those 2 15 to 20, and we haven't flowed that.
Matt McGrew: Thanks a bunch.
Your next workout to Dan Brennan with TD Cowen, please go ahead.
Matt McGrew: Great. Thanks for the question. I'm Matt with congratulations. Um Ryan I wanted to just go back to bioprocess orders. If you don't mind, I just wanted to confirm sort of Mike's earlier question. I think you said the book the bill was around 1 because I mean if I look back at the
Matt McGrew: First quarter transcript, I think you talked about the seventh consecutive quarter of a book to Bill. That was solidly over 1. I'm not trying to nitpick it, just trying to clarify, maybe that was related to consumables just maybe if you can expand upon that event.
Speaker Change: Uh, this is so the trends are really very comparable here. Um, I I would tell you that this book, the bill is not a perfect measure, um, and that lumpiness, especially with larger orders sometimes uh, does not play through. So, what we see here is is consistent with what we've seen in Prior quarters, it's around 1. And yes, we saw some lumpiness here and equipment and some larger orders
Speaker Change: but the activity level is very complex.
Speaker Change: Okay, um, and then maybe we go moving over to safety and I know you had a nice quarter here and it was low, double digits X coid. Um, could you just speak to kind of, you know, what's baked in for the 25th about that low double digits continuing or changing? As we get in the back half of the year. I know you gave some color in the prepared remarks but any further call, there would be great. Thanks. Sure. Well, as you said, overall Steph had exceeded our expectations on on a little bit better respiratory and
Speaker Change: double digit, non-respiratory growth and, and in fact is non-respiratory, reagents grew low, double digits in the, in the quarter second quarter,
Speaker Change: And and we did see strength across the test menu uh with double digit or better.
Speaker Change: To say or better growth and sexual health, for our burryology uh, and Hospital acquired infections. And we actually expect that strong non-respiratory demand to continue in the low to mid teens, uh, for the full year. And the reason is we continue to expand that installed base, particularly at large idns that are standardizing across their Network as they go a little bit closer, uh, to patients uh, in their satellite settings.
And it just shows how sephy its strategy is playing out. I mean we're we see increasing menu adoption and utilization of the existing installed base and we continue to expand that. And then with that, we see the pull through of uh assays. Such as the hospital acquired infections and neurology
And then, lastly, this recent menu expansion around our MVP, so, that's the multiple vaginitis, uh, test. Um, that's, um, that's up over. 75% in the US. So we feel very good about, uh, the non-respiratory portfolio continuing to track at higher growth levels, mid teens,
Thank you. Our next, we'll go to Rachel Vats andelle, with JP Morgan for our last question.
Morning, Rachel. Great.
Speaker Change: Pharma manufacturing plants and that that building, that capacity is going to take some time. So it's, it's really too early to determine what all these large announcements will how they play out. And, and when that money flows, now, that said, I mean essay is very well positioned here to capitalize. Uh, as these decisions start being taken and move through their capex processes, because of the breadth of our portfolio. Um, you know, our scale and, of course, the global footprint, we can, we can do this anywhere in the world.
Speaker Change: How do we think about the guide for 25 here? We we expect 2025 is going to be a down year for equipment and so we do not um expect in our guide. A a significant step up here when I talk about the improved funnel activity. Um what we uh do expect here is the continued small capacity expansions that you see where the decisions are much easier to make an existing plant Footprints um and and we'll see. Uh, as we get to October here, we'll talk a little bit more about how we're thinking about 2026.
Great. And then for my follow-up I wanted to dig on respiratory a little bit more so you raise the endemic rate on respiratory to 1.7 billion earlier this year. You typically see that split roughly 50/50 between the first half and back half.
Speaker Change: So just giving your tracking to 900 million at this point. That's slightly ahead of expectations relative to the 1.7 billion assumption for the year. Now, I, I know it's too early and you guys are kind of pushing towards that 3Q. Call in terms of how you're thinking about respiratory assumptions, but just can you walk us through? Would you consider revisiting that endemic rate as we get towards your end? Would you potentially revisit it for a fifth time? And then can you remind us? What are you currently? Assuming on that 1.7 billion dollar number in terms of the mix on 4 and 1 versus Co only tests
Speaker Change: Yeah, no. I mean, I think the way to think about respiratory is we've got a guy that is 17 that we've been kind of guiding to that really for the last probably 3 years and, you know, it's been a little bit better. The last couple years and I I, we are not um, you know, that is not a number that we are completely uh, bold to. I think if we start to feel as though that number is is a little bit higher, we would, we would, we would sign up to that. And so I think we've we've had those conversations. I think I'd like to see how this this year, uh, goes that this year started in January, that felt much more like a typical, um, you know, sort of a typical respiratory season. Got it did get a little higher for a peak higher there but it you know it followed us a more similar pattern um you know than we had seen before and you know so I think if we can get another year behind us we'd be open to revisiting that number for sure. Um, and as far as you know, the the 17 like you said, we're a little north of 900 million. You know, we'll see how Q4 plays out that.
that's that's usually the big quarter Q4 and q1 as you know and see also the difficulty with respiratory straddling sort of 2 years does make it a little bit difficult but
Speaker Change: Um, so that's kind of where we're at in 4 and 1. Um, you know, I think we're at this point probably, you know, 75 80% 4 in 1. We we do do some uh regular you know regular uh Co only typically mostly I shouldn't say well some a lot of it is in Europe uh but there is some in the US too that that will do that. But I mean that's basically been our our mix for the last couple of years.
Speaker Change: And I would like to turn the call over to John Bedford for any closing remarks.
John Bedford: Thank you, Margo, and everybody, we'll be around all day for for questions. Bye.
Speaker Change: Ladies and gentlemen that does conclude today's program. We thank you for your participation and you may disconnect at any time.