Douglas Schenkel

Douglas Schenkel asked about the underlying drivers of improvement in the lab business, given strong Q4 results against a tough comparison and accelerated two-year stack growth. He specifically inquired about signs of a budget flush and any changes in trends within key end markets.

Answer

CEO Patrick Kaltenbach attributed the lab business's performance to biopharma processing and some budget flush observed towards the very end of Q4, though the exact amount is hard to quantify. He highlighted the role of the LabX software solution in connecting a broader portfolio of products in R&D and QA/QC labs, enabling automation of workflows, which helps the company compete effectively and drives market momentum.

Douglas Schenkel asked about the underlying drivers of improvement in the lab segment beyond process analytics and bioprocessing, inquiring about signs of budget flush and changes in key end-market trends.

Answer

CEO Patrick Kaltenbach linked lab strength to biopharma processing and confirmed some budget flush at the end of Q4. He highlighted the role of the LabX software solution in connecting a broader product portfolio, automating workflows, and driving momentum in R&D and QA/QC labs, which helps Mettler-Toledo compete effectively.

Representing Douglas Schenkel from Wolfe Research, an analyst asked about the drivers of Q1 gross margin, the reason for elevated SG&A, and the outlook for OpEx. They also questioned the divergence in performance between Core Industrial (down 6%) and Product Inspection (up 8%).

Answer

CFO Shawn Vadala attributed the strong gross margin performance (up 90 bps ex-shipping delays) to favorable pricing and productivity programs. He characterized SG&A as reflecting ongoing investment and noted that full-year operating margin should be up slightly, excluding tariffs and shipping delay effects. He explained that Product Inspection is outperforming due to success with new products and a different end-market mix compared to the more China-exposed Core Industrial business.

Douglas Schenkel questioned the health economics of annual Galleri screening, particularly regarding the cost per cancer detected at a potential $500-$550 ASP. He also challenged the company's cash management strategy, asking why the board did not raise capital to de-risk operations given the stock's strong performance and the long timeline to potential FDA approval and reimbursement.

Answer

Executive Joshua Ofman affirmed that pricing strategies are based on annual testing, which is considered a highly cost-effective intervention that substantially lowers the cost to diagnose a cancer compared to current standards. Regarding cash management, an executive and Aaron Freidin explained that the company has a substantial cash runway to reach key value-creating milestones, making it prudent to wait. They added that the board continuously evaluates the situation.

Douglas Schenkel asked about the new, lower-cost version of the Galleri test, questioning how it impacts pricing flexibility and if there is evidence of demand elasticity. He also inquired about the latest developments regarding the MCED (Multi-Cancer Early Detection) legislation in the U.S. House.

Answer

Executive Robert Ragusa and President Dr. Joshua Ofman explained that the new test version is designed for long-term scalability and cost structure to support population-level screening, rather than for immediate pricing changes. They noted that fixed cost leverage will take time to realize and that price elasticity has not been tested yet. Regarding the MCED legislation, they confirmed it retains strong, bipartisan, and bicameral support and they are awaiting the right legislative vehicle for it to advance.

Douglas Schenkel questioned the path to revenue rebound, asking for a breakdown of Q1 clinical versus research growth outside of China. He also inquired about the full-year guidance assumptions for these end markets and Illumina's strategy for managing the declining China business risk beyond 2025.

Answer

CEO Jacob Thaysen reiterated confidence in the long-term strategy, emphasizing the business's resilience ex-China and the cost actions taken to offset the China impact. CFO Ankur Dhingra specified that Q1 clinical consumables grew mid-single digits while research consumables declined mid-to-high single digits. He added the full-year guide assumes a ~15% decline in the research market, offset by continued strength in clinical.

Douglas Schenkel asked about the levers Illumina could pull, such as margin improvements or buybacks, to protect its EPS targets if the China situation is not resolved. He also asked for management's commitment to achieving mid-single-digit revenue growth and superior EPS growth despite recurring challenges.

Answer

CEO Jacob Thaysen reaffirmed the company's commitment to its long-term financial targets, including high single-digit revenue growth by 2027 and double-digit to teens EPS growth. CFO Ankur Dhingra added that the company is pursuing all opportunities to drive margin and operating leverage, noting the base case already includes 170 basis points of expansion for 2025.

Douglas Schenkel asked about Q4 guidance, specifically whether Sequencing Consumable revenue would grow sequentially, and sought visibility on the clinical customer transition to NovaSeq X to address concerns about a potential 'clinical cliff'.

Answer

CEO Jacob Thaysen stated that the company does not see a 'clinical cliff,' highlighting strong momentum for the NovaSeq X and deep collaboration with customers on their transition plans, which can take 12-18 months per assay. CFO Ankur Dhingra added that the Q4 consumables guidance assumes a typical seasonal decline due to holidays, not an underlying issue with the clinical transition.

Douglas Schenkel questioned the full-year guidance, noting that strong Q1 and Q2 forecasts imply a growth deceleration in the second half. He asked if this was prudent conservatism and which business areas were outperforming the original plan.

Answer

CEO Thierry Bernard characterized the outlook as 'realistic ambitions' rather than conservatism, citing significant ongoing volatility in the economic and geopolitical environment. He confirmed the guidance accounts for cautious customer spending, tariff debates, and research funding uncertainty, while also leveraging the strong performance of QuantiFERON, QIAstat, QIAGEN Digital Insights, and QIAcuity consumables.

Douglas Schenkel asked about the specific end-market growth assumptions embedded in the 2025 guidance and whether the company could protect its margin expansion target if revenue is weak, or if it would let upside flow through if revenue is strong.

Answer

CEO Thierry Bernard stated the market growth assumption is around 4-5% and confirmed the 2025 guidance offers upside potential if the macro environment becomes less volatile. CFO Roland Sackers affirmed the company's ability to deliver on profitability goals due to a variable cost structure, referencing how they increased the EPS guidance three times in 2024 while maintaining high R&D investment.

Douglas Schenkel questioned if the decision not to raise full-year guidance beyond the Q1 beat was due to conservatism. He also asked for commentary on the strong Q1 free cash flow and its durability.

Answer

CFO Marco Dal Lago explained the steady guidance reflects offsetting factors, namely currency headwinds against tariff-related price increases. CEO Franco Stevanato added that plant ramp-ups have fixed technical timelines. Regarding cash flow, Dal Lago noted that while Q1 was strong due to collections, the company reiterates its full-year guidance for negative free cash flow of €40-€60 million, expecting fluctuations from CapEx and tax payments.

Douglas Schenkel from Wolfe Research asked if the company had seen any changes in customer behavior in early Q1 due to geopolitical factors and how much of the U.S. demand for high-value products the Fishers facility could support once fully ramped.

Answer

Chairman and CEO Franco Stevanato stated that the focus remains on executing existing contracts and capacity expansions. He explained that the Fishers facility is currently in Phase 1 of its build-out, scheduled for completion by late 2028, with a long-term vision for a Phase 2 expansion to ensure flexibility in meeting future U.S. market demand.

Douglas Schenkel of Wolfe Research asked about portfolio evolution, specifically when recent major acquisitions are expected to show organic growth and if diversification benefits are materializing. He also questioned if the reduced visibility in China is adequately captured in the guidance.

Answer

CEO Frank Laukien affirmed that the portfolio evolution is already providing benefits, with diagnostics and automation showing strength that helps offset academic market weakness. He stated that without these changes, the company might be facing an organic decline. Regarding China, he agreed visibility is low but believes it is captured in the guidance by not assuming any significant stimulus revenue in 2025.

Douglas Schenkel of Wolfe Research asked about the complexity of Myriad's business, the timeline for simplification under the new CEO, and key metrics to watch. He also requested a clear breakdown of the financial guidance bridge, specifically the impact from UnitedHealthcare on GeneSight.

Answer

President and CEO Samraat Raha acknowledged the need for simplification and stated a strategy refresh will provide clarity by late Q3 or Q4 2025, with a continued focus on oncology. He highlighted key execution milestones, including meeting updated guidance and hitting new product launch timelines. CFO Scott Leffler clarified the UnitedHealthcare headwind for GeneSight was $10 million in Q1, which was in line with expectations and factored into guidance.

Douglas Schenkel asked for clarification on the financial math behind the UnitedHealthcare impact on GeneSight and questioned the strategic fit of the historically 'controversial' GeneSight asset within the new, more predictable 'Myriad 2.0'.

Answer

President and CEO Paul Diaz confirmed the $40 million annual revenue impact from UnitedHealthcare's commercial business, translating to a ~$30 million gross profit loss, of which they aim to mitigate at least $10 million. Philosophically, Diaz defended GeneSight's value, citing the 3 million patients served and powerful personal stories of its impact on treating depression and anxiety, stating the company will not abandon those patients.

Douglas Schenkel asked a multi-part question about guidance, covering whether savings from the DNA storage spin-off would be reinvested, the timing of inventory builds for MRD launches, and the reasons for the more back-end loaded sales guidance.

Answer

CFO Adam Laponis clarified that most savings from the data storage spin-off will drop to the bottom line, improving the adjusted EBITDA outlook. He also stated that the guidance does not assume any material revenue from MRD launches in fiscal 2025. The guidance pacing reflects continued sequential growth against tougher year-over-year comparisons in the second half.

Douglas Schenkel of Wolfe Research asked about the strategy for penetrating deeper into large customer accounts beyond the initial sale and how current market uncertainties are factored into financial guidance.

Answer

CEO Emily Leproust confirmed they track and drive penetration within accounts by monitoring revenue growth and new user adoption from different labs. CFO Adam Laponis explained that guidance accounts for uncertainty by recognizing their relatively low exposure to academic funding (~20% of global business) and viewing market turbulence as an opportunity to gain share, particularly in areas like NIH where they are currently under-indexed.

Douglas Schenkel sought clarification on the non-COVID organic revenue growth guidance, noting a change from the previous quarter's range. He also asked about Repligen's strategic positioning in Asia, particularly in light of recent hires and potential customer shifts away from China.

Answer

Executive Jason Garland clarified the guidance metric now excludes currency fluctuations, making it fully organic, but it does not represent a change in the underlying business outlook. Executive Olivier Loeillot detailed the strategy for Asia, including new leadership in China to prepare for a market rebound from 2026 onwards and specific growth strategies for dynamic markets like South Korea, Japan, and Singapore.

Douglas Schenkel of Wolfe Research asked if Repligen's outperformance in instruments was due to customers swapping out competitor lines. He also suggested the Q1 guidance seemed conservative given strong Q4 orders and short fulfillment times.

Answer

President and CEO Olivier Loeillot stated that as a smaller player in the hardware market, Repligen is focused on winning share with superior products and confirmed they are gaining traction and being platformed at large pharma companies. Regarding Q1 pacing, he clarified that hardware has a 3-6 month lead time, so Q1 sales are largely based on prior quarter orders, which differs from consumables that can be ordered and delivered within the same quarter.

Douglas Schenkel asked if the lowered bioprocessing guidance was primarily a function of conservatism given the external environment, despite a strong order book. He also posed a long-term question about whether 100-150 basis points of margin expansion is mathematically plausible upon returning to mid-single-digit growth.

Answer

CEO Michael Stubblefield characterized the bioprocessing guide as 'prudent,' acknowledging it reflects Q1 results but that underlying momentum and order trends support incremental improvement. CFO R. Jones addressed the margin question, stating that while not providing future guidance, the math is plausible. He noted that the Bioscience Production business has 'fantastic' incremental margins at the right growth levels and the overall platform 'absolutely wants to be above 20% margin' with the proper growth.

An analyst on behalf of Douglas Schenkel asked how margins could be impacted if the trend of strong bioprocessing growth and weaker lab business performance continues or exacerbates, and if this could represent an area of upside.

Answer

CEO Michael Stubblefield acknowledged that lower lab volume would lead to under-absorption of fixed costs, which is factored into guidance. However, he noted that stronger-than-expected growth in either segment, particularly the higher-margin Bioscience business, would allow for better margin conversion and potential upside.

Douglas Schenkel asked if annualizing the Q4 EPS guidance would establish a reasonable minimum for 2025. He also sought color on the Bioscience Production (BPS) segment's performance, questioning the source of weakness given bioprocessing strength and the reason for a sequential margin dip.

Answer

President and CEO Michael Stubblefield deferred on 2025 guidance but noted encouraging business momentum. He clarified that the pressure in BPS was from the Advanced Technologies platform, specifically U.S. semiconductors, while the NuSil biomaterials business grew sequentially. EVP and CFO Brent Jones attributed the margin decline to higher freight expense and negative mix from the Advanced Technologies headwinds.

Douglas Schenkel asked for several clarifications: the status of SmartDose pricing discussions, confirmation that tariff surcharges are excluded from guidance, the implied full-year operating margin, and the timeline to reach the 23% long-range plan (LRP) target.

Answer

CFO Bernard Birkett confirmed that potential SmartDose price increases and tariff pass-through revenues are not in the guidance. He acknowledged the implied ~19% operating margin was reasonable and stated that achieving the 23% LRP target is contingent on returning to LRP-level growth, particularly double-digit growth in Biologics.

Douglas Schenkel asked if the current environment represents a 'new normal' with a structurally lower market growth rate and what Thermo Fisher would change in that scenario. He also inquired about evidence of manufacturing reshoring to the U.S. and the potential benefits for the company.

Answer

CEO Marc Casper acknowledged the challenging environment but emphasized the industry's long-term resilience and strong fundamental drivers. He stated that while a structurally lower global GDP would affect market growth, Thermo Fisher is well-positioned and would be transparent if its long-term view changed. Regarding reshoring, he confirmed that new U.S. facility announcements by customers represent a 'nice tailwind' and a meaningful revenue opportunity for equipment, consumables, and services.

Douglas Schenkel asked if Thermo Fisher expects to exit 2025 within its targeted 7-9% organic growth range and questioned the drivers behind the impressive 90 basis points of targeted operating margin expansion, especially given the below-target revenue growth.

Answer

Marc Casper, Chairman, President and CEO, clarified that the 2025 exit rate would likely be in the "strong mid-single digits," progressing towards but not yet at the 7-9% target. He stressed that the 90 bps margin expansion is a specific 2025 focus to deliver strong EPS in a recovering market, driven by the PPI Business System and cost discipline, and is not the new long-term expectation.

Douglas Schenkel inquired which geographies, customer groups, or product categories were tracking ahead of or below initial 2024 expectations. He also asked if the company could see outsized margin improvement as revenue growth returns, given the strong cost discipline during a challenging period.

Answer

Marc Casper, CEO, stated that performance has tracked with 'incredible precision' to initial plans, with biotech funding improving and China being the main area that has not progressed as hoped. He highlighted the strong adoption of high-end analytical instruments as a positive. CFO Stephen Williamson acknowledged that as volumes return in businesses where costs were cut, there could be an incremental margin benefit, but framed the outlook within the company's long-term model.

Douglas Schenkel asked for an update on the genomics segment, particularly Aldevron, and sought clarity on the full-year operating margin guidance given the strong Q1 performance.

Answer

EVP and CFO Matt McGrew explained that providing an EPS guide offers a better anchor in the current environment and confirmed the implied ~28.5% operating margin target. He noted the Q1 beat provides a cushion against macro uncertainty. President and CEO Rainer Blair added that the pressure at Aldevron was anticipated and is expected to improve in the second half of the year.

Douglas Schenkel asked for the implied normalized core growth rate for the Diagnostics segment after excluding headwinds. He also questioned the company's guidance philosophy, noting the steady downward revision of 2025 EPS estimates over time and asking about the biggest risks and potential upsides to the current forecast.

Answer

EVP and CFO Matt McGrew confirmed that normalized Diagnostics growth is in the mid-to-high single-digit range, excluding China and respiratory impacts. Regarding guidance, he explained their philosophy is a bottoms-up approach that incorporates current market 'noise' to be prudent, particularly in Life Sciences. He acknowledged past external challenges but expressed confidence in the company's strong margin profile.

Douglas Schenkel questioned the realism of the street's 2025 consensus for 8% core growth, highlighting headwinds like tough respiratory comps, China's VBC, and stimulus uncertainty. He also asked about the utility of the book-to-bill metric in bioprocessing and whether the reported 20%+ order growth is a strong indicator of a robust recovery.

Answer

President and CEO Rainer Blair acknowledged the points, stating that key variables for 2025 include the bioprocessing order trajectory in Q4, the severity of the respiratory season, and the rollout of China's stimulus. EVP and CFO Matt McGrew clarified that while the 20%+ order growth is off an easy comp, the five consecutive quarters of sequential order improvement are very encouraging. He noted that the company doesn't heavily rely on book-to-bill, preferring to focus on order trajectory and sequential growth.

Inquired about the specifics of customer discussions regarding instruments (e.g., customer type, expansion vs. replacement) and how quickly the company could increase its U.S. production in response to tariffs.

Answer

The company can increase U.S. production by about 10% within a few months, with further shifts being possible but costly. On instruments, there is a high level of customer activity and demonstrations, particularly for expansion projects, leading to optimism for an equipment recovery starting this year.

Douglas Schenkel of Wolfe Research questioned Maravai's strategy for improving forecast visibility, asking about processes beyond market data tracking, the potential impact of launching 50 new products, and whether excluding high-volume CleanCap effectively isolates the main area of uncertainty.

Answer

Chief Executive Officer William Martin confirmed that removing high-volume CleanCap from guidance walls off the largest source of unpredictability. He added that visibility is being enhanced through new license agreements that mandate disclosure of clinical milestones and through the intimate program insight gained from the company's new GMP service offerings.

Douglas Schenkel of Wolfe Research asked about the long-term potential for Signatera's Average Selling Price (ASP) to double and the early market reception of the new genome-based product among pharmaceutical clients.

Answer

CEO Steve Chapman confirmed the potential to double revenue per test over time by improving reimbursement for currently unpaid tests, agreeing that an ASP around $2,000 is a reasonable future outlook. He and President of Clinical Diagnostics, Solomon Moshkevich, added that the genome-based product is resonating well for clinical research with pharma and academic partners who require broader panels, while emphasizing the targeted multiplex PCR approach remains optimal for scalable clinical use.

Douglas Schenkel of Wolfe Research sought confirmation on expectations for absolute volume growth in the next year, questioned how to interpret recurring revenue true-ups for modeling purposes, and asked about the Signatera volume mix between adjuvant and recurrence monitoring.

Answer

Executive Mike Brophy confirmed that aiming for similar absolute unit growth next year is the baseline goal. Regarding true-ups, Brophy explained that while they reflect better-than-expected collections, it is appropriate to exclude them from forward-looking guidance for modeling. He noted the improved collections do, however, increase confidence in ASP stability. Brophy also clarified that the mix between adjuvant and recurrence monitoring has remained balanced and was not the primary driver of Q3's margin improvement; the larger driver was the overall business mix shifting toward the higher-margin Signatera franchise.

Douglas Schenkel asked for confirmation of a strong December budget flush in pharma and inquired if January's business trends were impacted by the new U.S. administration and related uncertainties.

Answer

CEO Padraig McDonnell confirmed strong December momentum from Infinity III, PFAS, and GLP-1 demand. He described January as a 'steady progression,' noting that while academia saw softness from NIH uncertainty, the pharma business remained steady and the PFAS business remained strong.

Douglas Schenkel sought to confirm the conservative philosophy behind the fiscal 2025 guidance and asked about the performance divergence between small molecule and biopharma, questioning if it was a real demand trend.

Answer

CEO Padraig McDonnell confirmed the guidance is 'very conservative' due to uncertainties around the LC replacement cycle, China stimulus, and the U.S. political environment, agreeing that error bars are wider than normal. CFO Robert McMahon explained that while biopharma was down, the decline was only low-single digits excluding NASD. He attributed the low-single-digit growth in small molecule to steady volumes and an older instrument fleet, suggesting it could be a leading indicator for a broader recovery.

Douglas Schenkel of Wolfe Research, LLC posed three rapid-fire questions: clarifying an apparent discrepancy in LSAG instrument decline figures, asking about any changes in China stimulus dynamics like project stalling, and questioning the path to mid-single-digit growth in 2025 given the Q4 exit rate.

Answer

CFO Bob McMahon clarified his 'low double-digit' decline comment was specific to LSAG instruments and that a total instrument decline of 20% was 'way too negative.' CEO Padraig McDonnell reported that the China team sees increased activity and that no stimulus benefit is included in Q4 guidance. Regarding 2025, McMahon stated it was too early to provide specifics but reiterated that they expect improvement throughout the year.

Douglas Schenkel asked a series of 'lightning round' questions, seeking to reconcile the reported instrument decline with management's commentary, inquiring about any changes in China stimulus dynamics, and questioning if a significant market improvement is needed to reach mid-single-digit growth in 2025.

Answer

CFO Bob McMahon and CEO Padraig McDonnell provided rapid responses. Mr. McMahon clarified his 'low-double-digit' instrument decline comment was specific to the LSAG segment and that a 20% overall decline was 'way too negative.' Mr. McDonnell stated that the team in China sees increased activity but no stimulus benefit is included in Q4 guidance. On the 2025 outlook, Mr. McMahon reiterated that it was too early for specifics beyond expecting continued improvement.

Douglas Schenkel of Wolfe Research asked for an updated view on the company's long-term growth outlook given current headwinds in key markets. He also questioned what led to the guidance miss relative to initial expectations, what this implies about business visibility, and if the guidance philosophy needs to change.

Answer

CEO Padraig McDonnell reiterated confidence in long-term drivers like biotherapeutics and PFAS. CFO Bob McMahon stated they are not walking away from the 5-7% long-term growth algorithm and expect to return to those rates. Regarding visibility, McMahon acknowledged that customer feedback on budget releases did not materialize as expected in a volatile market but believes visibility will improve with growing recurring revenue.

Douglas Schenkel asked for an update on the expected timing for data readouts for both the tumor-naive and tumor-informed MRD products. He also sought confirmation that no MRD-related revenue is included in the 2025 guidance and inquired about the company's appetite for further M&A.

Answer

CEO Eric Lefkofsky clarified that the tumor-naive MRD assay is already in the market and submitted for reimbursement, which is anticipated in late 2025, with no single pivotal study pending. He confirmed no substantive MRD revenue is in the guidance until reimbursement is secured. Regarding capital deployment, Lefkofsky stated the company is not looking for large genomics acquisitions but may consider smaller tuck-ins on the data and AI side.

Douglas Schenkel of Wolfe Research asked about Veracyte's strategy for balancing aggressive growth investments and capital deployment with the need for margin improvement, and questioned the specific drivers behind the 2025 high single-digit revenue growth guidance for the Afirma franchise.

Answer

CEO Marc Stapley explained that the core testing business provides a bridge to long-term growth drivers like MRD and international expansion, while portfolio rationalization creates opportunities for reinvestment. CFO Rebecca Chambers confirmed the Afirma growth guidance is primarily driven by volume from market penetration and share gains, not a significant ASP tailwind.

Douglas Schenkel of Wolfe Research asked for clarification on the company's statement about 2025 being its "most productive year," specifically regarding the balance of new product launches, Cologuard growth, and operating leverage. He also asked about the revenue assumptions for MCED and MRD in the 2025 guidance.

Answer

CEO Kevin Conroy explained that productivity means achieving strong Cologuard growth while launching three impactful new tests, supported by well-resourced teams. CFO Aaron Bloomer added that G&A leverage will be a primary driver of margin expansion. He stated that the revenue contribution from Cancerguard (MCED) and Oncodetect (MRD) in the 2025 guidance is "modest."

Douglas Schenkel asked for clarification on management's statement about 2025 being the "most productive year," focusing on the balance between new product launches, Cologuard growth, and achieving operating leverage. He also asked about the revenue contribution from MCED and MRD assumed in the guidance.

Answer

CEO Kevin Conroy explained that the "most productive year" refers to achieving strong Cologuard growth while launching three significant new tests. CFO Aaron Bloomer added that G&A will be the primary driver of margin expansion and that sales and marketing productivity is expected to continue. He stated that the revenue contribution from Cancerguard (MCED) and Oncodetect (MRD) is expected to have a "modest impact" within the 2025 guidance.

Douglas Schenkel from Wolfe Research questioned the magnitude of the guidance cut relative to the hurricane impact, asking for confirmation that guidance would have been cut regardless. He also asked if the company can achieve double-digit revenue growth without ASP increases or new products.

Answer

CFO Aaron Bloomer confirmed they would have cut guidance even without the hurricanes, citing the larger impact from not accelerating growth during the critical August-October period. He and CEO Kevin Conroy asserted that rescreens, care gap programs, and the Cologuard Plus pricing uplift provide a "solid base for double-digit plus growth" in the screening business, with improved commercial execution providing further upside.

Questioned the guidance cut, asking for confirmation that it would have happened even without hurricanes due to execution issues. He also questioned the implied Q4 volume moderation and asked if double-digit growth is achievable in the next 1-2 years without price increases or new products.

Answer

Management confirmed they would have cut guidance even without the hurricanes, citing a lack of growth acceleration in their core business. They stated that a floor for double-digit growth next year is provided by rescreens, care gap programs, and Cologuard Plus pricing, with improved commercial execution providing upside. They also clarified that absent the hurricanes, Q4 revenue would have shown sequential growth over Q3.

Douglas Schenkel from Wolfe Research sought to confirm that guidance would have been cut even without the hurricanes and questioned the implied 10% Q4 Cologuard volume growth given multiple tailwinds. He also asked if double-digit revenue growth is achievable in the next 1-2 years without price increases or new products.

Answer

CFO Aaron Bloomer confirmed that guidance would have been cut even without the hurricanes, as the larger impact was the failure to accelerate growth during the critical August-October period. CEO Kevin Conroy and Bloomer asserted that a combination of rescreens, care gap programs, and Cologuard Plus pricing provides a 'solid base for double-digit plus growth' in 2025, with improved commercial execution offering further upside.

Douglas Schenkel asked about the drivers of Cologuard's momentum, specifically whether strong first-time order growth was due to seasonality or new commercial initiatives. He also questioned the potential structural disadvantages of a PCR-based blood test versus NGS, particularly regarding specificity, and why the historical issue of performance attenuation in pivotal studies is not a concern for their upcoming blood test readout.

Answer

CEO Kevin Conroy addressed the technology questions, stating the company has improved its algorithm-setting process, which led to performance improvement, not attenuation, for Cologuard Plus. He argued that while scientifically harder, their proprietary PCR platform offers a significant cost advantage with comparable performance, which is a key differentiator. CFO Aaron Bloomer added that Cologuard's momentum came from growth across all segments, including rescreens and the 45-49 age group, which remains a major opportunity.

Douglas Schenkel asked about the drivers behind the strong gross margin guidance, particularly the exit rate above 40%, and inquired about initiatives to reduce friction for instrument adoption, such as reagent rental programs, in the tough capital environment.

Answer

President and CEO Christian Henry explained that gross margin improvement is driven by resolving prior manufacturing yield issues, in-sourcing more instrument manufacturing, and lowering per-unit costs for SMRT cells. He confirmed that higher revenue would likely lead to even better margins due to a favorable mix shift towards consumables. He also mentioned that PacBio has programs like "Run Revio" that function like reagent rentals, but that improving bioinformatics to accelerate consumable usage is another key strategy to drive demand.

Douglas Schenkel sought several clarifications on the 2025 guidance, asking about the specifics of the NIH-related adjustments, the potential impact from China, and the expected quarterly revenue pacing throughout the year.

Answer

CFO Adam Taich confirmed a ~$7M impact from NIH conservatism is included in the guide, while a potential $10-15M impact from indirect cost caps is not. He projected a back-end loaded year, similar to 2023, due to macro uncertainty and the commercial team ramp-up. CEO Serge Saxonov added that the risk in China is contained, as their products are sequencer-agnostic and China represents a small portion of revenue.

Using a sports team analogy, Douglas Schenkel asked for tangible metrics to demonstrate that 10x Genomics has a solid recovery plan and is making progress after a disappointing year. He questioned what would constitute a "win" in the fourth quarter beyond simply meeting the lowered guidance, seeking assurance that the company is on track to improve.

Answer

CEO Serge Saxonov acknowledged the disappointing year and stated that previous incremental changes to the organization were insufficient, necessitating the current comprehensive commercial transformation. He pointed to the relatively strong performance in regions with less disruption as an early sign of progress. For Q4, while guarded due to open hiring and macro pressures, Saxonov expressed confidence that the company is on the right path and expects to see sequential improvement.

Douglas Schenkel sought to clarify the drivers behind the reduced Breast Health guidance, asking for the split between market conditions versus a pre-launch stall, and also inquired about the M&A strategy and target parameters.

Answer

CEO Stephen MacMillan clarified that the Breast Health softness is a blend of factors but is more heavily weighted toward market conditions, specifically the digestion of pent-up demand following the chip shortage. On M&A, Mr. MacMillan identified it as the top capital allocation priority, highlighting recent deals like Endomagnetics and Gynesonics as ideal models. CFO Karleen Oberton added that they target assets with accretive revenue growth, strong gross margins, and the potential for double-digit ROIC over a reasonable period.

Douglas Schenkel inquired about the specifics of the end-market recovery, asking which product categories and geographies are back to normal versus lagging. He also asked about Revvity's 2025 guidance for China, specifically concerning assumptions for core growth, government stimulus, and Volume-Based Purchasing (VBP).

Answer

CEO Prahlad Singh stated that the recovery path is clear but the pace is uncertain. He noted Diagnostics and Software are performing at 'normal' levels, while Life Sciences reagents are 'getting closer' and instruments are still lagging. CFO Max Krakowiak added that 2025 China growth is expected to be in line with the company average of 3-5%, with Life Sciences at the higher end. He clarified the guidance includes a mid-single-digit pricing headwind from VBP in immunodiagnostics and only a modest assumption for stimulus impact.

Douglas Schenkel asked for a bridge explaining the nearly $20 million increase in full-year revenue guidance, questioning if it fully captured current momentum. He also attempted to calculate the Q3 Shield test volume based on the change in development services gross margin.

Answer

CFO Michael Bell detailed that the guidance increase of roughly $27 million at the midpoint was driven by several factors: out-of-period cash upside, the sustained increase in Guardant360 ASP to $3,000, and a higher outlook for biopharma revenue, now expected in the high-20s. Regarding the Shield volume calculation, he noted the logic was 'a bit off' and clarified that the cost per test, while previously over $1,000, is now rapidly declining as volumes ramp.