Thermo Fisher Scientific’s third-quarter results provide further evidence that demand for COVID-19 tests is exceeding expectations of diagnostic companies.
Days after Abbott reported that COVID-19 test sales “significantly” topped its forecast, Thermo Fisher said that its testing products brought in $200 million more than forecast in the third quarter, helping the company to beat its overall sales guidance by $800 million.
COVID-19 test sales totaled $440 million in the quarter. That helped prompt Thermo Fisher to raise its revenue forecast by $650 million for the full year because of the strength of its core business and “a modest impact of additional COVID-19 testing.”
The extra COVID-19 test sales factored into the forecast all came in the third quarter. Thermo Fisher is still assuming that COVID-19 test sales will fall to $100 million, what it calls the “endemic run rate level,” in the fourth quarter.
Transplant diagnostics and microbiology grow:
While demand for COVID-19 testing was higher than expected, it was still down from a year earlier. The lower COVID-19 testing revenue offset “strong underlying growth” at Thermo Fisher’s transplant diagnostics and microbiology businesses, CFO Stephen Williamson said on a conference call with analysts and investors.
The drop in COVID-19 testing sales resulted in 19% decline in revenue at Thermo Fisher’s specialty diagnostics unit on an organic basis. The company was able to absorb the slide in diagnostics sales because the unit accounted for only 10% of revenue in the third quarter. Growth came from the laboratory products and biopharma services unit, which provides contract research and manufacturing support.
Going forward, CEO Mark Casper said the company expects “really strong long-term growth trends in our pharma services and our bioproduction businesses.”
Thermo Fisher is contending with inflation across its business and is seeking to counter its impact. Williamson said the company has “been very effective in passing on higher prices to offset higher-than-normal inflation,” resulting in “no net impact” on adjusted operating income dollars. The CFO said he expects Thermo Fisher to continue to effectively manage inflation going forward.
Still, inflation is impacting the finances of Thermo Fisher employees, leading the company to make a “one-time payment of approximately one week’s additional salary to nonexecutive colleagues” to help them cope with rising costs.