Q3 2025 Danaher Corp Earnings Call
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My name is David, and I'll be your conference facilitator this morning. At this time, I'd like to welcome everyone to Danaher Corporation's third quarter 2025 earnings results 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 the number 1 or the star key followed by the number 1 on your telephone keypad.
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I would now like to turn the call over to John Bedford, Vice President of Investor Relations. Mr. Bedford, you may begin your conference.
Good morning, everyone, and thanks for joining us on the call.
With us today is Rainer Blair, our President and Chief Executive Officer.
And Matt McGrew, our Executive Vice President and Chief Financial Officer.
I would like to point out that our earnings release quarterly report on Form 10-Q and the slide presentation supplementing today's call.
The reconciliation and other information required by SEC Regulation G, relating to any non-GAAP financial measures.
Provided during the call, a note containing details of historical and anticipated future financial performance is available on the investors section of our website, www.danaher.com, under the heading "Quarterly Earnings."
The audio portion of this call.
Will be archived on the investor section of our website later today under the heading "Events and Presentations."
And will remain archived until our next quarterly call.
A dial-in replay of this call will also be available until November 4, 2025.
During the presentation, we will describe certain 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 company-specific financial metrics relate to the third quarter of 2025.
And all references to period-to-period increases or decreases in financial metrics are year-over-year.
We may also describe certain products and devices that have applications submitted and pending for certain regulatory approvals.
Or are our products available only in certain markets?
During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will, or may, occur in our future.
These four looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings.
In actual results might differ materially from any forward-looking statements that we make today.
These four looking statements speak only as of the date that they are made.
And we do not assume any obligation to update any forward-looking statements, except as required by law.
And with that, I'd like to turn the call over to Rainer.
All right. Thank you, John, and good morning, everyone. We appreciate you joining us on the call today.
We're encouraged by our strong third quarter results. Our team's DBS-driven execution, paired with continued momentum in our bioprocessing business and better-than-expected respiratory revenue at Sephi, enabled us to succeed in meeting our revenue, earnings, and cash flow expectations.
Cross. Our end markets and underlying conditions in the third quarter were generally consistent with what we saw in the first half of the year.
In Pharma Global Production of monoclonal antibodies, where the majority of our exposure lies, remained robust.
Pharma R&D spending will remain below historical levels.
In academic.
and government demand remained stable sequentially, but continues to be soft amid ongoing uncertainty around research funding.
Despite some encouraging headlines late in the quarter.
Clinical diagnostics and applied markets held up well.
Now we remain intensely focused on what we can control to continue delivering for our customers, associates, and shareholders. Our team is leveraging the Danaher Business System to mitigate ongoing geopolitical and policy-related pressures and drive meaningful productivity gains across our businesses.
At the same time, we're continuing to invest in innovation to strengthen our long-term competitive position, including accelerating digital and artificial intelligence initiatives.
We're accustomed to tackling challenges head-on and turning them into opportunities, and we expect that mindset and momentum to continue as we move forward into 2026 and beyond.
So with that, let's take a closer look at our third quarter 2025 results.
Sales were $6.1 billion in the third quarter, and we delivered 3% core revenue growth.
Geographically, core revenues and developed markets were up mid-single digits, with North America up mid-single digits and Western Europe approximately flat.
Revenue in high-growth markets was up low single digits as solid performance outside of China was offset by a mid-single-digit decline in China.
Growth in our biotechnology and life sciences businesses and China was more than offset by declines in diagnostics due to volume-based procurement and reimbursement. Policy changes implemented in the last 12 months.
Our gross profit margin for the third quarter was 58.2%, and our adjusted operating profit margin of 27.9% was up 40 basis points year-over-year.
As the favorable impact of higher volume leverage and disciplined cost management more than offset the impact of productivity investments.
Adjusted diluted net earnings per common share of $1.89 were up approximately 10% year-over-year.
We generated $1.4 billion of free cash flow in the quarter and $3.5 billion in the first three quarters of the year, resulting in a year-to-date free cash flow to net income conversion ratio of 146%.
Now, during the quarter, we deployed approximately $2 billion of capital towards the repurchase of 10 million shares of Danaher common stock.
Additionally, our board of directors approved a new share repurchase program authorizing the purchase of up to 35 million additional shares of Danaher common stock.
Our substantial investments in innovation over the last several years led to the launch of several leading-edge products and technologies this quarter.
Each one of these new solutions is designed to enhance our competitive positioning while enabling customers to improve quality.
And yield lower costs and accelerate the delivery of life-changing therapies and diagnostics.
So, let me highlight a few examples and the tangible value they're creating for our customers.
In biotechnology, Saiva launched the ReadyFlex TFF System 500.
A fully automated benchtop tangential flow filtration system.
Developed to meet the growing demand for efficient low-volume processing, the ReadyFlux TFF System 500 minimizes product loss, improves yields, and enables effective process development with limited material.
Importantly, the ReadyFlux platform is now scalable from process development to commercial production, enabling customers to quickly and smoothly transition across different stages of drug development.
This system is one of several planned launches, including the new TFS filter cartridges and our next generation Profusion system, together with our new Exceller XX platform, bioreactors, and differentiated filtration and cell culture media offerings. These solutions provide a powerful upstream package that helps customers improve yields and efficiency in the intensified biologic drug manufacturing process.
Portfolio and our ability to support customers across the bioprocessing workflow, from early-stage process development through to commercial manufacturing.
In life sciences, IDT announced a strategic expansion of its end-to-end translational gene editing portfolio, with the launch of high-purity customizable guide RNAs.
As scientists move from early research towards clinical applications, the need for greater purity, flexibility, and CRISPR tools increases.
These new guide RNA components direct CRISPR systems to specific genes, giving researchers more control over sequence design, lengths, and modifications to meet their precise needs. These capabilities are especially valuable for scientists in preclinical testing, who require high-quality materials for studies like toxicology ahead of clinical trials.
In Diagnostics, Beckman Coulter launched the Access BD Towel Assay. This is the industry's first fully automated research-use-only immunoassay for brain-derived towel protein, a promising, blood-based biomarker for researching neurodegenerative diseases such as Alzheimer's.
This assay leverages the high-resolution DXI 9000 analyzer to bring automation and scalability to Tau protein quantification.
Ultimately, this powerful technology combination can help improve research efficiency, enhance consistency, support long-term clinical trials, and accelerate regulatory pathways through stronger real-world evidence.
Now, let's take a closer look at our results across the portfolio and give you some color on what we're seeing in our end markets today.
Revenue in our biotechnology segment increased 6.5%.
For revenue, Discovery and Medical grew low single digits in the quarter.
Growth in medical and lab filtration was partially offset by declines in protein research instrumentation, where academic research customers continue to face funding constraints.
Core revenue and bioprocessing grew high single digits, with double-digit growth in consumables partially offset by declines in equipment.
Consumables growth was driven by robust demand for commercialized therapies from large pharma and CDMO customers.
Equipment revenue grew sequentially, but declined in the high teens versus the prior year, as expected.
Now, while we're seeing strong funnels and customers have a healthy pipeline of planned projects, this hasn't translated into equipment order growth, as customers are waiting for additional clarity on the policy environment before finalizing their investment decisions.
Based on what we're seeing today, we expect cautious equipment spending through the remainder of the year.
Now that's it with several. Billions of dollars invested to expand capacity at Citiva since 2020, including meaningful additions at our facilities in Florida, South Carolina, Utah, and Michigan. We believe we are very well positioned to help customers execute their region four manufacturing strategies.
Now, the long-term outlook for the biologics market remains very healthy, the primary growth driver of Sativa's bioprocessing business.
Is the increase in global production of biological medicines, particularly monoclonal antibodies?
Underlying biologic demand has grown double digits annually over the last 10-plus years, and we expect strong demand growth to continue in 2025 and beyond.
This growth has been supported by a steady pace of new FDA drug approvals. Building on several consecutive years with record-setting FDA approvals, as well as a continued shift in pharmaceutical pipelines towards biologics.
In fact, more than two-thirds of the world's top 100 drugs are projected to be biologics by 2030.
At the same time, we've seen increased development of biosimilars and expanded indications for existing therapies, both of which are expected to drive production and volume growth.
The substantial and sustained level of activity we have seen reinforces our conviction in the significant opportunity ahead in this market and supports the long-term core revenue growth trajectory for our leading bioprocessing franchise.
Now, turning to our Life Sciences segment.
%.
Revenue in our life sciences and instrument businesses was up slightly in the quarter.
By end market, clinical and applied markets held up well globally.
Demand from academic and government customers remains soft but was stable sequentially.
And as I mentioned earlier, we continued to see modest recovery in Farah spending, with revenue from these customers growing in the quarter.
In China, moderate improvements in the funding environment led to increased activity levels, which contributed to revenue growth in the quarter.
Core revenue in our life sciences consumables businesses, which include IDT, Alderaan AtCAM, and Phenomenex, declined in the quarter primarily due to lower demand for plasmas and mRNA from two of our larger customers, as well as continued funding pressure across early-stage biotech and academic research.
Declines related to these funding pressures were partially offset by growth in next-generation sequencing products at IDT and recombinant proteins at Abcam.
Moving to our diagnostic segment. Core revenue increased 3.5%.
For revenue in our clinical diagnostics business, it was up low single digits, with high single-digit growth outside of China.
Like a bio system delivered over 10%. Core growth with broad-based strength across core histology, advanced staining, and digital pathology.
Beckman Coulter Diagnostics also had another solid quarter with mid-single-digit growth outside of China.
This marks Beckman's fifth consecutive quarter of mid-single-digit or better core growth outside of China, driven by continued uptake of recent innovations, such as the DXI 9000, and strong momentum in commercial execution.
In molecular diagnostics, its core revenue was up mid-single digits in the quarter, with high-single digit growth across Sepia. Its core non-respiratory test menu was led by approximately 20% growth in sexual health.
Respiratory revenue exceeded expectations, as customers began purchasing earlier than typical in preparation for the upcoming respiratory season.
Dy continued to expand its global installed base. In the third quarter, the sustained growth in Sephia's installed base is driven in part by Healthcare System and IDN customers, adding new instruments at sites further out in their networks and closer to patients in order to provide faster diagnostics and treatment.
Decisions.
We believe this ongoing installed base expansion, combined with a leading test menu and workflow advantages, provides a long runway ahead for durable, long-term growth at Sephi.
Now, let's frame how we're thinking about the fourth quarter and the full year 2025.
For the full year 2025, we're maintaining our full-year adjusted diluted net EPS guidance range of $7.70 to $7.80.
In the fourth quarter, we expect core revenue to grow in the low single-digit percent range, as we expect market conditions to be largely consistent with what we saw in Q3.
Additionally, we expect the fourth quarter adjusted operating profit margin to be approximately 27%, which importantly includes the impact of anticipated productivity investments aimed at further improving our cost structure.
Now, before we wrap up, I'd like to share our initial thoughts.
On next year.
For the full year 2026, we expect core revenue growth in the 3% to 6% range, assuming modest recovery across our end markets.
Looking across the portfolio, we're assuming bioprocessing growth trends remain at levels consistent with 2025, including continued strength in consumables driven by healthy growth in Monaco antibody demand and our strong positioning across the biologics workflow.
And Life Sciences. We're assuming a modest improvement in end markets, but we assume growth will remain below historical levels given the current geopolitical and policy environment.
And in Diagnostics, we're assuming higher growth in 2026 due to moving past headwinds from policy changes in China, and our expectation that we will continue to execute globally.
Billion dollars in 2026, consistent with our expectations for 2025.
Turning to 2026 earnings, we expect the operating leverage on anticipated core revenue growth and the benefit of our 2025 productivity initiatives to drive more than 100 basis points of adjusted operating profit margin expansion. This would result in high single-digit adjusted earnings per share growth before any benefit from capital allocation.
As always, we will provide more color and a formal guide with our Q4 earnings in January.
So, to wrap up.
We're encouraged to deliver third-quarter results ahead of expectations in what remains a dynamic operating environment. Our team's commitment to innovating and executing with DBS has driven meaningful improvements in our businesses and enabled us to deliver more breakthrough solutions to our customers.
Now, looking ahead.
We remain focused on the areas we can control to drive results for our stakeholders.
We're taking thoughtful actions to reduce structural costs, supporting earnings growth and margin expansion in 2026 while maintaining the right foundation to continue investing in opportunities that strengthen our long-term competitive advantages.
We believe Danaher is well-positioned for sustainable long-term value creation. Our businesses are well-positioned and attractive, and markets are supported by long-term, secular growth drivers and share a common set of relatively durable, high-recurring revenue business models.
On top of that.
Our strong balance sheet and free cash flow generation position us to strategically deploy capital going forward.
So, I'll turn the call back over to John.
Thank you, Rainer Blair, that concludes our formal comments. We're now ready for questions.
Absolutely. At this time, if you'd like to ask a question, please press the star and 1 keys on your telephone keypad. Keep in mind, you can remove yourself from the question queue at any time by pressing star and 2.
We'll take our first question from Michael Wriston with Bank of America. Please go ahead; your line is open.
Great. Thanks for the question, guys. Um,
Good morning. Um, maybe just start where you left off. Ryan, on fiscal year '26, the 3% to 6% range, um, I think it's roughly where people were expecting, but it is a little bit of a wider range. I realize we're still in October, so still very, very early, a lot of uncertainty, but maybe you could just talk to the high points of what gets you there. And then maybe, you know, what the world looks like for a 3% versus a 6%. Um, where do you need to see more improvement?
Relative to this year to get, I guess, sort of like what's still up in the air to figure out if you come to the 3 or the 6.
Thanks Mike.
And, uh, good morning everyone. Let me
Before I get started, let me provide a little bit of context to this. We've
We've come off a strong quarter with Beats on the top and bottom lines, as well as cash flow.
I think it's important to see how Q3 demonstrates the earnings power of our portfolio and the execution of the team, even at a relatively modest growth rate.
And we're taking that Q3 beat to really proactively invest in further meaningful cost measures in Q4 to set up 2026, Mike. So, um, that's an important factor here in how we're thinking about '26. Now, the market and the policy environment, whilst improving, is still fairly dynamic. And so,
We could see a range of outcomes in 2026, which were ring-fencing between 3% to 6%. Topline growth and high single-digit earnings growth.
So for planning purposes, we think it's prudent to assume a modest recovery in our end markets. Uh, and let me talk about some of those.
Biotechnology.
We expect high single-digit core growth in bioprocessing.
At similar to what we've seen in 2025, we expect bioprocessing consumables to remain strong, given the monoclonal antibody pipeline, the on-market momentum of those commercialized drugs, as well as our leading position.
Now we're assuming for planning purposes that equipment is flat next year. Given that the order trajectory through Q3 has continued as it has in the first half.
Assumption is that that remains flat. Now, unlike sciences, we're not planning for meaningful improvement in our end markets.
uh, in Q3
Life Sciences performed as expected, and the activity levels were fairly positive, but we just didn't see that convert to orders. That would provide an inflection. So we're assuming here that our growth would improve modestly as we work through some of the headwinds in our life science consumables business.
And as we think about diagnostics here, we're assuming growth accelerates as we move past the China policy headwind where we've taken a conservative view and continue to execute well globally. And then, lastly, importantly, we need to think about respiratory for 2026. Here, we believe that it's going to be similar to 2025, at sort of that endemic rate that we've talked about of $1.7 billion. So,
Of course, we're going to provide a more quantitative view of all of this in January when we provide our guide.
But hopefully, this gives you a sense of how we're thinking about 2026 directionally, and maybe Matt can comment here a little bit more on the EPS side of it.
Sure. Um,
Like Runner said, we're kind of expecting 3% to 6% core growth here next year, excuse me.
Um, I would anchor at the low end of that range.
To begin with, and we'll kind of see how the year plays out, uh, as we go and we can kind of, uh, kind of provide some updates as we go. But I would, I would anchor at the low end to start. And then, from the math on the EPS perspective. Um, I'd assumed 35 to 40% fall through all the volume,
Plus the impact of the cost actions and that is going to uh, equal 100 basis points. North of 100 basis points of margin expansion. Like Riner talked about, uh, in in the prepared remarks and so gives you the high single digit EPS growth even at the low end of the range, um, and then maybe just to give you a little bit of color around, sort of the cost actions. We we talked about we're doing 150 million in the fourth quarter, but we're going to do 175 million in total here in 2025. And we do not expect these cost actions to repeat in 26. These are sort of 1 Time, 1 time items. Uh and we do expect the cost actions that 175 to generate a net 75 million in savings. So, you know, all off all in, you're talking about a 250 million type savings number in 2026. Um, that gives you call it. 3030 cents of eps Tailwind as we head into the year. So, I mean, as I think about 2025 and I think about what we're doing here in the fourth quarter, to set ourselves up. You know, I think we're going to be in a really good position to deliver High single digit EPS growth. Even if we end up with a
Into that range, and you know we might do better in 2026. And again, as Rainer said in the prepared remarks, all before we have any capital deployment either.
Okay, that that's all really, really helpful. Appreciate the bridge. Maybe quick follow up. If I can, um, Ryan, you touched a little bit on, um, China, Diagnostics and VDP. Um, a lot of a lot of concern on that. So you just talked about, um, you know, as you move past the headwind but you're still taking a conservative view. So just expand on on what you're seeing in vvp. Um, I think you're lapping, the comps as you get into the fourth quarter, but there's concern of another way down the road, maybe oncology and thyroid was called out by another um player in the market, just sort of how drift is trying to diagnostic from a DVP perspective, um, for 2027.
Yeah, Mike. I mean, I
Mean, like you said, we are getting...
The wave here that started in Q4, with the first reimbursement in China. So we will anniversary that I think, as we sort of have dealt with what has come vbp. The reimbursement is the various policy, you know, sort of changes during the year. I think we're I think we're pretty well dialed in. I mean, I would I would say that for next year. Um, you know, our assumption is that we probably have, you know, maybe 75 to 100 million, you know, dollars of headwind here, um, which you know, on a day or her level is fairly modest and and manageable. Um, and so I think that's kind of where we were or where we are as from a planning perspective and I think that's, I think that's a pretty good place to be, um, given what we know today. Um, you know, and and and have
Visibility to some of the things that are coming, and certainly have visibility to everything that's already been announced.
Great. Thank you.
And, you know, the odds that you could actually see an equipment pickup next year on the biotech side.
Yeah.
Let me comment a little bit more on the equipment side and, and what, what it would take. So I think some it is for, you know, for modeling purposes. Just so, as everybody's on the same page here, biotechnology in the fourth quarter, we are going to be high single digits in bioprocessing and we are seeing DNM down mid single digits. And so the discovery of medical a lot of that has to do with a a prior comp member they were upload double digits and and frankly they continue to see softness. Remember we've got the kind of a protein Discovery business in there. That acts a lot like a life science tool business. And so they're sort of seeing the same End Market, you know, pressures as we see in life sciences there. And so hence the reason they're down mid single digits. But just to be very clear bioprocessing in the fourth quarter is high single digits.
As it relates, as it relates to the, uh, equipment, uh question.
I've been spending a fair amount of time with pharma customers here. I do that more generally, but even more so here in the last several weeks to understand how they're thinking about,
Reshoring and, generally speaking, equipment investments. And first of all, the activity level in the...
End markets. So the manufacturing volumes continue to increase. So there is a need more generally to continue to invest and equipment, and that's probably been held up a little bit here, uh, due to, some of the policy, uh, discussions that have been ongoing. And what I've noted here, uh, in these discussions with some of the senior Pharma leaders is that there's, um, more confidence now, in making these investment decisions, uh, as some of these most favored nation, uh, negotiations are becoming to workable, uh, Solutions and the terrorists are starting to dial in and remain somewhat consistent. So, generally speaking, what we're seeing here is more activity, more discussion while some of those that planning is still fairly high level certainly for Greenfield Investments. Uh, what we're seeing is, uh, activity and and quotations and so forth around more Brownfield Investments. Uh, we just haven't seen those turned into orders yet, but having said that we're fairly
Constructive, uh, on equipment. But from a planning perspective, we thought it was prudent here, uh, to continue with what we've seen here, uh, up and through the third quarter.
Okay, that that's helpful and then maybe just flipping over to Diagnostics, appreciate that, China vbp, commentary. Maybe just can you talk about what's baked in for next year? For for Beckman? Xvb, uh, you know, is that mid single digit plus? Uh, is anything, you know, kicking in from Alzheimer's or is that too early and then similarly for sepia, you know, away from respiratory? How do you think about the base business there next year?
yeah, I mean, I think
It's too early for, for, uh, for Alzheimer's. I think. I mean, it's if that's probably a longer term play for us. I don't think we've got anything kind of built built in or baked in for that. I, I would expect that for, for Beckman, for next year. I mean, we can kind of, get into a little bit more details when we give the, the formal numbers, if you will, in in January, but, you know, they've been executing very well. They've got a good new product launch in the dxi 9000. Um, you know, they've been outside of China, that's been a mid single digit growth plus, you know, every single digit growth business. Uh, and I would expect that that would continue, uh, as we move into into next year, and um, as far as sepia again, outside of respiratory, respiratory our assumptions, there will be essentially flat at 1.7 billion. Um, and then outside of that, that's been a business that has done sort of, you know, High single low, double digits on a pretty consistent basis on non-respiratory, uh, I think with the install base continuing to, you know, sort of, uh,
And as we start to add more, uh, more menu onto existing customers, I suspect that those levels are a good place to start as well.
Okay, moving at that. Thanks, guys. Thanks so...
We'll take our next question from Scott Davis with Melius Research. Please go ahead, your line is open. Morning, Scott. Hey, good morning, guys.
Um, things seem to be more stable. The last couple quarters, it's nice to see that but um anyways um I was curious just on the the the mix between kind of respiratory and sexual health and uh and see it, because you quoted some pretty strong growth numbers, um, on the sexual health side but then also kind of guiding to more flattish in 2026 versus 25 totally for sepia. So perhaps um a little bit more granularity on that be helpful.
To be flat year-over-year. So you know, that which would not, you know, have sexual health in it. Um, I think kind of we we talked a little bit earlier on the question with with Tau that um, you know, the outside of respiratory which is where Sexual Health would reside that we would expect, you know, we've seen that business kind of be low low single, or sorry. Hi single low double digits and uh, I would expect that, that would continue into next year. Um, so sexual health will be a part of the
Group there, for sure. Um, has been and I suspect that it will be uh you know, for for a while as we go forward and expand that menu and and and drive penetration.
So to be clear, then sepia, it should grow in 26 versus 25. That's what you're expecting. I I think so.
Okay, all right, fair enough. Um, and then the, um, just a little bit of.
A question I guess is on the contract structures that you have at have, they changed over the last few years, just given the, the Tariff and cost inflation Dynamics. We've had supply chain, Etc. It's all been all kinds of headaches that many companies have had, but have your contract structures adapted in a way, uh, and include this is more equipment than consumables. But is it adapted in a way that allows you to adjust pricing a little bit easier for, um, for potential headwinds that could arise?
Got over over the years, we have brought more, uh, flexibility into that. Of course, each contract is specific to a a given customer's needs and we try to be responsive to those but generally speaking. Um, as you think about bioprocessing, for instance, uh, we have a fair amount of both flexibility and to some degree leverage there. In order to drive, differentiated pricing for differentiated Solutions.
Fair enough. Um, best of luck guys, thank you. Thank you, Scott.
Take your next question from Doug Shankle, with wolf research. Please. Go ahead morning. Doug.
Good morning, Riner. Good morning, everybody. Thanks for checking the questions. Um,
1 quick 1 on recent events. Have you seen any change in activity over the last few weeks? Or even just even in the tone of discussions with biotech and pharmaceutical customers? Since the fiser mfn announcement, um, came out, um, I'm I'm guessing you didn't reflect anything in guidance based on the way you talked about your framework, um, if if uh, if things are improving. But I'm, I'm curious if you've seen any changes,
Doug, I, I think I, I would say, yes, we and and also correct that we have not reflected that uh, in our guidance here, uh, neither for the fourth quarter, nor for our initial thoughts on 26, because we like to see, um, the shift in tone, turn into demonstrated, uh, order patterns, uh, so that we actually see the trend. But having said that, uh, and as I mentioned earlier, have been out in the market, a fair amount all over the globe here, talking to various, uh, Pharma, uh, Executives. Uh, and there is more confidence that the policy environment is finding more balance. And that some of these overhangs whether that's the most Favored Nations discussions. Where, like I say, um, some of those are not always, um, great. But they are workable. Uh, and remove an overhang for our Pharma customers, on the 1 hand. And on the other hand, we do see the tariffs situation, uh, stabilizing and
Becoming planable, and in that context, we're starting to see more confidence regarding capital investment decisions and the location of those.
We're looking at investments going forward, and we're hoping to see that translate from activity into quotations.
Into stronger, uh, order patterns. But we haven't seen that yet. And as a result of that we we're not reflecting that yet in any of our guides.
Okay, super helpful. And then, um,
Yeah, thank you for the framework for 2026. I have a question on margins. So.
Um, I think, you know, with this morning's announcement, by the end of the year, you will have invested. I think it's about $300 million in productivity enhancements in 2025, and unlike a lot of your peers.
Even mid single digit Topline growth.
That all in all you know that the error bar is probably skewed to the upside. As we think about margins for next year, again, just rolling through the the benefits of all the, the the productivity enhancements that you're putting into place as we speak.
Yeah. I mean, well first I I would just kind of anchor on this is I I believe that at 35 to 45% fall through and the impact of just the, the 250 I talked about that's north of 100 basis points, so right. Just want to because I think when you go to do your neck your math, it's not going to be 100. So so I think you're right on that on that point um as far as you know, is there more than what we have have sort of offered up here, you know, this is it is a net number so that we can continue to invest in the business. I think this is the right balance of investing in the business. Making sure that we're also delivering, you know, High single digit, or better EPS growth, uh, as we head into the 2026. But you know, we we do want to leave ourselves some room for that investment. Um, but you know, as the year plays out, we can always kind of uh, we always tweak and uh, and and, and work with that. So, but uh, I think the the the frame that you laid out of north of a 100 basis points of margin expansion is very fair and like I said you know that 250 million of net savings gets us that 30 Cent tailwind. And um I feel pretty comfortable about, you know, hyping
With the DPS, even if we're at the, you know, the low end of the of the of the guy of the range.
Okay. All right. Thanks guys.
Thanks Beth.
We'll take our next question. From Vijay Kumar with evercore. Isi, please go ahead. Your line is open morning Vijay.
Hi Reiner. Uh, good morning. And thank you for taking my question. Uh my first 1 on on uh if I wanted to touch on uh the fourth quarter Diagnostics assumptions.
Think um x, uh respiratory and exchange China. Uh, looks like uh the business has done around mid singles for the past 2 quarters and I think a guide implies for Q4, double digits. So, maybe uh, talk about what changes sequentially from 2 to 4. Uh, and what drives the optimism for uh, for a Diagnostics uh, exchange China Express. Respiratory.
Um, I I think that the uptick is is vbp lapses.
That's the that's the Delta. I don't think anything changes with the rest of the Core Business. I think that's mid single digits that based business if you will. But remember we took the first hit in respiratory in um in China with bvp and reimbursement in Q4. So I think it's the non. I think it's the reimbursement. It's the bvp that gets better. Not the base business.
Sorry, man. I think... Um, am I correct in assuming the zooming of X? Respiratory next, China, the business is made single since EQ.
And that assumption doesn't change for Q4 mid-singles, or does it change regarding X-ray and China?
again I I think your your your exchange is the the
the piece BJ that, that is going to that China number is going to get better in the fourth quarter, because we are lapsing, reimbursement,
Happy to follow up with you on some numbers offline.
Understood and maybe a brighter 1 for you and capital deployment, a pretty big Chevy Pro, and a Nazi Q uh, with the new 35 million authorization. Uh, how are you thinking of m&a versus uh, uh, Chevy purchases, right? When you look at assets available in the deal pipeline,
Towards M&A, we continue to be very active on the M&A front.
Or cultivating, uh, every day. Uh, and we continue, uh, to think about m&a and the context of our framework, uh, attractive and Market attractive company with value reserved. And importantly, uh, the valuation framework, the model has to work and we're going to stick with that discipline. Now that said,
said uh, and as we've demonstrated here, we're not opposed to buy backs that that current levels, the relative value of a buyback generates
Attractive Financial returns and we will continue to evaluate all our Capital allocation using the same roic lens. So biased to m&a, clearly. But we're going to maintain the discipline because we want to see the return.
Understood. Thank you guys. Thanks DJ.
We'll take our next question from Dan Brennan with TD Cohen. Please go ahead, morning, Dan.
Morning Riner. Um, thanks for the questions here. Um, maybe just going back to, uh, bioprocessing the equipment side.
For any demand that comes from this onshore in, can you just kind of zoom out a little bit and give us a flavor, how we might think about this? I know there's been, you know, hundreds of billions of announcements, but it's hard for us to parse what's really incremental, what's a shifting, from 1 reason to the other, and kind of how it might impact you. So, if we look out, like, what should we be looking for? And, you know, could this actually drive, you know, some potential, you know, real demand benefit for you, you know, whether it be in, you know, exiting 26 into 27, anything like that.
Sure, Dan. I mean, the in investment announcements that we've heard from Pharma, um, differ in terms of what they include and exclude depending on which Pharma company, you're talking about, and then of course, many times, the timelines were 5, and, and 10 years. So, those numbers grow pretty quickly, especially if the research and development Investments, uh, were considered in those investment numbers as well. But if we put that aside for a minute, there's 2 factors here that drive equipment. Demand first, the manufacturing growth that is required to meet the market demand. And uh, we have seen over the last
Quarters that the equipment investments have been fairly slow. While they've improved slightly, they've been below historical trends, while the end market and the production requirements have continued to be strong. So there is a general need around the world to start investing in equipment. That's sort of one factor, and then you add this, this.
Trend of regionalization of manufacturing capacity. And, of course, we think about that in terms of the reshoring discussions, uh, here, uh, in the United States, but other regions, think about regionalization Network as well. And so that speaks positively to the general environment, uh, and the requirements for equipment Investments going forward. And what is held that up here is the dynamic of policy changes. Certainly in the US, but elsewhere in the world as well. Um, as well as, how do we need to think about, uh, tariffs and most Favored Nations pricing, and there. I've tried to provide a little bit of color that we see. Those overhangs starting to dissipate, uh, as 1. The tariffs have become more planable and predictable and 2, the most favored nation pricing, which is a key factor when you're making these Investments.
Decisions as well. Uh, it's it's it's starting to dissipate as I said with some workable deals being made and and generally speaking that's provided more confidence uh to the most senior decision makers here uh in the Pharma industry.
Great. Thank you. And then, maybe this is a follow-up just on the 26 guide. I think you discussed a lot about China and bioprocess, but just on.
The on the, you know, life life science piece. Um, sounds like you're thinking about maybe starting that if Matt you know Matt talked about 0%, excuse me, 3%. As the good starting point for the company. So life sciences. Probably, I guess zero. Could you unpack a little bit? I know you talked about, you know, you're not baking in any Improvement, just between instruments and genomics. Like, what would have to happen to get to zero? Do you think that's going to prove to be, you know, kind of a conservative number. Thank you.
yeah, no, I think
Right. Uh, spot on, on on that being flat and again, sort of, um, you know, it's that's where we've been now. I think part of the, the reason that we, uh, we have the same thing. Same dynamic in Q4 that we do in life sciences. As as for all of 26, it's it's, it's been where we where we've been, it's been fairly flat. Um, as we have not seen that inflection in the market like like Ryan has talked about, maybe you want to talk about what what might happen to get physical glitter. Sure. So I mean, let's start with the fact that the clinical
And applied markets have remained fairly solid, and we don't expect that to change. We've also seen a modest recovery in Pharma research spending. It's below historical trends, but we've started to see a recovery there, and that was reflected in Q3 as well. It's really academic and government which, you know, on a global basis is low single digits exposure for Danaher.
Working through that, and we would expect that then, uh, also to be reflected, uh, in a little bit more supportive and modest, uh, growth next year. But for planning assumptions. Uh, we think, uh, where we sit today that it's best to consider flat growth for Life Sciences, uh, in the context of that 2026 guide that we gave you. And um, you know, if they're upside uh, there is, but we want to see some of that playing through here in orders. Uh, before we call that trend,
Great. Thank you.
We'll take our next question from Jack. Meham with Nephron Research. Please go ahead. Your line is open.
The first question in the quarter, uh, the sales were about 60 million higher than what consensus was looking for. Um, you know, there's about 200 million of upside from respiratory. Everything sounds great, and Beckman exchange China and Leica. So it just wasn't obvious to me. What might have fallen short at least versus what the street was thinking. Is there anything that you would call out? No, I would say it was all respiratory. Kind of, if you will a little bit earlier than we expected, I think customers were, you know, just kind of again, kind of coming earlier than we. We thought I would say, it was probably 125 million of of pull forward, if you want to call it that, but it was
Nothing else to call them diagnosed. Okay, got it. Um, actually I'll pivot to the biotechnology business just as a follow-up. Um, can you talk about the dialogue? You're having in terms of reshoring? I know you mentioned kind of like the billions of dollars being talked about and Manufacturing here in the US.
How do you think this is going to play out over the next few years? Just any color around, um, what that can mean for both Capital demand and recurring for that business? Uh, that would be great.
That that this reshoring in the US particularly, but the regionalization of Supply chains is going to result in continued investments in Capital Equipment. And we think the way that starts is with Brownfield Investments, where customers?
They are taking advantage of existing facilities in order to get those capacities in place more quickly and also demonstrate that they are investing in the respective regions, including the U.S., while in parallel planning sort of those larger...
Green Field Investments. Uh, that take a little bit more time that that is a different timeline, which takes certainly a couple of years, uh, in the best of cases and can take a little bit longer. So once that gets rolling, uh, we we might see an extended Capital cycle here, uh, over a number of years but we haven't seen that flow through in orders. Yet lots of discussions, some of them more near-term. IE those Brownfield Investments uh others at a higher level because those are uh larger Investments that just take more time, not only to plan but to execute
Great. Okay. Thank you guys.
Thank you.
And we'll take our last question today from Punnett Essay with Ling Partners. Please go ahead. Your line is open.
Uh, thanks rener. Um, so my first question is, um, uh, you know, I appreciate your qualitative comments on on the maps and biological growth and and bioprocessing being high single digit, but just wondering. Um, if you could provide any color on the order of growth or book to bill in the quarter, uh, I believe it was um, about 1 last quarter. Um, and we have seen weakness in the aab segment and some of the Innovative modalities. So just wondering, um, uh, what's your level of confidence on monicon antibody growth? Offsetting, uh, some of that to still deliver High single digit growth. And I have a, a follow-up on China.
Yeah, I mean the book to build was pretty similar to what we've seen all year around. So maybe you want to comment.
Well, I mean we continue to see monoc, clonal antibodies.
Growth, that's strong.
and not only because, the commercial volumes on existing indications are growing more quickly but also, uh, because we see, uh, new
applications of existing on Market drugs, uh, being approved. And then we also see bio similar here that are pretty close, uh, to the launch as well. So, we do think that that very, very large part of our business, 75% of our businesses and those, monoclonal antibodies, and the growth that's associated with that, uh, takes care of some of the volatility, uh, that we have seen.
Uh, here in some of the AAP business, some of, which has been around, uh, for some time. So it's also lapping. But just to say that it's really driven by protein and these nucleic acids, uh,
Therapies while they will are interesting and efficacious. Uh they will continue to take time to find it into the first line of standard of care. And while we're very well positioned their, what's driving? Uh, the growth here is really uh, protein, monoclonal antibodies, um, going forward,
Uh, that has emerged over the last few weeks, uh, there's a 20% pricing rebate for those manufacturing locally. Uh, this is beyond the vvp and the drg headwinds we've been hearing about. So, uh, maybe could you just remind us? How much of your production and uh, sales in China are manufactured, uh, locally and maybe both reagents and on the instrumentation side? What do you have defensiveness? And where do you need to expand manufacturing? If this was to spread uh, broadly to other government agencies, including academics. Thank you.
Factors is actually not. The, the newest of news. It's been out there, uh, informally, which is often how it works. Uh, in China. Uh, for some time, in fact, I was just in China, uh, for a couple of weeks here, uh, taking a close look at, uh, what's happening? Uh, and of course, uh, talking to customers and, and government officials. And, and, of course, our teams. And, and we think that we're very well positioned here as it relates to localization, uh, by the end of the year, um, much of our diagnostic businesses, whether that equipment or reagents, uh, will be localized, uh, and that degree of localization, uh, plays uh, well across the portfolio. So, while we don't talk about, uh, percentages of localization,
Uh, we think that we're very well positioned here and view this actually as advantageous, as opposed to a short-term headwind.
Got it. Okay, thank you. Thank you.
And with that, we'll turn the call back to John Bedford for any additional or closing remarks.
Thank you, David, and thank you, everybody. We'll be around.
All day and the rest of the week for for follow-ups, have a good, uh, good rest of your Tuesday here.
This does conclude today's program. Thank you for your participation, and you may now disconnect.