Patrick Donnelly

Patrick Donnelly asked about the pacing and productivity of new hires for Caris Life Sciences' sales force, and whether any MSAT (Multi-Cancer Early Detection) related investments are included in the current numbers. He also inquired about catalysts and timelines for the MRD (Minimal Residual Disease) part of the portfolio.

Answer

Bobby Hill, CCO, stated that all Phase I positions for new hires have been posted, and hiring began in H1 2026, including ramping up for the MSAT field-based sales force and the Everlywell partnership, with updated training programs. Luke Power, CFO, responded that for MRD, Caris needs to collect more data and mature clinical outcome data, and therefore is not guiding to any specific timelines at this point.

Patrick Donnelly asked about the pacing of new hires for the sales force, how quickly they are expected to become productive, and if any impact from the Caris Detect (MSAT) investment is included in the current numbers. He also inquired about the MRD part of the portfolio, asking for any upcoming catalysts or timelines.

Answer

Bobby Hill, CCO, stated that positions for the first phase of new hires have been posted, hiring has already begun in 2026, and a multi-channel approach is being ramped up for MSAT, along with updated training. David Spetzler, President, addressed the MRD portfolio, stating that the company needs to collect more data and allow clinical outcome data to mature, and therefore is not guiding to any specific timeline for catalysts.

Patrick Donnelly inquired about Fortrea's outlook, particularly regarding biotech optimism, the uneven first half of 2026, and the position on new bookings. He also asked about key margin levers, the expected steady ramp of EBITDA and cash flow throughout 2026, and the potential flow-through of revenue upside to the bottom line.

Answer

Anshul Thakral, Chief Executive Officer and Director, explained that the uneven first half reflects 2025 bookings, noting improving client engagement, normalized decision-making timelines, and constructive dialogues with both large pharma and biotech. Jill McConnell, Chief Financial Officer, detailed that revenue growth is key for margin improvement, with 2026 seeing a step back due to pass-through mix and FSP headwinds, but cost savings will drive bottom-line expansion. She anticipates strong drop-through when revenue recovers.

Patrick Donnelly asked about Fortrea's outlook, particularly regarding the uneven first half of 2026, the impact of past bookings, and the current position on new bookings. He also inquired about any changes in market share and the overall backdrop for future bookings, as well as key margin levers, the expected ramp throughout the year, and the potential flow-through of revenue upside to the bottom line.

Answer

CEO Anshul Thakral explained that the uneven first half reflects 2025 bookings, noting an improving environment with higher client engagement, shorter decision timelines, and constructive dialogues with large pharma for 2026 pipelines. He also highlighted increased RFP flow from biotech. CFO Jill McConnell confirmed a steady margin ramp throughout 2026, emphasizing revenue growth as the primary driver for achieving peer-level margins over time, supported by cost savings initiatives. She clarified that both revenue and margin improvements are expected year-over-year for Q1.

Patrick Donnelly of Citi asked for details on the bookings environment, specifically focusing on cancellation trends and win rates. He also inquired about the key drivers for margins and the current state of the pricing environment.

Answer

CFO Jill McConnell stated that cancellations remain low and in line with historical trends, even slightly improving from Q1. She noted win rates were stable with existing clients but saw a drop with 'new to Fortrea' biotechs. On pricing, she described the market as competitive but affirmed Fortrea's strategy is to be priced at market, not to be the lowest-cost provider. She deferred specific 2026 margin guidance but highlighted the future benefit from cost-saving initiatives.

Patrick Donnelly asked about the current bookings backdrop, considering challenges like biotech funding and potential drug pricing policy changes, and whether the competitive landscape and pricing environment have intensified.

Answer

CEO Tom Pike stated that while the overall environment feels similar, there is increased caution among biotech clients, who are seeking more regulatory clarity and ensuring funding is secure, leading to slower decision-making. He acknowledged that competition from larger CROs has increased but affirmed that the pricing environment remains disciplined.

Patrick Donnelly asked about the delayed identification of issues with pre-spin projects that are negatively impacting the 2025 forecast, and questioned the company's strategy for shareholder returns given the stock's performance.

Answer

CEO Tom Pike explained that a detailed, project-by-project analysis, necessary after exiting legacy systems, revealed the issue over the last couple of months. He noted that new, higher-margin work is starting slower than expected due to a heavy mix of biotech and oncology studies. For shareholder value, Pike highlighted strong bookings, a focus on growing areas like FSP, and a significant SG&A transformation program targeting $40-$50 million in savings for 2025.

Patrick Donnelly inquired about the strong Q3 book-to-bill of 1.23x, which exceeded prior expectations of a gradual build in the second half, and asked about the confidence level in achieving previously discussed 2025 EBITDA margin targets.

Answer

CEO Tom Pike affirmed the company's target of a 1.2x average book-to-bill for the second half, noting a predictable mix in the Q4 pipeline. CFO Jill McConnell deferred providing 2025 guidance, stating the company needs to finalize Q4 results, assess the new business mix, and complete TSA exits before offering an update in Q1 2025.

Patrick Donnelly from Citi sought details on the Life Sciences and Diagnostics Group (LDG) segment's performance, specifically softness in cell analysis and genomics, and the profitability drivers within LDG, including CDMO batch cadence.

Answer

President and CEO Padraig McDonnell attributed LDG's performance to weather and academia/government softness. Simon May, President of the Life Sciences and Applied Markets Group, elaborated on cautious academic spending. CFO Adam Elinoff added that CDMO batch cadence also impacted Q1 LDG margins.

Patrick Donnelly focused on the LDG segment, asking for more detail on the softness observed in cell analysis and genomics, particularly in academia and government, and its impact on profitability. He also requested further color on the CDMO business (NASD, BIOVECTRA), including its low double-digit growth in the quarter, and the visibility and pacing towards the mid-teen full-year growth expectation.

Answer

President and CEO Padraig McDonnell confirmed that LDG's 3% growth was below expectations due to weather and softness in academia/government impacting cell analysis and genomics, while larger markets like pharma, biotech, and diagnostics grew high single digits. Simon May, President of the Life Sciences and Diagnostics Markets Group, elaborated on the academic research market challenges, lower recurring revenue mix in cell analysis, and cautious spending, but expressed optimism for future improvement. CFO Adam S. Elinoff added that CDMO batch cadence also impacted Q1 LDG margins. For CDMO, Adam S. Elinoff confirmed low double-digit growth, attributing it to normal batch cadence, and reiterated the mid-teens full-year growth expectation based on production schedules and demand. Simon May added that strong year-over-year order intake and good pipeline visibility support the revenue ramp in the second half.

Patrick Donnelly asked about the general tone from biopharma customers, specifically on the instrument side, noting signs of loosening in biotech and a more constructive pharma market. He also sought details on the NASD business, its visibility, 2026 growth, capacity expansion plans (Train C and D), and potential margin impacts.

Answer

President and CEO Padraig McDonnell reported 12% growth in pharma and low 20s (low double digits ex-CDMO) in biotech, attributing it to reduced MFN tariff uncertainty, U.S. biotech recovery in large caps, and improved funding for small/mid-biotech. He highlighted strong momentum from innovations like Infinity III, Pro iQ LCMS, and Altura BioInert column, expecting a more normalized year-end budget flush. President of the Life Sciences and Diagnostics Markets Group Simon May added that the CDMO business has a robust order book for FY2026, with Train C capacity expansion expected to go live in early/mid-2027, acknowledging future margin dynamics related to amortization.

Patrick Donnelly inquired about the general tone from biopharma customers, specifically on the instrument side, noting signs of loosening in biotech and a more constructive pharma environment. He also asked about the visibility and growth outlook for the NASD business, including capacity expansion plans and potential margin impacts.

Answer

President and CEO Padraig McDonnell reported 12% growth in pharma and low 20s (low double digits ex-CDMO) in biotech, attributing it to reduced MFN tariff uncertainty and strong innovation. He noted a more normalized calendar year-end budget flush. Simon May, President of the Life Sciences and Diagnostics Markets Group, stated a very robust order book for NASD in FY2026, with Train C capacity expected to go live in early to mid-2027, acknowledging future dynamics around amortization.

Patrick Donnelly from Citi inquired about the potential for outsized margin expansion in fiscal 2026, given the reversal of tariff headwinds, and asked about the contribution from pricing in the quarter.

Answer

CEO Padraig McDonnell pointed to Ignite program gains, tariff mitigation, and volume leverage as key tailwinds for 2026 margins, reaffirming the long-term '100 basis points plus' algorithm. Interim CFO Rodney Gonsalves specified that pricing contributed approximately 100 basis points to growth in the third quarter.

Patrick Donnelly from Citi inquired about the potential for above-average margin expansion in fiscal 2026, considering the reversal of 2025 headwinds like tariffs, and asked about the specific contribution from pricing versus volume in Q3.

Answer

President and CEO Padraig McDonnell acknowledged the key tailwinds for 2026 margins, including Ignite program gains, tariff mitigation, and volume leverage, reaffirming the long-term goal of 100 basis points-plus improvement. He highlighted the expected 200 basis point sequential margin improvement from Q3 to Q4. Interim CFO Rodney Gonsalves specified that pricing contributed approximately 100 basis points of improvement in the quarter.

Patrick Donnelly of Citi inquired about Q2 order trends, particularly their progression during the quarter, and whether there was any pull-forward activity related to tariffs. He also asked for an update on the performance and visibility of the NASD and BioVectra businesses.

Answer

CEO Padraig McDonnell confirmed the book-to-bill ratio was above one and noted stable pharma demand with no order pull-forward, though some consumables revenue was pulled into Q2. Simon May, President of the Life Sciences & Diagnostics Markets Group, added that the CDMO businesses performed well, with NASD progressing on commercial programs and BioVectra showing success in GLP-1 manufacturing. May expressed confidence in achieving double-digit growth for NASD in the second half of the year, citing a strong order book.

Patrick Donnelly asked for details on Agilent's outsized share gains from China's stimulus program and whether the next round of tenders is factored into guidance. He also requested an update on the NASD business and its growth outlook.

Answer

CEO Padraig McDonnell confirmed winning 50% of ~$35M in Q1 stimulus orders but noted about half was likely a pull-forward. CFO Bob McMahon clarified the next stimulus round is not in the guide and represents potential upside. Regarding NASD, President of Life Sciences and Diagnostics Simon May stated the full-year guide for high-single-digit growth remains intact, expressing confidence in the long-term outlook.

Patrick Donnelly inquired about the current state of the instrument replacement cycle, expectations for its recovery, and the outlook for the China market in fiscal 2025, including the impact of government stimulus.

Answer

President and CEO Padraig McDonnell stated that Agilent is seeing a steady instrument recovery, with a book-to-bill ratio over one, and is likely midway through the replacement cycle. He highlighted the new Infinity III LC, which has already secured tens of millions in orders and is expected to drive demand. Regarding China, McDonnell and CFO Robert McMahon noted better-than-expected performance, improving lab activity, and early stimulus orders. They project slight growth for the year in China, with PFAS being a standout growth driver, but have taken a conservative approach in their guidance.

Patrick Donnelly of Citigroup Inc. inquired about the outlook for China, including expectations for the remainder of the year and the potential for a capital spending pause ahead of stimulus clarification. He also asked about the margin structure for the rest of the year and into 2025, focusing on key drivers like the cost-saving program.

Answer

CFO Bob McMahon expressed optimism for China's mid-term stimulus, viewing it as more of a fiscal 2025 event, and pointed to encouraging activity in services and consumables. Angelica Riemann, President of the Agilent CrossLab Group, confirmed sequential services growth in China. On margins, McMahon stated the $100 million annualized savings program is on track, providing a tailwind for 2025 that will help offset variable pay resets. He affirmed a commitment to leveraged earnings growth, with more details to come at the December Investor Day.

Patrick Donnelly questioned the outlook for China, asking about expectations for the remainder of the year and the potential for a capital spending pause ahead of stimulus clarity. He also asked for a breakdown of the margin construct moving into 2025, including the impact of cost savings and variable pay resets.

Answer

CFO Bob McMahon and ACG President Angelica Riemann responded. Mr. McMahon noted that while instrument demand in China remains dampened, encouraging lab activity is evident from growth in services and consumables. He views the stimulus as primarily an FY25 event. On margins, Mr. McMahon confirmed the $100 million cost savings program is on track, providing a tailwind for FY25 that will help offset variable pay resets, and reiterated a commitment to delivering leveraged earnings growth.

Patrick Donnelly of Citi questioned if the slowdown in the instrument business is still related to the velocity of converting orders to revenue and if that timeline is stretching out. He also asked how the company is thinking about capital investment for NASD given the revised revenue outlook.

Answer

CEO Padraig McDonnell confirmed the sales funnel is stable with a book-to-bill over 1, but purchasing decisions are extending through the second half. CFO Bob McMahon added that expected budget releases didn't materialize. Regarding NASD, McDonnell stated there is 'absolutely not' any change to capital investment plans, citing the strong long-term outlook and 50%+ growth in the clinical business. McMahon noted the expansion also adds new therapeutic capabilities like CRISPR.

Patrick Donnelly asked about the EPS guide, specifically the impact of higher net interest income and the pacing of the cost savings plan. He also inquired about the expected trend for the instrument book-to-bill ratio throughout the year.

Answer

CFO Robert McMahon confirmed that higher-than-anticipated interest income, driven by strong cash flow, provides more confidence in the full-year guide. He also noted the cost savings plan is on track. Regarding order trends, McMahon reiterated the company's previous statement that the full-year book-to-bill will be above one, with Q1's instrument book-to-bill being below one as an expected part of that pattern.

Patrick Donnelly from Citigroup sought clarity on the confidence behind the expected revenue ramp in the second half of fiscal 2024, asking about visibility and the balance between market optimism and easier comparisons. He also requested details on the moving pieces of the margin outlook and cost-saving initiatives.

Answer

CEO Michael McMullen expressed confidence in a gradual recovery, citing early signs of order stabilization, healthy sales funnels, and easier second-half comps. CFO Robert McMahon added that the Q1 guide prudently assumes no budget flush. Regarding margins, McMahon detailed the $175 million in planned cost savings, noting about half would be offset by variable compensation resets. The savings are sourced from DGG portfolio optimization (30%), COGS improvements (25%), and reductions in discretionary spending and workforce optimization.

Patrick Donnelly asked about Medline's pricing strategies, particularly concerning tariffs, where it's strategic in passing along costs, and if pricing is an upside lever for the year.

Answer

CEO Jim Boyle explained Medline's playbook includes shifting production, improving manufacturing efficiencies, and leveraging trade protocols. He noted a tariff-specific price increase was implemented in August 2025, but no additional tariff price increases are expected. Medline has returned to its normal 'smart pricing' model, which typically contributes less than 50 basis points to overall growth, indicating pricing is not a primary lever for growth.

Patrick Donnelly asked about Medline's pricing strategies concerning tariffs, specifically where they are strategic in passing costs along, and if pricing remains an upside lever for the year.

Answer

CEO Jim Boyle explained Medline's playbook includes moving production, improving manufacturing efficiencies, and leveraging USMCA/AROEE. He noted a tariff-specific price increase in August 2025 but does not expect additional tariff price increases. Medline has returned to its normal 'smart pricing' model (January/July, typically <50 basis points growth), emphasizing that price is not a primary lever for growth; volume and share gains are.

Patrick Donnelly asked for insights into Sterigenics' 2026 outlook, focusing on volume and pricing trends, and demand in bioprocessing and med tech categories. He also questioned the progression of Nelson Labs' revenue throughout 2026 as expert advisory services (EAS) headwinds ease, and the outlook for Nelson Labs' margins, specifically if they are expected to return to the low to mid-30% range.

Answer

Chairman and CEO Michael Petras indicated that Sterigenics' pricing is expected to be at the high end of the 3-4% range, with significant growth in bioprocessing and continued growth in med tech volumes. CFO Jonathan M. Lyons stated that Nelson Labs' margins are expected to remain solidly in the low to mid-30s, with Q1 being the lightest quarter. He added that the EAS headwind, while still meaningful in Q1, should ease thereafter.

Patrick Donnelly asked for insights into Sterigenics' 2026 outlook, focusing on volume and pricing trends, and demand in bioprocessing and med tech. He also questioned the progression of Nelson Labs' revenue throughout 2026, particularly as Expert Advisory Services (EAS) headwinds ease, and the expected margin trajectory for Nelson Labs.

Answer

Chairman and CEO Michael Petras indicated that Sterigenics is expected to achieve pricing at the high end of the 3%-4% long-range guide. He noted continued significant growth in bioprocessing and sustained volume growth in med tech, while the commercial segment remains more challenging. CFO Jonathan M. Lyons stated that Nelson Labs' margins are expected to remain in the low to mid-30s, with Q1 being on the lower side. Mr. Lyons added that EAS headwinds are trailing into Q1 but should improve thereafter, with Q1 typically being the softest quarter for Nelson Labs.

Patrick Donnelly inquired about the specific areas driving volume recovery, particularly in med tech and bioproduction, and sought an update on the broader litigation landscape across various states.

Answer

Chairman and CEO Michael Petras noted consistent volume recovery across almost all categories in Sterigenics, including bioprocessing and med tech. He provided a detailed update on litigation, stating Illinois cases are wrapping up with settlements, Georgia's recent rulings align with their position, New Mexico has no current personal injury claims, and California trials are expected in 2027.

Patrick Donnelly from Citi inquired about the drivers of Sterigenics' strong performance, asking if there was any pull-forward demand related to tariffs and seeking details on the recovery in medtech versus bioprocessing volumes.

Answer

Chairman and CEO Michael Petras confirmed there was no material pull-forward from tariffs. He attributed the strength to progressing volumes as forecasted, with both medtech and bioprocessing performing well. Petras specified that Sterigenics' volume and mix grew 6% while pricing increased 4% in the quarter.

Patrick Donnelly asked about the potential impact of tariffs on Sotera Health's business and sought an update on the volume recovery trends in the Sterigenics and Nelson Labs segments.

Answer

CEO Michael Petras stated that the company does not expect current tariff policies to have a material impact, noting that Cobalt-60 from Canada is exempt under the USMCA. He also expressed optimism about the ongoing volume recovery, mentioning that volumes improved throughout the first quarter and are expected to continue improving for the remainder of the year in both Sterigenics and Nelson Labs.

Patrick Donnelly of Citigroup inquired about the overall volume backdrop from Q4 2024, the underlying assumptions for volume recovery and destocking in the 2025 guidance, and the expected progression of margins throughout the year.

Answer

CEO Michael Petras stated that volume improved gradually in 2024 and this trend is expected to continue in 2025, with minimal concerns around customer destocking. CFO Jon Lyons added that Sotera Health anticipates solid constant currency margin improvement in 2025, noting that Q1 is typically the lowest quarter for both revenue and margins. Michael Petras also highlighted expectations for sequential margin improvement at Nelson Labs.

Patrick Donnelly of Citigroup asked for an update on the volume recovery trajectory in the Sterigenics segment, including visibility for Q4 and beyond. He also sought high-level commentary on whether 2025 performance would align with the company's long-term financial profile.

Answer

CEO Michael Petras confirmed that Sterigenics saw volume and mix growth in Q3 and expects similar slight improvements in Q4. He noted that inventory destocking pressures are easing and expressed optimism for continued volume improvement. Regarding 2025, Petras deferred specific guidance to the upcoming Investor Day but affirmed that the business fundamentals, including pricing power and organic growth investments, remain intact.

Patrick Donnelly from Citigroup Inc. requested an update on the divestiture process, including remaining hurdles and the expected timeline for completion by mid-2026. He also asked about the planned deployment of capital once the divestitures are finalized. Additionally, Mr. Donnelly inquired if the NHP sourcing benefits from K.F. and NovaPrim would have a compounding effect, leading to greater savings in 2027.

Answer

Chair, President, and CEO Jim Foster stated that the divestiture process is ongoing with interested parties, and the company hopes to close these transactions in the first half of 2026. He emphasized that the deployment of proceeds would be contextual, decided quarterly based on market demand, M&A opportunities, debt repayment, and share price. SVP and Interim CFO Michael Knell confirmed that the NHP sourcing benefits from K.F. would indeed have a compounding effect, with an expected $0.25 EPS benefit in 2026 and approximately $0.60 accretion from K.F. alone in 2027.

Patrick Donnelly requested an update on the divestiture process, including the status of negotiations with buyers, remaining hurdles, and the expectation for completion by mid-year. He also asked how the capital generated from these divestitures would be deployed once the transactions close.

Answer

James Foster, Chair, President, and Chief Executive Officer, stated that the divestiture process is ongoing with sophisticated investment banks and interested parties, with an expectation to close sometime in the first half of the year. He reiterated that the deployment of proceeds would be contextual, evaluated quarterly by the board, considering M&A, debt repayment, and share purchases, without any preordained feelings.

Patrick Donnelly of Citi asked about management's confidence in increasing hiring and what book-to-bill ratio would be necessary to drive positive DSA growth next year. He also inquired about pricing stability and its implications for margins, given the planned headcount additions.

Answer

CEO James Foster clarified that the hiring is to catch up with current demand, not get ahead of a recovery, and deferred commenting on 2026 growth. He described DSA pricing as stable, with Charles River competing on quality and speed rather than price. CFO Flavia Pease added that a favorable mix of higher-priced studies has positively impacted the price/mix dynamic in the first half.

Patrick Donnelly asked if the DSA segment's book-to-bill ratio is expected to remain above 1x going forward and inquired about the key moving parts for segment margins throughout the year.

Answer

CEO James Foster expressed pleasure with the 1.04x book-to-bill but cautioned that it is only one quarter and needs to be sustained to indicate a trend. CFO Flavia Pease noted that while DSA margins were strong in Q1, they remain cautious for the second half. She expects Manufacturing margins to improve as the year progresses, leading to a tightened full-year company margin outlook.

Patrick Donnelly questioned the 'flat sequentially' book-to-bill comment, noting his math suggested a decline based on the backlog change, and asked for clarification. He also inquired about the long-term margin trajectory for the DSA segment.

Answer

EVP & CFO Flavia Pease reiterated that the gross and net book-to-bill ratios were flat quarter-over-quarter, suggesting potential FX impacts in his model. Chair, President & CEO James Foster stated that DSA margins will not continue to contract long-term and should improve due to infrastructure leaning, technology implementation, and the return of pricing power as capacity tightens.

Patrick Donnelly of Citi asked about the rationale for closing 15 facilities and how the footprint is being managed to ensure capacity for a future demand recovery. He also requested a high-level framework for 2025 interest expense, considering the expiring interest rate swap.

Answer

Chairman, President and CEO James Foster explained the site closures are part of a footprint optimization to consolidate smaller, less efficient sites into larger, more robustly utilized facilities, which improves margins without sacrificing capacity for a recovery. EVP and CFO Flavia Pease noted that while the favorable swap is expiring, a significant portion of debt remains fixed-rate, and the company feels good about its balance sheet and leverage position heading into 2025.

Patrick Donnelly asked about the confidence in the spatial piece of the guidance, specifically regarding the shift between Xenium and Visium, and if the company could provide details on margin strengthening.

Answer

CFO Adam Taich expressed confidence in double-digit spatial consumables growth for 2026, driven entirely by the Xenium franchise, as Visium did not grow in 2025. He highlighted strong customer sentiment and utilization rates for Xenium, with new customers buying in even in a CapEx-constrained environment. He also reiterated the company's focus on cost discipline and wise resource deployment, which led to a $130 million increase in cash from end of 2024, and will continue in 2026.

Patrick Donnelly inquired about the confidence in spatial guidance, the shift between Xenium and Visium, Xenium's momentum, and any details on the strengthening cost profile and margins.

Answer

CFO Adam Taich affirmed strong spatial consumables growth in 2025, driven entirely by Xenium, with Visium remaining flat. He expressed confidence in Xenium's double-digit growth for 2026 due to strong customer sentiment and high utilization. He also reiterated the company's commitment to cost discipline and wise resource deployment, which strengthened the balance sheet.

Patrick Donnelly asked for an update on the academic research funding environment, particularly regarding NIH budget uncertainty and customer spending behavior throughout the quarter.

Answer

CEO Serge Saxonov described the environment as dynamic and cautious. He noted that while there was some increased optimism, the slow disbursement of funds and ongoing budget uncertainty have kept customers conservative. He highlighted specific issues like NIH funding allocation scares and new university restrictions, stating that he expects Q3 to be broadly similar to Q2.

Patrick Donnelly asked about the nature of recent customer conversations amid NIH and academic funding volatility, and what path would restore visibility enough to reinstate full-year guidance.

Answer

CEO Serge Saxonov described a worsening funding environment creating a "very large cloud of uncertainty" that extends beyond the NIH to other agencies and procedural issues, causing customers to hesitate on new projects. CFO Adam Taich added that this unpredictability created an unusually wide range of outcomes, making the withdrawal of full-year guidance the "most intellectually honest approach" until conditions stabilize.

Patrick Donnelly asked about the potential impact of the newly announced 15% cap on NIH indirect costs, inquiring about initial customer reactions and how the company is framing the risk.

Answer

CFO Adam Taich clarified that the 2025 guidance already incorporates a ~$7 million revenue impact from anticipated weakness in NIH funding based on trends from late 2024. However, the guidance does not reflect the potential impact of the 15% indirect cost cap. Taich estimated this could represent an additional $10 million to $15 million revenue risk if fully implemented, and acknowledged the heightened uncertainty could further impact customer spending.

Patrick Donnelly asked how 10x Genomics is balancing the need for disciplined spending and profitability with the significant hiring required to fill open sales roles. He also requested an update on the competitive landscape, asking if pressure was coming from academic homebrew solutions or from other corporate players.

Answer

CEO Serge Saxonov explained that while headcount is being added in key commercial areas, the new structure is designed to be substantially more efficient, which he expects to improve leverage and support cash management. On competition, he noted no significant change in the spatial dynamic. In single-cell, he acknowledged more aggressive behavior from smaller competitors but stated the fundamental dynamic has not changed, with customers still preferring 10x for quality and performance.

Patrick Donnelly asked about the drivers behind the expected 100+ basis points margin expansion in 2026, focusing on mix and the economic implications of the gradual shift between multi-dose pens and auto-injectors, and the confidence in this gradual shift.

Answer

CFO Bob McMahon explained that margin expansion is driven by increased demand for HVP components, leading to better plant utilization and positive mix shift, along with positive pricing and Annex 1 conversions. CEO Eric Green detailed that West supports vials, auto-injectors (component + plunger), and multi-dose pens (plunger + line seal), noting that multi-dose pens are approximately four doses per single-use auto-injector. He emphasized that the shift would be multi-year due to significant customer installed capacity investments and patient acceptance differences, drawing insights from West's contract manufacturing business. Bob McMahon added that many future indications and new molecules are for single-dose auto-injectors in the U.S., reinforcing the consistency of auto-injector demand.

Patrick Donnelly asked about the drivers for the over 100 basis points margin expansion expected in 2026, and for more details on the economics and confidence behind the gradual shift from multi-dose pens to auto-injectors, particularly in the GLP-1 space.

Answer

CFO Bob McMahon explained that margin expansion is driven by HVP components demand (better utilization, absorption, mix shift), positive pricing, and Annex 1 conversions. CEO Eric Green clarified that West supports vials, auto-injectors (component + plunger), and pen systems (plunger + line seal). He noted that multi-dose pens are more prevalent in Europe, while single-dose auto-injectors are common in the US. The shift is expected to be multi-year due to significant installed customer capacity investments and patient acceptance differences. Bob McMahon added that many new GLP-1 indications and molecules are single-dose, reinforcing auto-injector stickiness.

Patrick Donnelly of Citi asked about the visibility and timing for backfilling the CGM contract space in Dublin with higher-margin business after its mid-2026 exit, and inquired about CFO Bob McMahon's long-term view on margin opportunities from supply network optimization beyond mix benefits.

Answer

CEO Eric Green stated that West is in late-stage discussions with multiple customers to replace the CGM business, expecting stronger economics from future business, with a transition period in H2 2026 and commercial operations by year-end. CFO Bob McMahon highlighted the long-term opportunity to optimize the supply network footprint for greater efficiency, beyond 2026, by consolidating certain areas and leveraging past investments.

Patrick Donnelly questioned the visibility and timing for backfilling the exiting CGM contract in mid-2026 with high-margin business, and the long-term margin opportunities from supply network optimization.

Answer

CEO Eric Green detailed late-stage discussions for replacing the CGM business, expecting stronger economics and a transition period with engineering fees, aiming for commercial operations by late 2026. CFO Bob McMahon discussed optimizing the supply network for long-term efficiency, potentially consolidating certain areas beyond 2026, and driving cost efficiencies.

Patrick Donnelly from Citi asked about the margin outlook for the second half of the year and the key building blocks for margin expansion into 2026, given HVP momentum and the CGM headwind.

Answer

SVP & CFO Bernard Birkett projected a slight margin step-down from Q2 into Q3, consistent with typical seasonality due to plant shutdowns in Europe. He also noted that costs associated with hiring and training new employees to meet demand could have a temporary impact on productivity. He framed this as a normal seasonal pattern rather than a change in the underlying margin profile.

Patrick Donnelly asked about order trends for high-value components to assess confidence in the second-half ramp as destocking abates. He also inquired about the progress of discussions with customers to pass through tariff-related costs.

Answer

CEO Eric Green confirmed that destocking is proceeding as anticipated and that current order patterns support the forecast for a sequential improvement and a second-half ramp-up. CFO Bernard Birkett stated that while tariff mitigation efforts including customer pass-throughs are underway, he was not prepared to quantify the impact yet, promising more clarity on the Q2 call.

Patrick Donnelly of Citi inquired about the growth trajectory of the GLP-1 market for West's Proprietary Products and the company's perspective on the potential market impact of oral GLP-1 alternatives. He also asked for color on the expected margin progression throughout 2025.

Answer

CEO Eric Green stated that while oral GLP-1s will have an impact, the company's models assume injectables will remain the majority delivery method. He identified Proprietary elastomers for GLP-1s as the company's fastest-growing area in 2025. CFO Bernard Birkett noted that Q1 margins would be the most challenged, with improvement expected through the year driven by HVP growth.

Patrick Donnelly of Citi asked about the factors contributing to the soft gross margins in Q4 2025, specifically tariffs and product mix, and sought clarity on the expected progression and cadence of both gross and operating margins for 2026. He also inquired about milestones, FDA dialogue, and timelines for Lex, as well as expected revenue contributions.

Answer

CFO Joe Busky attributed the Q4 2025 gross margin decline to tariff impact, higher instrument revenue, and negative product mix, though full-year 2025 gross margin was up 40 basis points. For 2026, he expects gross margins to be relatively flat due to additional tariff impacts and product mix, partially offset by direct procurement initiatives, which are expected to hit more robustly in 2027 and 2028. He stated a goal to reach gross margins closer to 50% in the next couple of years, aided by Lex's higher molecular margins post-dilutive stages. CTO Jonathan Siegrist noted that Lex's FDA 510(k) and CLIA waiver review is progressing as planned, despite taking longer than initially hoped, with no issues identified, and commercialization will follow clearance and acquisition activities.

Patrick Donnelly of Citi inquired about the Q4 2025 gross margins, which were softer than expected, asking for clarification on tariff impacts and product mix, and how to think about the progression and cadence of gross and operating margins for 2026. He also asked for an update on LEX milestones, FDA dialogue, confidence in timelines, and expected revenue contribution.

Answer

Joe Busky, Chief Financial Officer, attributed the Q4 gross margin decline to tariff impact, higher instrument revenue, and negative product mix, though full-year 2025 gross margin was up 40 basis points. For 2026, he expects gross margins to be relatively flat due to additional tariff impacts and LEX dilution, with more robust direct procurement savings expected in 2027 and beyond, aiming for gross margins closer to 50%. Jonathan Siegrist, Chief Technology Officer, stated that LEX FDA clearance is taking longer than hoped but is progressing according to plan, noting it's a new platform with CLIA waiver, and they are awaiting the process to work through the FDA.

Patrick Donnelly of Citi asked for a breakdown of the moving parts affecting the full-year adjusted EBITDA guidance, particularly the balance between lower COVID-19 revenue and benefits from the Savanna discontinuation and reduced tariffs. He also sought clarity on the confidence in the second-half China forecast.

Answer

CFO Joseph Busky clarified that the full-year adjusted EBITDA guidance remains unchanged as the negative impact from lower COVID-19 revenue ($20-25M) is fully offset by benefits from reduced tariff impacts ($15-20M) and the discontinuation of Savanna development ($5-10M). He also noted the China forecast was narrowed due to improved visibility with two quarters completed.

Patrick Donnelly inquired about the specific financial exposures related to tariffs, particularly U.S.-to-China trade, and sought an update on the Savanna molecular diagnostics platform, including the company's commitment level and development timelines.

Answer

CFO Joe Busky clarified that the largest tariff impact is on immunoassay products shipped from the U.K. to the U.S., with a smaller impact on products shipped to China. He expressed confidence in fully mitigating the impact. CEO Brian Blaser addressed Savanna, stating the company is 'laser-focused' on its RVP4 panel submission to the FDA this summer and remains committed to the molecular diagnostics market.

Patrick Donnelly from Citigroup Inc. asked about the specific levers driving EBITDA margin expansion in 2025 and beyond, as well as the key drivers for the respiratory revenue guidance and the outlook for Savanna.

Answer

Chief Financial Officer Joe Busky detailed that the 250 basis point margin improvement in 2025 is driven by approximately $50 million in carry-over savings and $30-$50 million in new procurement savings, primarily impacting OpEx. He also explained that the decline in guided COVID revenue is due to non-repeating government contracts and lower retail sales, with the professional business now at an endemic level. The rest of the respiratory portfolio is expected to see low-single-digit growth.

Patrick Donnelly asked about the key levers for achieving the long-term mid-to-high 20s EBITDA margin target beyond current cost savings, and what growth assumptions for China are factored into the 2025 outlook.

Answer

CEO Brian Blaser outlined further margin levers, including broad cost improvements across the P&L and focusing commercial teams on more profitable segments. CFO Joe Busky projected mid-to-high single-digit growth for China in 2025, stating that despite complexities, they see more opportunity than risk.

Patrick Donnelly asked for a detailed breakdown of the moving pieces impacting margins in 2026, specifically mentioning Corewell, Project Nova, Haystack, and an extra payroll week. He sought quantification of these impacts and clarification on the expected margin cadence throughout the year.

Answer

CFO Sam Samad confirmed an expected increase in operating margin for 2026, despite negative impacts from the Corewell co-lab business (low single-digit margins in 2026, improving later) and Project Nova's $0.25 EPS dilution. He noted strong organic volumes and relatively flat pricing as positive factors, with Haystack being less dilutive. Mr. Samad outlined the typical seasonality: Q1 weakest, Q2 strongest, Q3 a step down, and Q4 a further step down, with roughly 49% of EPS in H1 and 50% in H2. Chairman, CEO and President James E. Davis added that the consumer business (cash pay, no denials) and improving margins from LifeLabs Canada are enhancing overall margin rates.

Patrick Donnelly asked for a detailed breakdown of the various factors influencing Quest Diagnostics' operating margins in 2026, including the impact of Corewell Health, Project Nova, Haystack MRD, and the additional payroll week, seeking a bridge and cadence for these moving pieces.

Answer

CFO Sam Samad stated that operating margin is expected to increase in 2026, despite negative impacts from the ramp-up of the Corewell Health co-lab business (contributing $250 million in revenue at low single-digit margins in 2026, improving to low teens in 2027). He noted strong organic volumes and flat pricing as positive drivers, with Haystack MRD being less dilutive. Project Nova is expected to incur approximately $0.25 of incremental EPS dilution from increased investment. Mr. Samad outlined typical seasonality with Q1 weakest and Q2 strongest, projecting just over 49% of EPS in the first half and just over 50% in the second half. Chairman, CEO, and President James E. Davis added that the growing consumer business (with no denials or bad debt) and improving margin rates from LifeLabs Canada are also enhancing overall margins.

Patrick Donnelly inquired about the current utilization backdrop, expectations for year-end, and the latest developments regarding PAMA, including potential offsets for 2026.

Answer

CEO Jim Davis highlighted elevated organic volume and revenue per requisition, attributing growth to network expansions with Elevance and Sentara, strong demand for advanced diagnostics like autoimmune and brain health testing, and robust performance in the consumer business. CFO Sam Samad discussed PAMA, indicating that while the RESULTS Act faces challenges, a delay is more probable, and outlined a potential $100 million impact in 2026, with partial offsets from controlled investments.

Patrick Donnelly inquired about the elevated utilization backdrop, expectations for year-end, and sought an update on PAMA, including potential offsets for 2026 and the probability of legislative action.

Answer

CEO Jim Davis noted strong organic requisition volume growth of 3.9% and a 3% increase in organic revenue per requisition, driven by expanded health plan access, strong mix in advanced diagnostics (autoimmune, cardiometabolic, brain health), and robust consumer business growth. CFO Sam Samad stated that while the RESULTS Act faces challenges, a PAMA delay is more probable. He estimated a $100 million impact in 2026 if PAMA is not reformed, with a portion to be offset by controlling investment pace.

Patrick Donnelly from Citi requested details on the expected cadence of margins and earnings in the second half of the year and asked for a follow-up on the financial implications of PAMA, including potential offsets.

Answer

CFO Sam Samad outlined the typical earnings cadence, noting Q2 is usually the strongest quarter, with margins stepping down sequentially in Q3 and Q4. Regarding PAMA, he stated the potential negative impact is sized at approximately $100 million if cuts are not deferred or reformed. He added that while the company would take actions to mitigate this, it would not be able to offset the majority of the impact.

Patrick Donnelly asked about the expected margin pacing for the second quarter and the full year, including any impacts from tariffs or freight. He also inquired about the performance of the LifeLabs acquisition during the quarter.

Answer

Sam Samad, CFO, explained that Q1 operating margins expanded 50 basis points to 15.3% and that full-year EPS pacing should follow historical seasonality, with Q2 being the strongest quarter. James Davis, Chairman, CEO and President, added that LifeLabs' revenue was in line with expectations and that its margin rate is improving quarter-over-quarter, putting it on track to reach the corporate average within the planned 2-3 year timeframe.

Patrick Donnelly of Citi inquired about the expected cadence of margin expansion in 2025, considering the LifeLabs acquisition, and asked about underlying utilization trends exiting Q4 and into the new year.

Answer

CFO Sam Samad explained that while LifeLabs will initially be a drag on margins, overall margin expansion is expected for the year. He suggested pre-COVID quarterly EPS seasonality is a good proxy for 2025's cadence. CEO Jim Davis noted that utilization remains robust, driven by strong organic revenue per requisition growth from advanced diagnostics and favorable payer mix.

Patrick Donnelly inquired about the near-term margin impact from the LifeLabs acquisition, its earnings accretion profile for next year, and the current M&A pipeline for smaller versus larger deals.

Answer

CFO Sam Samad explained that LifeLabs' operating margin rate is initially dilutive but accretive to operating margin dollars and EPS, with the rate expected to ramp up to the company average over 2-3 years. CEO Jim Davis added that while the M&A pipeline remains strong, the immediate focus is on integrating recent acquisitions, though the company's appetite for smaller outreach deals continues.

Patrick Donnelly asked about the rationale behind the cautious customer investment outlook for Q1, despite positive headlines in pharma and life sciences, and inquired if this was based on current market feedback or typical management conservatism. He also requested a breakdown of the 2026 guidance components, specifically pricing versus volume on the revenue side, and a margin build including pricing and FX.

Answer

CEO Patrick Kaltenbach explained that the cautious outlook reflects ongoing market volatility and uncertainty across the broader portfolio, leading to longer deal cycles, which has been factored into Q1 and full-year guidance. CFO Shawn Vadala echoed this, noting that while Q4 exceeded expectations, a prudent approach for Q1 assumes customers will start the year cautiously, with gradual improvements expected throughout 2026. Shawn Vadala detailed pricing expectations of 3.5% for Q1 and 2.5% for the full year, with acquisitions contributing 1% in H1 and 0.5% for the full year. Organic volume is projected to be down 1.5% in Q1 and up 1% for the full year. He also clarified that currency would be a 100 basis point headwind to operating margin in Q1 and 50 basis points for the full year, with operating margin expected to be up slightly in Q1 and 60-70 basis points for the full year, excluding currency.

Patrick Donnelly inquired about Mettler-Toledo's cautious Q1 guidance, asking if it reflects current market feedback or typical management conservatism, and sought details on the components of the full-year guide, including pricing, volume, and margin build with FX impacts.

Answer

CEO Patrick Kaltenbach and CFO Shawn Vadala confirmed the cautious Q1 outlook is a prudent approach given volatile headlines, market uncertainty, and longer deal cycles, with expectations for gradual improvement. Shawn Vadala detailed pricing (3.5% in Q1, 2.5% full year), acquisition benefits (1% H1, 0.5% full year), and organic volume (1% full year, -1.5% Q1). He also outlined operating margin impacts, noting a 100 basis point FX headwind in Q1 and 50 basis points for the full year, with ex-currency margins expected to be up slightly in Q1 and 60-70 basis points for the full year.

Patrick Donnelly asked about the current trends, customer conversations, and visibility within the core industrial segment. He also inquired about Europe's performance, noting it was flattish year-to-date but improving, and sought insights into the confidence level for low single-digit growth next year.

Answer

Patrick Kaltenbach, Chief Executive Officer, highlighted strong performance in core industrial due to an innovative portfolio, benefiting from automation and digitalization demand despite challenging market conditions (PMIs below 50). He noted China's return to growth in this segment and expects soft market conditions to continue, with future benefits from onshoring. For Europe, Mr. Kaltenbach described a mixed bag, with Southern Europe outperforming Central Europe, which faces pressure from high energy costs. He expressed satisfaction with Mettler-Toledo's execution, leveraging Spinnaker programs and targeting hot segments like bioprocessing, but acknowledged Europe is likely to be slower than the U.S. next year.

Patrick Donnelly asked about the current trends, customer conversations, and visibility within the core industrial segment, seeking insights into its forward trajectory. He also inquired about Europe's performance, noting it was flattish year-to-date but improving, and asked about the confidence level for low single-digit growth next year, considering steady improvement or comps.

Answer

Patrick Kaltenbach, CEO, stated that Mettler-Toledo's core industrial business is performing well with an innovative portfolio in a challenging market, benefiting from automation and digitalization demand. He noted China's return to growth in Q3 and expects soft market conditions to continue, with future benefits from onshoring. For Europe, Mr. Kaltenbach described a mixed bag, with Southern Europe outperforming Central Europe, and acknowledged a more difficult environment. He emphasized leveraging Spinnaker programs and targeting hot segments like bioprocessing, expecting Europe to be slower than the U.S. next year.

Patrick Donnelly from Citi asked about the company's confidence in its above-consensus Q3 guidance and requested a segment-level breakdown. He also questioned the role of pricing as a lever to offset tariff impacts.

Answer

CFO Shawn Vadala expressed confidence in the Q3 guide, breaking it down as low-single-digit growth for Lab, mid-to-high single-digit for both Core Industrial and Product Inspection, and a low-single-digit decline for Retail. He noted particular optimism for the Industrial businesses. On pricing, Vadala stated that price realization was about 3% in Q2, is expected to be around 3.5% in the second half, and will land near 3% for the full year. He added that future pricing will consider the new tariffs in a balanced manner.

Patrick Donnelly from Citi asked for a detailed breakdown of the tariff impact, including its sources and the specifics of mitigation efforts like supply chain adjustments and pricing. He also inquired about customer sentiment and the outlook for the Core Industrial market amid macro volatility.

Answer

CFO Shawn Vadala explained that mitigation actions have reduced direct China import exposure to approximately $50 million and that the full-year pricing assumption has been raised from 2% to about 3%. CEO Patrick Kaltenbach added that while there are some short-term delays in large industrial projects, the long-term outlook is positive due to automation trends. Mr. Vadala then provided specific growth forecasts for the Core Industrial and Product Inspection businesses.

Patrick Donnelly of Citi asked for a detailed breakdown of the margin build for Q1 and the full year 2025, including contributions from price and other factors. He also sought to reconcile comments about a cautious start to the year with positive momentum in several end-markets.

Answer

CFO Shawn Vadala detailed the margin drivers, highlighting strong Q4 expansion from volume, pricing, and productivity. For 2025, he guided to 2% pricing with potential upside from tariffs. He explained the margin impacts from the prior-year shipping comparison, providing adjusted figures showing underlying expansion. CEO Patrick Kaltenbach reiterated a cautious stance for early 2025 due to global uncertainties like tariffs, despite specific areas of strength.

Patrick Donnelly asked for clarity on the underlying margin algorithm excluding logistics timing effects, the margin level in China, and whether the Industrial segment's weakness is confined to China.

Answer

CFO Shawn Vadala acknowledged that 2024 margins would likely have been down without the shipping delay benefit due to lower volumes, but affirmed long-term margin levers remain strong. He confirmed China's margins are above the corporate average. CEO Patrick Kaltenbach added that the Industrial segment's softness is broad-based, with slower decision-making also impacting the U.S. and Europe, not just China.

Patrick Donnelly focused on the biotech market, noting its continued decline but improving trends and strong calendar Q4 funding. He asked about customer feedback, the timing of funding improvement translating to revenue (e.g., a six-month lag), and the path forward. He also questioned the cell therapy business, asking about the sizing of the two largest customers, if the GMP business would normalize to 20%+ growth in fiscal Q1 2027, and the impact of these customers.

Answer

President and CEO Kim Kelderman acknowledged the challenging biotech market (negative high single digits in Q1, negative mid-single digits in Q2) but expressed encouragement from product strategies, new introductions, and improving funding (Q3 stabilized, Q4 significantly increased). She confirmed the typical six-month lag for funding to impact life science tools, with reagents seeing quicker effects and CapEx taking longer. For cell therapy, she confirmed the two largest customers created a 200 basis point headwind in Q1 and 400 in Q2, expecting 300 in Q3 and 100-200 in Q4, followed by a total reset in fiscal Q1 2027. She noted the underlying business grew 30% last quarter and expressed a positive view on the division's future due to increased clinical studies and favorable market shifts.

Patrick Donnelly inquired about the timing of biotech funding improvements translating into revenue for Bio-Techne, specifically the typical 6-month lag. He also asked for clarification on the cell therapy business, including the sizing of the GMP business, the impact of the two large Fast Track customers, and the expected normalization of growth in fiscal 2027.

Answer

Kim Kelderman, President and CEO, noted that biotech funding rebounded significantly in calendar Q4 2025, and the typical revenue lag is around six months, with reagents potentially quicker and CapEx taking longer. For cell therapy, she confirmed the two large customers caused a 200 basis point headwind in Q1 and 400 in Q2, expecting 300 in Q3 and 100-200 in Q4, with a total reset in fiscal Q1 2027. She stated the underlying growth for the cell therapy business, excluding these two customers, was 30% in the last quarter, and they expect a return to normalized growth.

Patrick Donnelly from Citi inquired about the underlying performance in China, excluding temporary factors like pull-forwards, and how the region fits into the forward outlook. He also asked what specific indicators management is watching for to gain visibility and signal an inflection point back toward normal growth rates.

Answer

President & CEO Kim Kelderman described the underlying China market as stabilizing, with a key future driver being the high level of out-licensing activity by Chinese firms, which he believes will support a continued recovery to modest growth. CFO James Hippel listed the key indicators for a market inflection as resolution on NIH funding, stabilization of biotech funding, and clarity on potential pharma tariffs and MFN pricing policies.

Patrick Donnelly of Citi inquired about the biopharma segment's performance, asking for specific trends in the biotech customer base given funding volatility, and also requested an update on Wilson Wolf's performance.

Answer

CEO Kim Kelderman stated that large pharma's recovery is outpacing biotech, which was 'flattish' in Q3. He attributed the biotech weakness to its sensitivity to capital markets and economic uncertainty, which leads to more frugal spending. CFO Jim Hippel reported that Wilson Wolf continues to perform very well, delivering solid double-digit growth in the quarter and remaining on track for a strong year.

Patrick Donnelly asked for on-the-ground insights from the management's recent trip to China and for details on the drivers of the second-half margin expansion beyond foreign exchange impacts.

Answer

CEO Kim Kelderman noted that while China's economic environment remains tough, the commitment to life sciences research and increased government funding support a return to growth. CFO Jim Hippel attributed the expected 2H margin expansion to strong volume leverage on higher revenue, improved product mix, and the full impact of prior organizational efficiency initiatives.

Patrick Donnelly followed up on the life sciences business, asking about year-end trends, including any budget flush, and the 2026 outlook, particularly the potential for upside beyond the flattish forecast, with a focus on Abcam and Aldevron. He also inquired about the longer-term path back to Danaher's high single-digit core growth long-range plan, asking what conditions would need to materialize for this target to be achievable in future years.

Answer

CEO Rainer Blair confirmed life sciences performed slightly above expectations in Q4, driven by SCIEX and Beckman Coulter Life Sciences, with a modest budget flush in the pharma end market, particularly in Europe. For 2026, he expects continued pharma improvement and stable clinical/applied markets, with upside potential from academic/government stabilization and biotech funding translating into orders. He expressed encouragement for Abcam's continued improvement, driven by recombinant protein and pharma segments, with operating margins 500bps higher than acquisition. Regarding the LRP, Rainer stated it's too early to comment on 2027+, but emphasized intact growth drivers in excellent end markets, expecting a return to high single-digit growth as end markets recover.

Patrick Donnelly (Citi) followed up on the life sciences business, asking about year-end trends, the impact of any budget flush, and what factors are needed to drive growth beyond the flattish 2026 outlook, specifically for Abcam and Aldevron. He then posed a longer-term question regarding the path back to Danaher's high single-digit core growth long-range plan (LRP) and the conditions required to achieve it in future years.

Answer

Rainer Blair, President and CEO, reiterated Q4 life sciences strength, particularly in pharma (including a European budget flush), and expects continued pharma improvement, stable clinical/applied, with academic/government as a potential upside. He highlighted Abcam's consistent improvement, three months of growth (recombinant protein, pharma segment), and a 500 basis point increase in operating margins since acquisition. For the LRP, Blair stated it's too early for 2027+ but affirmed that fundamental growth drivers (biologics, life science research, diagnostics) remain intact, and recovery in end markets will lead back to high single-digit growth.

Patrick Donnelly asked about the moving pieces impacting margins for next year, including pricing, annualization, and available levers for cost reduction versus pricing pressures. He also inquired about expectations for the academic government market, particularly in light of the U.S. government shutdown.

Answer

EVP and CFO Brent Jones explained that gross margin decline was due to modest price gains against higher inflation and unfavorable business mix. He emphasized the need for net cost reduction, effective pricing against COGS, and productivity improvements. President and CEO Emmanuel Ligner reiterated commitment to improving both top and bottom lines through simplification and productivity. Brent Jones added that the academic and government market saw significant weakness in Q3, exacerbated by K-12 impacts and consumables softness, with the U.S. government shutdown further pressuring Q4 guidance.

Patrick Donnelly asked about the key drivers impacting margins for the upcoming year, including the annualization of pricing, potential offsets, and the remaining scope for cost reduction initiatives versus ongoing pricing pressures. He also inquired about the academic and government market, specifically the impact of the U.S. government shutdown and the forward expectations for this sector.

Answer

R. Brent Jones, EVP and CFO, explained that gross margin decline was primarily due to absorbing more inflation than price in the lab segment, with sequential pressure from business mix. Emmanuelle Ligner, President and CEO, committed to improving both top and bottom lines through productivity gains and simplified processes. Brent added that the academic/government sector saw a double-digit decline in Q3, exacerbated by K-12 and higher education consumables, with the U.S. government shutdown further impacting Q4 Lab Solutions guidance.

Patrick Donnelly inquired about the broader order trends in the bioprocessing business, excluding the one-time issues, and asked about current lead times. He also asked about the rationale behind the new CEO appointment and any potential shifts in strategy or capital allocation.

Answer

President & CEO Michael Stubblefield stated that the underlying bioprocessing end market continues to strengthen, with strong demand for monoclonal antibody solutions and lead times returning to a normal 2-3 months. Regarding the CEO transition, he highlighted the incoming CEO's (Emanuel Ligner) deep industry and bioprocessing experience. He deferred on strategy changes, noting the new CEO will share his priorities after an initial assessment, likely on the Q3 call.

Patrick Donnelly requested an expansion on the performance and outlook for the advanced technologies business, specifically the semiconductor piece, and its corresponding impact on margins for the upcoming year.

Answer

CEO Michael Stubblefield explained that the semiconductor market, a small part of the segment, stabilized in Q4 after a Q3 deterioration and is assumed to remain stable in 2025, creating a tough Q1 comp. An Unknown Executive added that this is fully baked into the margin guide, which benefits from a positive mix shift toward bioprocessing.

Patrick Donnelly followed up on the biotech and pharma customer base, asking about any dichotomy in spending willingness. He also asked for a quick outlook on gross margins, given the mix impact in the current quarter.

Answer

President and CEO Michael Stubblefield reiterated the mixed biotech picture, with smaller firms remaining muted while more established ones show growth. EVP and CFO Brent Jones addressed gross margins, stating that for Q4, headwinds from the divestiture and mix should be offset by strong bioprocessing growth, resulting in a margin profile similar to Q3. He deferred on a 2025 outlook.

Patrick Donnelly from Citi inquired about Labcorp's expectations regarding PAMA, specifically the anticipated $100 million top-line impact, ongoing mitigation efforts, and the likelihood of the Results Act passing or another delay in PAMA implementation.

Answer

Chairman and CEO Adam Schechter stated that while the Results Act has strong bipartisan support, its passage by year-end is difficult to predict due to current legislative activity. Labcorp is planning for a $100 million impact on both top and bottom lines for 2026, with approximately $25 million in mitigation efforts underway, leveraging AI and efficiency improvements, in addition to Launchpad initiatives.

Patrick Donnelly inquired about expectations regarding PAMA, specifically the $100 million top-line impact, mitigation efforts, and the probability of the Results Act or another delay.

Answer

Chairman and CEO Adam Schechter reiterated concerns about CMS's PAMA execution and advocacy for the bipartisan Results Act. He noted uncertainty regarding year-end legislation or delays due to the OBO score. Labcorp is prudently planning for a $100 million top-line and bottom-line impact in 2026, with approximately $25 million in additional mitigation efforts (beyond Launchpad) from AI and efficiency initiatives already underway.

Patrick Donnelly from Citi asked about the strong performance in the Biopharma Laboratory Services (BLS) segment, seeking color on the momentum in Central Labs and Early Development, customer conversations, and future expectations given the strong bookings.

Answer

President, CEO, and Chairman Adam Schechter attributed the 11% BLS revenue growth to strength in both Central Labs and Early Development. He noted Early Development's 18% constant currency growth benefited from an easy prior-year comparison but is expected to grow mid-single digits for the full year. He emphasized the strong quarterly book-to-bill of 1.18, driven by large Central Lab awards, which provides significant momentum for the business.

Patrick Donnelly from Citi asked about the performance of the Biopharma Laboratory Services (BLS) segment, seeking color on the momentum in Central Labs and Early Development, customer conversations, and the outlook given the strong bookings.

Answer

President, CEO, and Chairman Adam Schechter highlighted the segment's 11% revenue growth (8% constant currency). He noted that Early Development's strong growth benefited from an easy prior-year comparison and that the quarterly book-to-bill was a robust 1.18, driven by several large Central Lab awards. This strong booking provides significant momentum and fuel for future growth in the business.

Patrick Donnelly inquired about pricing conversations in the core lab business and whether tariffs were affecting them. He also asked if the guidance range for the Biopharma segment primarily reflects uncertainty around the timing of trial starts.

Answer

Chairman and CEO Adam Schechter stated that pricing in the Diagnostics business remains relatively flat, with constructive dialogue with payers on multi-year contracts. He confirmed that a key variable being watched for the Biopharma segment is the timing of trial starts within the backlog, noting it's more a question of 'when' not 'if' these trials will proceed.

Patrick Donnelly of Citigroup inquired about the pricing environment for the core Diagnostics business, including the nature of recent conversations with payers. He also asked about the level of conservatism applied to utilization assumptions within the 2025 guidance.

Answer

CEO Adam Schechter characterized discussions with payers as going very well, emphasizing the value Labcorp provides through quality, scale, a broad test menu, and lower costs, particularly as it acquires hospital outreach businesses. He reiterated the strong underlying demand seen in Q4 provides momentum for the 2025 guidance, which assumes 3.5% organic growth for the Diagnostics segment.

Patrick Donnelly asked about the core utilization trends in the Diagnostics business, excluding weather impacts, and whether there was any reason to expect performance to fall outside the long-range plan (LRP) in 2025.

Answer

CEO Adam Schechter acknowledged an acceleration in overall healthcare utilization but believes Labcorp is also gaining market share through hospital and regional lab acquisitions. He expressed confidence in the company's long-term guidance for Diagnostics, which includes 2.5% to 4.5% organic growth plus an increased inorganic growth expectation of 1.5% to 2.5%, citing strong momentum heading into the new year.

Patrick Donnelly asked about Revvity's preliminary 2026 outlook, specifically the 2%-3% organic growth rate, the impact of China diagnostics and software growth, and the confidence in maintaining a 28% operating margin.

Answer

President and CEO Prahlad Singh expressed confidence in the prudent 2026 growth assumption, citing improving customer behavior and strong performance in diagnostics outside China. Senior Vice President and CFO Max Krakowiak affirmed the 28% operating margin target for 2026, noting actions are underway to achieve it and that additional organic growth could lead to further margin expansion. Donnelly also inquired about the life science business's reagents versus instruments performance in Q3 and future expectations. Krakowiak noted reagents were modestly lower than anticipated due to lighter summer months, with Q4 guidance assuming a similar market environment and a modest impact from the government shutdown.

Patrick Donnelly asked about the performance and forward expectations for the reagents business across its end markets. He also inquired about the company's appetite for M&A versus share repurchases.

Answer

CFO Max Krakowiak noted five straight quarters of reagent growth and expects a stable, modestly improving environment to continue. CEO Prahlad Singh stated that while Revvity is actively evaluating M&A, it remains disciplined and has not yet found a target compelling enough from a financial and strategic perspective, leading to more aggressive share repurchases.

Patrick Donnelly of Citigroup inquired about Revvity's strategy to quickly neutralize the $135 million gross tariff impact on U.S.-to-China sales and asked for a breakdown of the moving parts within the Life Science Solutions guidance, particularly regarding instruments, software, and reagents.

Answer

CEO Prahlad Singh stated that contingency planning began post-election, enabling rapid supply chain adjustments. CFO Maxwell Krakowiak added that the affected products are primarily in Life Sciences, as Diagnostics are mostly manufactured in-region. Krakowiak clarified the Life Sciences guide, noting that instrument pressure is offset by stronger-than-expected growth in the Signals software business, while reagents are expected to see solid, albeit slightly slower, growth.

Patrick Donnelly questioned the Q1 2025 earnings guide, which appeared below consensus, asking for details on offsetting factors and the expected margin build throughout the year. He also requested an overview of the moving pieces and expectations for the Immunodiagnostics (ImmunoDx) business in 2025.

Answer

CFO Max Krakowiak clarified the full-year cadence, noting Q1 earnings are impacted by a higher initial tax rate and lower operating margins, consistent with the pattern in 2024. He stated the ImmunoDx business is expected to grow at high single-digits in 2025, driven by strong performance outside the U.S. (low to mid-teens growth) and continued geographic expansion, particularly in the autoimmune business.

Patrick Donnelly asked for a high-level overview of margin tailwinds and headwinds for 2025, considering factors like growth recovery and incentive compensation. He also requested more detail on the company's preclinical reagent exposure and its recovery path.

Answer

CFO Maxwell Krakowiak reiterated the company's margin expansion framework of 50-75 bps depending on market growth, with no major known headwinds. CEO Prahlad Singh confirmed that most reagents are in the preclinical space, making the broad-based recovery across all product lines an encouraging leading indicator for the business.

Patrick Donnelly inquired about the potential impacts of pricing and pass-throughs on margins in 2026, asking about levers, offsets, and the possibility of maintaining flat to increasing margins.

Answer

CFO Nigel Clerkin confirmed that increased pass-throughs and the tougher pricing environment from 2025 will weigh on 2026 margins. He reiterated ICON plc's long track record of efficient business management and technology investments as mitigating factors. He deferred specific 2026 margin guidance until the official release in January or February.

Patrick Donnelly asked about the potential impacts of pricing and the pass-through environment on ICON plc's margins into 2026, inquiring about levers to manage margins, potential offsets, and the opportunity to maintain or improve them.

Answer

CFO Nigel Clerkin confirmed that increasing pass-throughs and the tougher pricing environment will be weighing factors for 2026 margins. He reiterated ICON's commitment to efficient business management and technology investments to mitigate these challenges. Clerkin stated that specific margin guidance for next year would be provided in January or February.

Patrick Donnelly of Citi inquired about the progression of bookings throughout the quarter and whether management feels the industry has 'turned the corner' regarding cancellations and the book-to-bill ratio.

Answer

CEO Steve Cutler described the environment as 'constructive' but still volatile, stating he doesn't want to get 'too far ahead.' He noted that while gross bookings were strong, he expects cancellations to remain elevated in the near term. He believes pharma clients are beginning to move forward with plans despite market uncertainties and patent cliff pressures.

Patrick Donnelly from Citigroup Inc. asked for an overview of the current business backdrop, including pharma reprioritization, the biotech funding environment, and expectations for future cancellations and book-to-bill trends.

Answer

CEO Dr. Steve Cutler explained that predicting the cycle is difficult but expects elevated cancellations to persist for the rest of the year, noting a significant cancellation from a BARDA study will impact Q2. Executive Kate Haven added that the company's updated guidance incorporates the assumption of continued high cancellation rates.

Patrick Donnelly asked if management's sentiment had changed since issuing a wide earnings guidance range a month prior, what factors could lead to the low end of the range, and how margins are expected to progress throughout the year, including planned cost actions.

Answer

CEO Dr. Steve Cutler stated that their view has not changed, as market volatility and caution persist, justifying the wide guidance range. CFO Nigel Clerkin elaborated on margins, expecting the full-year 2025 EBITDA margin to be approximately 1% lower than 2024's 21% level. He projected lower margins in the first half of the year due to pass-through mix, with an expected improvement in the second half driven by cadence and cost management actions.

Patrick Donnelly followed up on margins, asking for details on the planned cost-saving actions and whether the implied second-half EBITDA margin would be a fair baseline for the next year.

Answer

CEO Dr. Steve Cutler confirmed that decisive cost actions are underway, including reviewing spans of control and staffing levels, with some benefits expected in Q4 and a fuller impact in 2025. Outgoing CFO Brendan Brennan added that cost management is a core strength embedded across the organization, emphasizing that while it takes time to adjust, the company is proactive in aligning its cost base with revenue realities.

Patrick Donnelly asked about Thermo Fisher Scientific's capital allocation strategy, M&A appetite, and specific focus areas for potential acquisitions. He also inquired about the expected Q4 organic exit rate, the view on growth acceleration throughout 2026, which segments might be holding back performance, and the key drivers for future acceleration.

Answer

Chairman, President, and CEO Marc Casper detailed active capital deployment ($7.5 billion total: $4 billion M&A, $3.5 billion buybacks/dividends). He described a busy M&A pipeline, focusing on good companies that fit the strategy and generate strong returns, with many fragmented industry parts offering expansion opportunities. Regarding 2026, Mr. Casper stated growth is expected to build over time, with the company exiting 2025 at 2% organic (3% ex-COVID runoff), setting a good foundation for excellent earnings growth in 2026 and beyond.

Patrick Donnelly asked about Thermo Fisher's capital allocation strategy, specifically inquiring about the company's M&A appetite, the nature of current discussions, and any particular areas of focus. He also asked about the expected growth acceleration throughout the next year, considering the Q4 exit rate, China's potential turnaround, and improved pharma conditions, and which segments might still be holding back.

Answer

Marc Casper (Chairman, President and CEO) highlighted active capital deployment, with approximately $7.5 billion deployed ($4 billion on M&A, $3.5 billion on buybacks and dividends). He noted a busy M&A pipeline, favoring good companies that may struggle in execution-focused environments, and opportunities to expand offerings that align with strategy and generate strong returns. Regarding future growth, Mr. Casper stated that growth is expected to build over time in the next couple of years. He expressed excitement about exiting the year with 2% organic growth (or 3% excluding COVID runoff) and the ability to translate revenue growth into excellent earnings growth, setting the stage for a strong 2026 and beyond. He deferred detailed 2026 outlook to the early 2026 call.

Patrick Donnelly asked about the company's competitive strategy and timeline for its Minimal Residual Disease (MRD) offering. He also inquired about the progress with commercial payers and how it is trending relative to internal expectations.

Answer

Dr. David Spetzler, President, described the MRD offering as a differentiated, tissue-naive, whole exome/transcriptome assay that provides comprehensive data beyond a simple positive/negative result, but did not provide a timeline. Luke Power, SVP, CFO & Chief Accounting Officer, stated that commercial payer progress is trending "a quarter or two ahead" of initial expectations, with major national contracts expected to contribute more significantly in the second half of the year.

Patrick Donnelly of Citi asked about the company's competitive strategy and timeline for the MRD market, and how commercial payer traction was trending relative to internal expectations.

Answer

President David Spetzler described the MRD offering as a unique, comprehensive, tissue-naive assay that provides therapy guidance, germline findings, and CHIP mutations, differentiating it from existing solutions. He did not provide a specific timeline. SVP & CFO Luke Power added that commercial payer contracting is progressing positively, potentially a quarter or two ahead of schedule.

Patrick Donnelly from Citi asked about Caris's competitive strategy for the Minimal Residual Disease (MRD) market, including timelines and commercial approach, and also requested an update on progress with commercial payers.

Answer

President David Spetzler highlighted the MRD offering's comprehensive, tissue-naive approach, which provides therapy guidance and germline findings in addition to the MRD result. He did not provide a specific timeline. SVP & CFO Luke Power stated that commercial payer contracting is trending positively and is 'a quarter or two ahead' of initial expectations, with new national contracts set to contribute in the second half of the year.

Patrick Donnelly of Citi questioned how the company is absorbing the new tariff rates and asked for an update on the capacity at the Fishers facility. He also requested color on the expected split of performance between Q3 and Q4.

Answer

CFO Marco Dal Lago detailed that tariff impacts are being managed through customer negotiations, price adjustments, and optimizing their global footprint. CEO Franco Stevanato noted the Fishers plant is focused on validations and will offer more benefit in the medium term. For the second-half outlook, Dal Lago guided to mid-single-digit growth in both Q3 and Q4 versus the prior year.

Patrick Donnelly asked for details on the expected quarterly progression of revenue and margins for the rest of the year and how geopolitical tensions and tariffs are impacting the company's China expansion strategy.

Answer

CFO Marco Dal Lago reiterated the outlook for sequential growth, with H2 being stronger than H1 (56% vs 44% of revenue), and sequential margin improvement. CEO Franco Stevanato explained that the immediate focus is executing on the Latina and Fishers expansions to meet customer contracts, which has taken priority over the China expansion for now, though Asia remains a strategic market.

Patrick Donnelly of Citigroup asked for details on the expected pacing of revenue and margins throughout 2025 and questioned the potential impact of a U.S. administration change on tariffs and government contracts.

Answer

CFO Marco Dal Lago projected sequential quarterly growth in 2025, with a stronger second half driven by new syringe capacity, vial market recovery, and Engineering project completions. Chairman and CEO Franco Stevanato emphasized the company's global footprint, especially the Fishers plant, as a strategic tool to mitigate tariff risks. Dal Lago also noted that U.S. vaccine revenue is minimal, limiting exposure to contract changes.

Patrick Donnelly from Citi asked for details on margin pressures, particularly from the Engineering segment, and questioned the company's confidence level that the vial destocking issue is largely resolved.

Answer

CEO Franco Stevanato expressed "strong confidence" that vial destocking is a temporary inventory normalization, noting that current demand is below 2019 levels. CFO Marco Dal Lago added that the Engineering segment is undergoing an optimization plan to address challenges from complex projects and that it will take another 2-3 quarters to fully normalize profitability.

Patrick Donnelly focused on the second-half guidance, noting that the implied Q4 earnings represent a very steep ramp-up from Q3 and questioned the company's visibility and confidence in achieving this significant sequential improvement.

Answer

EVP & CFO Gerald Herman acknowledged the significant Q4 lift but expressed confidence, citing historical seasonality where Q4 is disproportionately large. He also highlighted that planned cost savings kicking in during Q4 will help improve profitability. Chairman, CEO & President Frank Laukien reinforced this, stating that large fourth quarters are a typical pattern for Bruker.

Patrick Donnelly of Citigroup requested details on the pricing, cost, and manufacturing initiatives intended to fully offset tariff impacts by 2026. He also asked whether the current U.S. academic market downturn is a structural issue or a one-year re-basing event.

Answer

CEO Frank Laukien detailed that mitigation plans include targeted pricing, supply chain re-engineering, and about $30 million in new cost actions for 2025, with the full benefit expected in 2026. Regarding the academic market, he anticipates continued weakness into next year but expects year-over-year growth from the disrupted 2025 base, suggesting some current headwinds are temporary.

Patrick Donnelly's associate inquired about the academic and government budget outlook in Europe and China, including the impact of stimulus, and sought clarification on the expected EPS dilution from acquisitions in 2025.

Answer

CEO Frank Laukien noted that China's stimulus funding is expected to be spread out over 2025 and 2026, with Europe remaining reasonably good. CFO Gerald Herman confirmed that the EPS dilution from acquisitions is expected to decrease from $0.15-$0.20 in 2024 to $0.08-$0.10 in 2025. Frank Laukien added that the goal is for these acquisitions to be near breakeven by 2026.

Patrick Donnelly asked for an update on the margin dilution from recent acquisitions, particularly NanoString, and inquired about the academic and government market outlook for 2025 in light of the U.S. election.

Answer

CFO Gerald Herman stated that acquisition integration is on track and dilution expectations for 2024 and 2025 remain solid. CEO Frank Laukien added that the goal to bring NanoString and Cellular Analysis to breakeven by 2026 is unchanged, though progress is hampered by weak life science tools demand. Regarding the academic market, Laukien noted that current election uncertainty is a headwind, and a split government might be the most stable outcome for the sector by avoiding extreme policy shifts.

Patrick Donnelly of Citi inquired about the sustainability of the strong Q2 results in Process Chromatography, the specific revenue contribution from the Stila acquisition in the updated guidance, and the primary factors driving the revised margin forecast.

Answer

Executive VP & CFO Roop Lakkaraju confirmed the sustainability of Process Chromatography performance, raising its full-year outlook to low-double-digit growth. He stated the overall guidance increase reflects the Stila acquisition, durable consumables, and the improved Process Chrome outlook. Lakkaraju attributed the higher operating margin guidance primarily to a significant reduction in expected tariff headwinds from 130 bps to 30-40 bps, supplemented by better manufacturing absorption and favorable product mix.

Patrick Donnelly asked about the sustainability of gross margin improvements into 2025, the recovery timeline for the process chromatography business, and the company's current stance on monetizing its Sartorius stake.

Answer

EVP and CFO Roop Lakkaraju stated that while underlying cost improvements are sustainable, mix and one-time royalties affect quarterly results, but the current ~55% margin is a reasonable starting point for 2025. He noted process chrome destocking will continue through 2025 but expects a return to growth next year. CEO Norman Schwartz added that the company's view on its Sartorius stake is unchanged; it remains a monetizable asset, but there is no immediate need to sell, particularly at its currently depressed value.

Patrick Donnelly from Citi asked about the strategy of reinvesting gross profit upside into sales and marketing, and how this reflects management's confidence in the long-term path to profitability and the strength of the balance sheet.

Answer

CFO Michael Bell reaffirmed the company's commitment to its 2028 cash flow breakeven target and the strategy of reducing cash burn annually. He explained that reinvesting the stronger-than-expected Shield gross profit into commercial infrastructure accelerates growth without increasing the overall planned burn for the screening business. He also noted that the core business, excluding screening, remains on track to reach breakeven by year-end, underscoring their confidence in the financial plan.

Patrick Donnelly asked about the change in commercial strategy for Guardant Reveal now that the company is no longer holding back volumes post-reimbursement, and also inquired about the expected timeline for the Shield V2 catalyst.

Answer

Co-CEO Helmy Eltoukhy explained that the sales team has been trained and motivated to more robustly pursue the Reveal opportunity, especially in the surveillance setting which was previously not a focus. Co-CEO AmirAli Talasaz stated that the company is planning for the approval and launch of Shield V2 by the end of 2025.

Patrick Donnelly asked for more detail on the visibility for the Breast Health division's return to growth in Q4 and questioned the margin outlook for Q4 and the appropriate launching point for fiscal 2026.

Answer

CEO Stephen MacMillan attributed the improved Q4 visibility in Breast Health to better sales force execution and the strong performance of Endomagnetics. CFO Karleen Oberton projected a sequential increase in gross margins from Q3 to Q4, driven by higher revenue and favorable mix, but advised using the full-year FY25 margin as the baseline for FY26, not the Q4 exit rate.

Patrick Donnelly inquired about the financial impact of recently announced tariffs, including potential higher costs from suppliers and Hologic's mitigation efforts. He also asked about the strategic rationale behind the Breast Health sales force reorganization and the current capital spending appetite from hospitals.

Answer

CEO Stephen MacMillan stated that while the macroeconomic environment is volatile, the company believes it can offset potential supplier price increases related to tariffs. He explained that the Breast Health sales force reorganization aims to create a more stable, less 'boom-bust' business by separating capital and disposable sales efforts. This move is intended to strengthen recurring revenue streams and better position the company for future product launches like Envision and to maximize recent acquisitions.

Patrick Donnelly inquired about the cyclical nature of the mammography gantry business and the competitive landscape for the diagnostics portfolio, particularly for the BV/CV/TV assays.

Answer

CEO Stephen MacMillan explained that the gantry softness is a cyclical issue stemming from a post-chip-shortage sales bolus in late 2023 and early 2024, which created difficult comparisons. He expressed confidence in a 2026 reacceleration with a new product launch. Regarding diagnostics, Mr. MacMillan conveyed strong optimism about the business, citing the expanded Panther installed base and the significant market opportunity for vaginitis testing. CFO Karleen Oberton added that the specialized physician sales force is a key competitive advantage in driving test adoption.

Patrick Donnelly inquired about the fiscal 2025 margin outlook, including the key moving parts and potential for expansion, and also asked about the growth forecast for the Breast Health business, considering an upcoming new gantry launch.

Answer

Chief Financial Officer Karleen Oberton explained that transitory headwinds in the first half, such as the IV fluid shortage impacting the profitable Surgical business, will give way to accelerated revenue and margin expansion in the second half, aided by network optimization. Chairman, President and CEO Stephen MacMillan added that while the new gantry launch might slightly slow sales in the near term, the overall Breast Health business remains solid due to its service and interventional segments, with reacceleration expected in future years.

Patrick Donnelly asked for details on QIAGEN's exposure to global tariffs, any mitigation strategies in place, and the primary levers for margin expansion throughout the remainder of the year.

Answer

CFO Roland Sackers stated that while the tariff environment is volatile, QIAGEN was well-prepared through early inventory build-ups and supply chain reviews. He noted that imports from China to the U.S. are not material. For margin expansion, Sackers attributed 40-45% of the improvement to the NeuMoDx discontinuation, with the remainder driven by ongoing efficiency programs, including digitization and reorganization. He expressed confidence in achieving an adjusted operating margin north of 30% for the year.

Patrick Donnelly questioned the drivers behind the flattish growth guidance for Sample Technologies in 2025 and asked about any observed impacts from recent administration changes in the U.S. and China.

Answer

CEO Thierry Bernard explained that the Sample Tech strategy focuses on automation, which is growing, and that 2025 is a transition year ahead of three new instrument launches by 2026. Regarding political changes, he advised it's too early to judge the new U.S. administration's impact. For China, he reiterated a cautious view, not expecting a market rebound before 2026. CFO Roland Sackers added a European perspective, expecting innovation focus to resume post-elections.

Patrick Donnelly inquired about the sustainability of QuantiFERON's double-digit growth and the key drivers for revenue and margins heading into 2025.

Answer

CEO Thierry Bernard attributed QuantiFERON's success to converting skin tests, a successful partnership with DiaSorin, and broader guideline adoption, reiterating a $600M target for 2028. For 2025, Bernard highlighted momentum in QIAstat and Sample Technologies, while CFO Roland Sackers confirmed that margin expansion would continue, driven by ongoing efficiency programs and the full impact of the NeuMoDx discontinuation.

Patrick Donnelly of Citigroup inquired about the international revenue outlook, particularly concerning alternative funding sources for HIV testing amidst U.S. funding uncertainty. He also asked about potential demand pull-forward ahead of tariffs and key indicators for future ordering trends.

Answer

CEO Carrie Eglinton Manner stated that international funding conversations are progressing, leading to a "steady but flat" outlook, which is an improvement from prior expectations. She noted multilateral funding sources remain more stable. CFO Ken McGrath highlighted the strength of their easy-to-use oral self-test, which requires less infrastructure. Regarding tariffs, Manner confirmed no demand pull-forward was observed and expects minimal impact due to the advanced progress of in-sourcing manufacturing to their Pennsylvania facility.

Patrick Donnelly of Citigroup inquired about the expected duration of gross margin headwinds from the wind-down of the risk assessment business and sought an update on the Saphris partnership's product development and timeline.

Answer

Chief Financial Officer Ken McGrath explained that Q4 gross margins are impacted by the risk assessment exit and a higher international sales mix, but the company maintains its long-term goal of reaching gross margins in the 50% range through operational efficiencies. President and CEO Carrie Eglinton Manner added that while the Saphris partnership is progressing well, the regulatory process has inherent uncertainty, and they still anticipate a 2025 revenue contribution as previously planned.

Requested an update on the blood-based colon cancer screening test, including remaining hurdles, confidence in the timeline, and expectations for the data.

Answer

The company is on track for a mid-summer top-line data release. The team is focused on the final operational steps for running the pivotal BLUE-C study samples. While the long-term goal is inclusion in quality measures via USPSTF, which will take years, they believe they will have a competitive test. Exact Sciences feels it is well-positioned to win in the blood-based testing niche due to its brand, commercial capabilities, tech platform, and cost profile.

Patrick Donnelly of Citigroup asked about the commercialization pathway for the pipeline products—Oncodetect (MRD), Cancerguard (MCED), and the blood-based CRC test—and which is expected to become a material revenue contributor first.

Answer

CEO Kevin Conroy identified Cologuard Plus as having the most immediate and significant impact, followed by MRD (Oncodetect), and then multi-cancer screening (Cancerguard) over the longer term. CFO Aaron Bloomer added that the existing commercial infrastructure and ExactNexus platform will provide significant leverage for these new launches.

Patrick Donnelly asked about the pathway for the pipeline tests—Oncodetect (MRD), Cancerguard (MCED), and the blood-based CRC test—to become material revenue contributors and their expected trajectory.

Answer

CEO Kevin Conroy ranked the expected impact as Cologuard Plus having the most immediate effect, followed by MRD, and then multi-cancer screening, which he noted has the largest long-term potential. He expressed confidence that these three opportunities, combined with the company's established platform, will drive double-digit growth for a decade. CFO Aaron Bloomer added that the tests' attractive economics can be dropped into the existing commercial infrastructure for significant leverage.

Patrick Donnelly from Citi asked how the headwinds developed during the quarter and when the company realized a shortfall was likely. He also asked about the EBITDA guide down and the cost structure trajectory into 2025.

Answer

CEO Kevin Conroy stated they monitor daily and weekly orders and saw that the typical steep growth from August to October did not materialize as expected, with the challenge becoming clear in September and October. CFO Aaron Bloomer expressed confidence in the 2027 target of 20%+ adjusted EBITDA margin, noting significant leverage on G&A (down over 500 bps YoY in Q3) and plans to continue addressing the cost base.

Asked about the timing of when the headwinds became apparent during the quarter and questioned the EBITDA guidance reduction, seeking clarity on the cost structure and the trajectory into 2025.

Answer

Management indicated they realized the challenge was significant starting in September and into October, as expected order growth did not materialize at historical rates. On EBITDA, they reiterated confidence in their 2027 target of 20%+ margin, noting meaningful margin expansion is still occurring this year and is expected again in 2025, driven by revenue growth and cost controls, particularly in G&A.

Patrick Donnelly from Citi asked when during the quarter the company identified the headwinds and about the implications of the lowered EBITDA guidance on the cost structure and trajectory into 2025.

Answer

CEO Kevin Conroy stated that the challenge became apparent in September and into October when the typical seasonal increase in orders was weaker than expected. CFO Aaron Bloomer expressed confidence in achieving the 2027 target of 20%+ adjusted EBITDA margin, noting meaningful progress this year. He highlighted that leverage is being driven across the P&L, particularly in G&A, and that the company will continue to address its cost base to drive margin expansion in 2025.

Patrick Donnelly inquired about the drivers behind the strong profitability and raised EBITDA guidance, asking about confidence in long-term margin trends. He also asked for an update on Exact Sciences' internal blood-based colon cancer screening program, its competitive positioning against a newly FDA-approved test, and the strategic role of the TwinStrand IP acquisition.

Answer

CEO Kevin Conroy attributed growth to Cologuard's brand awareness, strong health system relationships, and the Exact Nexus platform. CFO Aaron Bloomer highlighted that strong operational execution, especially in G&A, drove record adjusted EBITDA and allowed for reinvestment into high-ROI areas like MRD. Bloomer expressed confidence in exceeding the 2027 adjusted EBITDA target. Conroy positioned Cologuard Plus as superior to blood tests, citing challenges for competitors in gaining guideline inclusion and demonstrating value over FIT tests. He confirmed their own blood test shows promising performance in a 3,000-patient study and that the TwinStrand IP strengthens their portfolio for cell-free DNA sequencing.

Patrick Donnelly asked for details on Q4 consumables performance, which appeared lighter than some expectations, requested a consumables versus instruments breakdown for the Q1 guide, and sought confirmation on whether Illumina is currently able to sell into China.

Answer

CEO Jacob Thaysen confirmed that Illumina continues to serve its customers in China. CFO Ankur Dhingra explained that Q4 consumables results were in line with their guidance for a seasonal step-down from Q3. For Q1, he guided to positive year-over-year growth for consumables but a likely decline for instruments.

Patrick Donnelly asked about the progress on the $100 million cost savings program, the pacing of the incremental $200 million in savings, and any potential margin headwinds to consider for 2025.

Answer

CEO Jacob Thaysen highlighted a company-wide cultural shift toward operational excellence. CFO Ankur Dhingra confirmed they are on track for the $100 million in savings this year, with the future $200 million coming from COGS and OpEx initiatives. He noted the main 2025 headwind is standard inflation, which they plan to offset, alongside potential reinvestment in sales and marketing.