Danaher - Earnings Call - Q2 2025

Executive Summary

• Q2 delivered a clean beat: revenue $5.94B (+3.5% YoY; core +1.5%) vs S&P Global consensus ~$5.84B, and adjusted EPS $1.80 vs ~$1.64; GAAP EPS was $0.77 due to a $432M LS trade name impairment. EPS/revenue beats marked with an asterisk in tables are from S&P Global estimates.*
• Management raised FY25 adjusted EPS guidance to $7.70–$7.80 (from $7.60–$7.75), maintained FY core growth ~3%, and guided Q3 core growth low-single digits; Q3 adjusted OPM ~25.5%.
• Bioprocessing remained the key engine (segment core +6%; consumables low double-digit; book-to-bill ≈1), while Life Sciences softened (-2.5% core) and Diagnostics posted +2% core with Cepheid’s non-respiratory assays growing double digits and installed base >60,000.
• Costs/tariffs managed effectively (structural cost-out $150M for FY, ~half realized YTD; tariff exposure now “a couple hundred million,” net neutral in China in Q2), supporting margin resiliency despite macro/tariffs/VBP in China.

What Went Well and What Went Wrong

What Went Well

• Bioprocessing momentum: “positive trends in our order book,” consumables low double-digit growth, book-to-bill around 1, and 1H fall-through >50%; management reaffirmed high single-digit 2H growth and LT outlook.
• Diagnostics ex-respiratory strength: Cepheid non-respiratory grew double digits with strong adoption (sexual health/urology/HAI) and >60,000 installed instruments; MVP vaginitis panel grew >75% in U.S..
• Cash generation: Q2 FCF $1.09B on $1.34B CFO; YTD FCF-to-net income conversion 143% underscoring quality of earnings and cash conversion.
  • Quote: “Strong growth in our Bioprocessing business and disciplined cost management enabled us to exceed our expectations for the quarter.” — CEO Rainer Blair.

What Went Wrong

• GAAP profitability diluted by impairments: $432M LS trade name impairment (EPS +$0.60 adjustment) and other items reduced GAAP EPS to $0.77; adjusted EPS $1.80.
• Life Sciences softness: segment core -2.5% on weaker genomics consumables (plasmids/mRNA from two large customers) and ongoing academic/government funding pressure; step-up required in 2H (roughly $150M bridge).
• China diagnostics headwinds: VBP/reimbursement changes drove declines; management still expects ~$150M adverse VBP impact in 2025 (no deterioration vs plan).

Transcript

Speaker 1

My name is Margo, and I'll be your conference facilitator this morning. At this time, I'd like to welcome everyone to Danaher Corporation's second quarter 2025 earnings result conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, please press star, then the number two on your telephone keypad. I will now turn the call over to John Bedford, Vice President of Investor Relations. Mr. Bedford, you may begin your conference.

Speaker 2

Required by SEC Regulation G relating to any non-GAAP financial measures provided during the call, and a note containing details of historical and anticipated future financial performance are all available on the investor section of our website, www.danaher.com, under the heading Quarterly Earnings. The audio portion of this call will be archived on the investor section of our website later today under the heading Events and Presentations. It will remain archived until our next quarterly call. A replay of this call will also be available until August 5th, 2025. During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. Our Form 10Q and the supplemental materials describe additional factors that impacted year-over-year performance. Unless otherwise noted, all references in these remarks and supplemental materials to company-specific financial metrics relate to the second quarter of 2025.

All references to period-to-period increases or decreases in financial metrics are year-over-year. We may also describe certain products and devices which have applications submitted and pending for certain regulatory approvals or are available only in certain markets. During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, and actual results might differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements except as required by law. With that, I'd like to turn the call over to Rainer.

Speaker 0

Thank you, John. And good morning, everyone. We appreciate you joining us on the call today. Now, before we get into the details of the quarter, I'd like to touch briefly on the announcement we made this morning regarding our CFO succession plan. As I'm sure many of you saw, we announced that Matt Gugino, the current Group CFO of our Life Sciences Innovation Group and Vice President of Corporate FP&A, will succeed Matt McGrew as Chief Financial Officer of Danaher at the end of February 2026. As we've done with past transitions, Matt McGrew will continue on as an Executive Vice President as he begins his gradual path to retirement. Matt, it's been a privilege working with you. For more than two decades, we've all benefited from your outstanding financial leadership, your thoughtful guidance, and trusted partnership.

Since stepping into the CFO role in 2019, you've helped guide Danaher through pivotal moments, including launching Invista and Veralto as public companies, the acquisition of Siteva, and the challenges of the pandemic, all while developing an exceptional internal finance talent pipeline. Matt, Danaher simply would not be the company it is today without your leadership, strategic vision, and humility. Thanks, buddy, for everything. Now, many of you know Matt Gugino from his time as Vice President of Investor Relations. Matt has had a number of important roles during his past 12 years with Danaher. And throughout Matt's time at Danaher, he has gained extensive experience in several key areas, including investor relations, FP&A, mergers and acquisitions, talent development, and most recently, operational experience as Group CFO. He has consistently demonstrated exceptional leadership and has played a central role in shaping our financial strategy and portfolio evolution.

I know he'll be an outstanding CFO as we continue to grow Danaher into one of the most respected science and technology leaders. We look forward to helping him transition to his important role at the end of February 2026. So with that, let's get to our results. Our team's strong execution with the Danaher Business System drove solid second quarter results in what remains a dynamic operating environment. Strong growth in our bioprocessing business, paired with disciplined cost management, enabled us to exceed both our adjusted operating profit margin and cash flow expectations for the quarter. While global trade tensions have led to some uncertainty, market conditions in the second quarter were generally consistent with what we saw in the first quarter.

In pharma, global production of monoclonal antibodies, where the majority of our exposure lies, remained robust, and we continued to see a modest recovery in pharma R&D spending. Academic and government demand remained soft as expected, with ongoing uncertainty around research funding. Clinical diagnostics and applied markets, meanwhile, remained stable. Now, while the macro environment remains fluid, we're intensely focused on what we can control, and that's to continue delivering for our customers, associates, and shareholders. Now, our team has done a nice job running the DBS playbook to offset cost pressures from tariffs, deliver meaningful productivity gains, and turn challenges into opportunities. At the same time, we're taking thoughtful actions to protect our financial and competitive positioning, including addressing structural costs while continuing to invest in innovation for the long term. Our second quarter results also highlight the strength and resilience of our portfolio.

We're well-positioned in attractive end markets, driven largely by non-discretionary healthcare needs and supported by strong secular growth drivers. Our businesses share a common set of relatively durable, high-recurring revenue business models, with the majority of our revenues being consumables that are specified into regulated manufacturing processes or specific to the equipment that we supply. On top of this, our strong balance sheet and free cash flow generation positions us well to further enhance our portfolio going forward. With that, let's take a closer look at our second quarter 2025 results. Sales were $5.9 billion in the second quarter, and we delivered 1.5% core revenue growth. Geographically, core revenues in developed markets were up low single digits, with North America up slightly and a high single-digit increase in Western Europe.

Core revenues in high-growth markets were flat overall, as solid performance outside of China was offset by a mid-single-digit decline in China. Growth in our biotechnology and life sciences businesses in China was more than offset by declines in diagnostics due to volume-based procurement and reimbursement changes implemented in late 2024. Our gross profit margin for the second quarter was 59.3%. Our adjusted operating profit margin of 27.3% was flat year-over-year as the favorable impacts of higher volume leverage, product mix, and disciplined cost management were offset by productivity investments to reduce our structural costs. Adjusted diluted net earnings per common share of $1.80 were up approximately 5% year-over-year. We generated $1.1 billion of free cash flow in the quarter and $2.2 billion in the first half of the year, resulting in a year-to-date free cash flow-to-net income conversion ratio of 143%.

As I mentioned earlier, we're continuing to make significant investments in long-term growth initiatives across Danaher. In the second quarter alone, those investments translated into several important new product and technology launches, each reinforcing our long-term competitive position while delivering meaningful benefits to our customers. Let me highlight a few of these key introductions and how they're designed to help customers improve quality and yields, reduce costs, and bring new therapies and diagnostic tests to market more efficiently. In biotechnology, Siteva expanded its comprehensive purification portfolio with the launch of two new protein A resins, MAB Select Sure 70 and MAB Select Prisma X. Each stage of drug development presents unique purification needs, and these resins are designed to offer cost-effective solutions for preclinical and clinical production without compromising on quality.

They also underscore Siteva's commitment to delivering innovative solutions to help customers reduce manufacturing costs, increase flexibility, and maintain the high-performance standards they expect across all stages of the drug development process. Now, life sciences, SCIEX reinforced their leadership position in mass spectrometry with the introduction of the Xenotop 8600 at June's American Society of Mass Spectrometry meeting. The Xenotop 8600 expands SCIEX's high-resolution mass spectrometry footprint and delivers tangible performance improvements across proteomics, lipidomics, metabolomics, and small molecule workflows. The 8600 offers competitive molecular identification and superior quantification compared to other leading high-end platforms, helping scientists better understand molecular structures and measure more targets in complex samples with greater speed and confidence, with the ultimate goal of accelerating drug development times. In diagnostics, we announced a new partnership with AstraZeneca to develop diagnostic tools that help clinicians identify which patients are most likely to benefit from precision medicine treatments.

This collaboration is leveraging the newly launched Danaher Centers for Enabling Precision Medicine to support a more streamlined end-to-end development process. The first product in development uses technologies from Leica Biosystems with a focus on digital and computational pathology, including AI-assisted algorithms to improve diagnosis and enable more targeted therapy decisions. Now let's take a closer look at our results across the portfolio and give you some color on what we're seeing in our end markets today. Core revenue in our biotechnology segment increased 6%, with bioprocessing up high single digits and discovery and medical down low single digits. In bioprocessing, we were pleased to see the positive trends in our order book continue through the second quarter. Revenue growth was led by low double-digit growth in consumables, with particularly robust demand for commercialized therapies.

Equipment declined as expected as customers continued to absorb capacity added over the past several years, and global trade uncertainty contributed to delays in some larger capital investment decisions. In addition to strong demand for commercial production, the number of therapies in development and clinical trials remains robust. Monoclonal antibodies, which comprise more than 75% of our bioprocessing revenues, remain the largest investment area for our customers, and there is a healthy pipeline of new molecules in development. At the same time, biosimilar development and production and demand for our solutions are increasing as patents on high-volume therapies expire, making life-saving treatments more accessible and driving broader adoption. With our comprehensive portfolio and an innovation engine geared towards increasing yields and enhancing manufacturing efficiencies, we're well-positioned to support our customers as they advance these therapies through development and into commercial production.

The strength of the development pipeline, paired with consistent growth in commercial production, also reinforces our conviction in the high single-digit long-term growth outlook for our leading bioprocessing franchise. Now, turning to our life sciences segment, core revenue decreased by 2.5%. Core revenue in our life sciences instrument businesses collectively declined low single digits in the quarter. Looking across our end markets, clinical and applied markets held up well globally, while demand from academic and government customers remained weak. As I mentioned earlier, we continued to see modest recovery in pharma spending, with revenue from these customers growing in the quarter. In China, we saw an improvement in demand as stimulus-related funding translated into new customer orders and revenue.

Core revenue in our genomics consumables business declined in the quarter, driven by lower demand for plasmids and mRNA from two of our larger customers, along with funding pressure across early-stage biotech and academic research customers. Now, you likely saw IDT and Aldevron in the headlines this quarter for their groundbreaking role in helping develop the world's first on-demand mRNA-based personalized in vivo CRISPR therapy. This achievement marks a major milestone for in vivo CRISPR-based therapies and serves as a powerful example of how our genomics businesses are helping advance the future of personalized medicine. Now, moving to our diagnostics segment, core revenue increased 2%. Core revenue in our clinical diagnostics businesses was up low single digits, with mid-single digit growth outside of China. Beckman Coulter Diagnostics led the way with high single-digit growth outside of China and notable strength in instrumentation.

This marks Beckman's fourth consecutive quarter of mid-single digit or better core growth outside of China, and is a direct result of good traction from recent innovations such as the DXC-500i integrated clinical chemistry and immunoassay analyzer, and the DXI-9000 high-resolution immunoassay analyzer and continued momentum in commercial execution. In molecular diagnostics, Cepheid's respiratory revenue was modestly better than expected, though slightly below prior year levels. Cepheid's core non-respiratory revenue grew double digits, including double-digit or better growth in sexual health, urology, and hospital-acquired infections. This sustained growth in non-respiratory revenue reflects increasing menu adoption and system utilization across our installed base, along with continued strength from newer assays such as the multiplex vaginitis panel, which grew over 75% in the U.S. this quarter. Now, Cepheid continues to expand its global installed base of more than 60,000 instruments.

This expansion has been driven by notable wins across large healthcare systems and integrated delivery networks that are standardizing testing on the GeneXpert platform. As these customers look to allocate resources more efficiently, Cepheid's point-of-care molecular testing is proving increasingly valuable, helping deliver greater efficiency through fewer total tests, higher rates of correct treatment, and ultimately lower overall treatment costs compared to other testing strategies. Now let's frame how we're thinking about the third quarter and the full year 2025. For the full year 2025, we continue to expect core revenue growth of approximately 3%. Additionally, we're raising our full-year adjusted diluted net EPS guidance to a range of $7.70-$7.80 versus our previous range of $7.60-$7.75. In the third quarter, we expect core revenue to grow in the low single-digit % range, and additionally, we expect the third quarter adjusted operating profit margin of approximately 25.5%. To wrap up.

We're encouraged by the momentum we've generated in the first half of the year, particularly in our bioprocessing business. Our team's focused execution in a dynamic operating environment enabled us to deliver financial results ahead of our expectations while advancing solutions that are at the forefront of improving patient and healthcare outcomes. Our solid second quarter results also underscore the unique positioning of our portfolio. Our businesses are well-positioned in end markets with long-term secular growth drivers, and our business models are resilient, with more than 80% of our sales today comprised of consumables and service revenue, which is typically highly recurring. At the same time, the strength of our balance sheet and financial position allows us to invest for the future, both organically and through strategic capital deployment to further enhance our long-term competitive advantages.

Looking ahead, we remain focused on what we can control and what has become a more complex macro environment since the start of the year. We believe the combination of our talented team, the differentiation of our portfolio, and our strong financial profile, all powered by the Danaher Business System, will enable us to continue delivering strong results for the remainder of 2025 and beyond. With that, I'll turn the call back over to John. Thank you, Rainer. Operator, that concludes our formal comments. We're now ready for questions. Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question, please press Star, then the number one on your telephone keypad. You may remove yourself from the queue at any time by pressing Star Two. Once again, that is Star One to ask a question.

We'll take our first question from Michael Racekin with Bank of America. Please go ahead. Thanks for taking the question, guys. I want to be the first to congratulate both Matt on current and future roles. It's great working with both of you, and I look forward to it. Rainer, I want to start on just—I want to start on the order trends commentary real quick on bioprocess. You had some really positive commentary in terms of positive trends in the order book continuing, especially in the consumables. I was wondering if you could dive into that a little bit more in terms of what the book-to-bill was, whether you saw orders accelerate from the first quarter, just sort of expectations for order trends in the third quarter, or any color you can provide maybe by biotech versus pharma, just any additional color you can provide on bioprocess trends. Thanks.

Thanks, Mike. Good morning. Let me put the order trend right into the context here of some of our comments. I think first, it's important to note that our biotechnology segment consists of two businesses. One is the bioprocessing business, which is the $6 billion annual revenue business that you were just asking about. The other is the discovery and medical business, which is a $1 billion business. That business, the discovery and medical, behaves a lot more like a life science tools business. Now, to your point here, let's talk about bioprocessing and work through to the orders. Development here. First of all, the performance and trends in Q2 were very consistent with what we saw in Q1. Consumables continued to lead the way globally with low double-digit growth and consumables really driven by commercial demand and large pharma CDMO customers.

Smaller customers, while they were stable, are still below historical trends or historical levels. Equipment remains below those historical trends, with funnels improving, so we're seeing better funnel activity, but we continue to see order delays with trade policy creating some incremental noise here and probably slowing some decision-making. Overall, our book-to-bill was consistent with prior quarters and around one, with some lumpiness in equipment orders. Overall orders activity in the first half and second quarter are fully supportive of a high single-digit core growth in the second half. If you put all that together here, and I think it's important to also comment on the top-line performance here, which continues to drive strong profitability with fall-through of over 50% in bioprocessing in the first half. When you put all that together, we're really encouraged by the strong first half.

We expect high single-digit growth in the second half of the year. All of this reaffirms our belief that bioprocessing is a high single-digit grower both in 2025 and the long term. Okay. Thanks. I want to touch on something you also brought up a couple of times. You mentioned global trade tensions a few times in the prepared remarks. You just touched on it in your prior answer. If you could expand on that, where you're seeing it, is it sort of what regions geographically and also what customer segments, whether it's pharma or some of the more industrial or applied markets? Is it pausing of orders? Is it cancellations of orders? Is it delays of new orders? Just sort of how are you seeing those dynamics play out?

Do you expect a recovery in that or improvement in that as we go through the rest of the year and we have sort of continued discussion on the tariff front? Thanks. Mike, I think there's a general overlay here of trade uncertainty as it relates to how the tariffs will play out. If we think about the different end markets, in pharma, certainly, as we pointed out, this market continues to grow over time. There is going to be a need for capacity expansions. Now pharma companies have to ask themselves the critical question as to where they're going to build that new capacity. Of course, that's hard to do if you don't know yet what the tariff situation ultimately plays out to be. We would expect that that overhang here clears here, certainly in the next. 6 to 12 months. That's certainly our planning assumption.

That is an overlay on pharma. As it relates to the applied and clinical markets, I think that's less of a factor. Clinical markets, we see volumes remaining fairly consistent. Capacity increases are more incremental in that regard. As it relates to applied markets, I would say the same thing. Great. Thanks. I'll leave there. Thanks, Mike. I'm on next to go to Doug Schneckow with Wolf Research. Please go ahead. Good morning. Matt and Matt, congrats and thanks for all the help. Thanks to the Braber team for giving us some time this morning. I just want to talk about bioprocessing a little bit more. I really just want to clarify your bioprocessing assumptions that are embedded into guidance. First, you had previously told us to expect high single-digit bioprocessing revenue growth for the year. Is that still the case?

Second, you got two and a half points of price in the biotech segment in Q2. What is your assumption for pricing for the second half within the segment, and what does that imply regarding volume pacing? Third, really more to the point, it seems like you may have increased bioprocessing guidance while reducing DNM assumptions. You kind of referenced this in your response to Mike. I just want to see if that's the case. Thank you. Yeah, Doug, maybe I'll take a first stab at it. To your first part of the question on bioprocessing, I think the simple answer is yes, high single digits is still our guide for the year for the bioprocessing piece. Again, just for folks, that's that $6 billion of the $7 billion in the segment. We are still expecting to see high single digits.

I think your second question was around price and what we saw here. I think we saw about, call the first half, 1.5%, 2% kind of price is what we saw in the segment. I think we're probably going to do roughly the same, maybe a little bit better here in the second half from a price perspective in the segment. From a volume pacing perspective, which I believe you asked about as well, we really will see Q2 kind of step down in Q3. Very traditional for us to have a kind of a volume step down in Q3. We do some work on some of our plants, and typically, Q3 is our lowest volume quarter. You see that both in, you see it really in the margins too, in bioprocessing, Q2 to Q3. Then you step right back up, Q4 is our best quarter in bioprocessing.

I would expect to see the same kind of cadence on that. Lastly, I think it was on just sort of maintaining the full margin or the full guide for the year on the segment. I think that's right. I think on the margin, you're probably a little bit lower at DNM, but we're probably a little bit better here in bioprocessing in that $6 billion piece. Again, it's on the margin. It's not huge, but we would maintain the guide for the full year for the segment, a little better in bioprocessing, maybe a touch worse in DNM. As Rainer said, that DNM piece is very different than bioprocessing. It kind of acts almost like a life science tools business to some degree. Great. Thank you. Next, we'll go to Scott Davis with Melius Research. Please go ahead. Hey, good morning, guys. I'll echo my congrats.

Rainer, you're lucky to have two rock stars with you there. Three, including John. Sorry, John. Totally agree. Totally agree. Thanks, Scott. First, just to clarify something, is the structural cost out part of the story? Is that behind us now? Yeah. I mean, I think we feel very comfortable and confident that we are going to get all of that $150 million. I think we've probably got about half already, Scott, and the other half will come as we work through the second half. I feel very comfortable with it. Okay. I'm actually just kind of curious of you here. I mean, early-stage biotech, and just trying to get a sense of what you think. This is going to, how this is going to play out in the next couple of years.

Is this a case of where kind of AI spend is crowding out perhaps some of the opportunities? Is there pent-up demand here? I mean, just kind of are we still going to be talking about this in 12 months, I guess, is my question. I'm just kind of curious how you guys view the market. I would say that if we just look where we are today, biotech is at lower activity levels but stable. The investment environment has been tough here with the amount of venture capital that goes into these biotechs, flowing, and those that are already out there really needing to focus on those therapeutic programs that show the best data. I think that is representative of what has been going on here more generally in the sector, that the enormous wave of investment that we saw during and just after the pandemic has waned.

The market is now finding its footing. Now, as it relates to AI, we really see that ultimately as a tailwind because we see then less money being spent on getting to compound ideas, if you will, and more money being spent taking great ideas, which have been validated in silico, as they say, through the development pipeline, ultimately driving more manufactured and commercialized therapies. Of course, that's where our business is, where we have the most volume, of course, the most share. We view this really positively. But we have to say that we're at a low activity level currently in the discovery phase of the biotech market. Okay. Good color. All right. I'll pass it on. Congrats again, Matt and Matt. Thanks, Scott. Thanks, Scott. Next, we'll go to Tycho Peterson with Jefferies. Please go ahead. Good morning, Tycho. Hey, thanks. Good morning.

I want to probe a little bit on the guide. So you're not flowing through the entire EPS beat. I'm just curious if there are areas of maybe incremental caution in the back half of the year. And then on four keys specifically, you've got a step up in life sciences, I think kind of ramping to mid to high single digits. And the comps there are more difficult. Just curious if you can get us more comfortable with that in particular. Is that contributions from the new SCIEX launches at ASMS? Yeah, that's a piece of it. Maybe I'll let Rainer kind of take the second half piece because he can talk about some of the, like you said, some of the new stuff that's out there. Maybe I'll take the first question, which is sort of on the guide and the flow through.

Maybe I'm kind of sort of thinking about the guide like this. We got off to a pretty good start in the first half, both on the cost actions. Like I said to Scott earlier, I feel very comfortable with where we are on those. And we had a little bit better FX as well. Probably FX was maybe a nickel better for us. Like I said, I think we get the full cost actions, which is probably $0.15 or so. I kind of look at that, say, $0.20, and that's what we flowed through to the full year. All the cost actions and the better first half FX. We started in January with, call it, $7.60 as sort of the range, put the $0.20 on top of that, and that's how you get to kind of the high end of the range now at $7.80.

There are two other things here that I think you're right, we have not flowed through fully. I think maybe the easiest way to think about it is, one, we had a good start in respiratory in Q1 and Q2, and two, FX. In the second half, that's going to be much more favorable than we thought in January. I think the combination of those two, maybe probably another $0.15-$0.20, that has not flowed through. The reason we haven't flowed it through is, one, we're going to maintain the full-year respiratory guide at $1.7 billion, see how that plays out in Q3, Q4. You know that is a variable number. FX is the same, right? That could fluctuate and come back. That has made a significant movement since January, and that could very well come back.

We have decided now to hold back on respiratory, hold back on the second half FX, and just kind of see what happens, especially in a pretty dynamic policy and operating environment. Just felt like we will sit and see how things play out before we commit to that final 15-20 cents. Yeah. To the second part, Tycho, I mean, what we are really saying is the first half in the life science segment was down low singles. We expect the full year to be flat. The second half needs to be up, positive low singles. What we are really seeing there is the impact of three factors. The first is, and we are actually not assuming a significantly improved activity level. In genomics, we expect to see better comps, as an example. In China, we are seeing it is incrementally firmer with some stimulus dollars following through.

As you suggested, we have a number of new product introductions that are gaining traction in our funnels here in the first half, including SCIEX and Beckman Coulter Life Sciences and some others. We expect those to gain traction here in the second half. Maybe to put some numbers around it for you, Tycho, you are sort of that step up from one half to two half to go from down low single to up low single in life sciences, call it $150 million bucks, roughly. If you are kind of trying to bridge that, I would say that genomics, again, remember the first half, we had those two large customers really fall off. I think that is probably a third of it. I would say that we are assuming China, especially China in tools with some easier comps and a better funding environment, is another third of it.

Lastly, new products and kind of other things is the final third. A third, a third, a third between China, genomics, new products, other, that is sort of what we are assuming and have baked into the model for the step up from one half to two half of roughly $150 million. Okay. That is helpful. One quick follow-up. It sounds like you are not flagging any incremental headwinds on volume-based procurement. Obviously, one of your peers did last week. Maybe just get us comfortable that that is not a lingering issue that could get worse. In China, volume-based procurement and the reimbursement changes was essentially what we thought in Q2 and for the first half of the year. In fact, volume was consistent with Q1 and our expectations. There is really no change to our expectations of a $150 million adverse impact from volume-based procurement in 2025.

Now, under the hood there, there have been some recent policy changes, which largely did not affect us because they are really geared to different aspects of the testing menu, which we actually do not have. It's possible that different companies experience different things here. For us, we saw the quarter develop as expected. Volumes were consistent with Q1, and we do not have a different perspective on the $150 million here for the year on volume-based procurement. Okay, that's helpful. Thank you. Thanks, Tycho. Next, we'll go to Vijay Kumar with Evercore. Please go ahead. Morning, Vijay. Hi, Rainer. Good morning, and thank you for taking my question. Congrats to both Gugino and Mugu. Maybe one on biotech for you, Rainer. Guidance 7% was maintained. You look at your second quarter and third quarter assumptions here for 6%. Implied growth for Q4 should accelerate high singles, maybe 8-9%-ish.

What is the guide assuming for Q4 acceleration in biotech? Is that maybe China coming back, small biopharma coming back, or maybe Equifax turning around? No, I mean, I think I would say that we've got high single-digit core for both Q3 and Q4. I do not know that there's any real material changes that we have tried to bake in by a certain geography or in equipment or anything like that. I would say we're just assuming a fairly steady environment, which is we've seen really good double-digit type growth out of consumables. Equipment has been pretty muted, and we expect that to continue here throughout the back half of the year as we work through. I do not think it's a massive change for us. This is not about a step up in activity level.

This is just the normal seasonality, Vijay, that you see with Q3 being sort of the lowest level of activity in bioprocessing and some other markets as well. As the fourth quarter kicks in, that's always been and continues to be the largest quarter for us from an activity level. Understood. Maybe my follow-up sort of related question here. Was there any pull forward either in academic channels or biopharma channels? I think that question comes up because of tariffs. Was there any customer change in customer behavior? Given all of these macro situations, is this bioprocessing sort of high singles? Is this now a sustainable number, or is macro still sort of an overhang when you think about 2026? Vijay, we have not seen any meaningful pull forward. We just have not. We're often asked, and our numbers and our surveys and our customer conversations do not indicate that.

We think the bioprocessing market has for years, and the activity levels continue to confirm that this is a high single-digit growth market, and that'll continue. Now, as it relates to 2026, we obviously have still half a year ahead of us in what is a pretty dynamic operating environment with some questions that still need to be answered, as I spoke to earlier. It is our plan to provide some preliminary thoughts on 2026 for Danaher overall during our October earnings call. We just want to see here how the third quarter plays out, and then in October, we'll give you our preliminary thoughts on 2026. That's helpful. Thank you, guys. Thanks, Vijay. Next, we'll go to Puneet Sooda with Lee Rinker Partners. Please go ahead. Morning, Puneet. Yeah, hi. Thanks, Rainer. And Matt and Matt, my congrats also. Just wondering.

I know you talked about tariffs, but just wanted to clarify. You previously sized at about $350 million in tariff costs with room to mitigate via supply chain and optimization. Can you talk to us about the updated number there and just given the interquarter changes with U.S.-China trade policy and the 145 tariffs going to now 30%? Yeah. I would say that from a number perspective, we're still at kind of a couple hundred million dollars of exposure right now today. That's what we would think of. As far as versus the $350 million. I mean, and that obviously could change in very short order.

As far as China and the tariff there, we've got a lot of different things that we can do both internally that we have control over and also other levers that were available to us within the quarter that we were able to use to effectively not have to charge our customers in tariff. And so we took advantage of those levers. Therefore, from our perspective, as we've always said, we plan on offsetting all the tariffs, and we only plan on offsetting them if we have to pay it. We will try and pass that along somehow, some way. But if we don't pay it, we're not going to try and pass it along. That was a net neutral event for us in China. Got it. Thanks, Matt.

And then just briefly on a question that is on minds of investors, just given the impact that has happened in the gene therapy market. One of your customers has seen suspension of their therapies from FDA on safety concerns. The question is, how broad is the exposure to gene therapies? And I totally recognize that innovation doesn't come without risk. So just how are you thinking about this risk overall and the AAV exposure that you have with respect to Aldevron and also the Siteva segment as well? Thank you. Gene therapy, so AAV-based gene therapy, as you were just suggesting, is really in the early innings, Puneet. This is going to have its vacillations, two steps forward, one step back. Of course, what we just saw here in the news is a step back.

It's not to say that that therapy is not a very interesting and important alternative here for all kinds of different disease forms that are out there, specifically some genetic diseases. I think as we think of the broader picture, genomics is in the early innings and has the potential to be an exciting and effective treatment regimen. Now, as we think about our own exposure here across Danaher, we're not talking about more than a couple hundred dollars. Keep in mind, we're a protein house here with really 85% of what we do focused on proteins. And of course, that's a well-established market, and that's what drives our business and our earnings. Now, we typically talk about these things more narrowly, but if we think about our guidance, and you mentioned Sarepta here and Aldevron. Our guidance in the market is essentially playing out as we expected.

But the Aldevron Sarepta revenue, we expect to be $30 million for the full year, with a minimal contribution here in the second half. So our guide contemplated and did not expect significant revenue contribution from that particular therapy. Got it. Helpful. All right. Thank you. Thanks, Puneet. Thank you. And next, we'll go to Dan Leonard with UBS. Please go ahead. Morning, Dan. Good morning. I was hoping, Rainer, that you could elaborate on trends in China outside of diagnostics. Is that business turning a corner? And if you could elaborate further because you touched on it briefly a few times in the prepared remarks. Our China business outside of diagnostics has been firming up. The bioprocessing business has shown slight growth here in the quarter. And we see the biotech and pharma market there showing some more solid activity levels. We do see that in bioprocessing.

As we think of life science tools, we did see more stimulus activity, and that's flowing through not just to orders and to revenues. It's still not at normal activity levels, but we do see it firming up. We're encouraged by what we see here for those two businesses, and that's reflected here in our second-half view. You'll recall Tycho's question here. The firming up of China in life science tools is a part of that. Thank you. And just a clarification question for Matt McGrew. Matt, did I hear you correctly that at current foreign exchange rates, that your guide would be 15 cents higher? With both the respiratory and the current FX, probably 15-20 cents. I'm not sure I'd say that the guide's higher, but that's what the math would imply that we have not, if you would, not flowed through. So yeah. Understood.

Between those two, 15-20, and we haven't flowed that through. Thanks a bunch. Yep. Thanks, Dan. Thank you. And next, we'll go to Dan Brennan with TD Cowen. Please go ahead. Great. Thanks for the question, Matt and Matt. Matt, congratulations. Rainer, I wanted to just go back to bioprocess orders, if you don't mind. I just wanted to confirm sort of Mike's earlier question. I think you said the book-to-bill was around one, equipment more lumpy. Because I mean, if I look back at the first quarter transcript, I think you talked about the seventh consecutive quarter of a book-to-bill that was solidly over one. I'm not trying to nitpick. I'm just trying to clarify. Maybe that was related to consumables. Just maybe if you can expand upon that a bit. The trends are really very comparable here.

I would tell you that this book-to-bill is not a perfect measure. That lumpiness, especially with larger orders, sometimes does not play through. What we see here is consistent with what we've seen in prior quarters. It's around one. Yes, we saw some lumpiness here in equipment and some larger orders. The activity level is very comparable. Okay. Maybe moving over to Cepheid, I know you had a nice quarter. I think it was low double digits, ex-COVID. Could you just speak to kind of what's baked in for the 2025 guide, how we think about that low double digits continuing or changing as we get into the back half of the year? I know you gave some color in the prepared remarks, but any further color there would be great. Thanks. Sure.

As you said, overall, Cepheid exceeded our expectations on a little bit better respiratory and double-digit non-respiratory growth. In fact, the non-respiratory reagents grew low double digits in the second quarter. We did see strength across the test menu with double-digit or better, I have to say, or better growth in sexual health, virology, and hospital-acquired infections. We actually expect that strong non-respiratory demand to continue in the low to mid-teens for the full year. The reason is we continue to expand that installed base, particularly at large IDNs that are standardizing across their network as they go a little bit closer to patients in their satellite settings. It just shows how Cepheid's strategy is playing out. I mean, we see increasing menu adoption and utilization of the existing installed base, and we continue to expand that.

With that, we see the pull-through of assays such as the hospital-acquired infections and virology. Lastly, this recent menu expansion around our MVP, so that's the multiplex vaginitis panel. That's up over 75% in the US. We feel very good about the non-respiratory portfolio continuing to track at higher growth levels, mid-teens. Thank you. Next, we'll go to Rachel Vatsendell with JP Morgan for our last question. Morning, Rachel. Great. Good morning, you guys. Thanks for taking the questions. I wanted to echo everyone's earlier comments and congratulations to both of the Matts here. My first question, I just wanted to dig on to some of the trends on bioprocessing equipment. You've highlighted that revenues were weak and orders were lumpy in the quarter given some of that global trade uncertainty, but you said that the funnel remains strong as well.

If we look at some of these press releases on companies building out additional capacity, I just wanted to get your thoughts on how you are thinking about the timing of recovery on bioprocessing equipment given those dynamics. Are you assuming recovery in equipment in the back half of the year on a revenues basis? How are you thinking about the opportunity for onshoring and reshoring longer term? Thanks, Rachel. It is, as you suggested here, that larger projects are in discussion. The decisions are being delayed, certainly for the reasons I talked earlier, trade policy, tariffs, a couple other points. What's also important to note is that the reality of this is that it takes a number of years to build new pharma manufacturing plants. Building that capacity is going to take some time.

It is really too early to determine what all these large announcements will, how they play out, and when that money flows. That said, I mean, Siteva is very well positioned here to capitalize as these decisions start being taken and move through their CapEx processes. Because of the breadth of our portfolio, our scale, and of course, the global footprint, we can do this anywhere in the world. To your point earlier about how do we think about the guide for 2025 here, we expect 2025 is going to be a down year for equipment. We do not expect in our guide a significant step up here. When I talk about the improved funnel activity, what we do expect here is the continued small capacity expansions that you see where the decisions are much easier to make in existing plant footprints.

We will see as we get to October here, we will talk a little bit more about how we are thinking about 2026. Great. For my follow-up, I wanted to dig on respiratory a little bit more. You raised the endemic rate on respiratory to $1.7 billion earlier this year. You typically see that split roughly 50/50 between the first half and back half. Just giving your tracking to $900 million at this point, that is slightly ahead of expectations relative to the $1.7 billion assumption for the year. I know it is too early and you guys are kind of pushing towards that 3Q call in terms of how you are thinking about respiratory assumptions. Can you walk us through, would you consider revisiting that endemic rate as we get towards year-end? Would you potentially revisit it for a fifth time?

Can you remind us, what are you currently assuming on that $1.7 billion number in terms of the mix on four-in-one versus COVID-only tests? Yeah. No, I mean, I think the way to think about respiratory is we have got a guide that is $1.7 billion. We have been kind of guiding to that really for the last probably three years. It has been a little bit better the last couple of years. We are not. That is not a number that we are completely full into. I think if we start to feel as though that number is a little bit higher, we would sign up to that. I think we have had those conversations. I think I would like to see how this year goes. This year started in January. That felt much more like a typical, sort of a typical respiratory season.

It did get a little higher for a peak higher there, but it followed a more similar pattern than we had seen before. I think if we can get another year behind us, we would be open to revisiting that number for sure. As far as the 1.7, like you said, we are a little north of $900 million. We will see how Q4 plays out. That is usually the big quarter, Q4 and Q1, as you know. Also, the difficulty with respiratory straddling sort of two years does make it a little bit difficult. That is kind of where we are at. Four-in-one, I think we are at this point probably 75%-80% four-in-one. We do do some regular COVID-only, typically mostly, I should not say, well, a lot of it is in Europe, but there is some in the U.S. too that will do that.

That has basically been our mix for the last couple of years. Thank you. I would like to turn the call over to John Bedford for any closing remarks. Thank you, Margo and everybody. We will be around all day for questions. Bye. Thank you. Ladies and gentlemen, that does conclude today's program. We thank you for your participation, and you may disconnect at any time.