Thermo Fisher Scientific has increased its growth forecast for the second half of the year on the back of surging COVID-19 revenues.
The company disclosed as part of a virtual analyst meeting on Thursday that it expects third quarter organic sales growth of 24%, up from 15% when it previously provided a prediction in July. The new forecast is underpinned by a 45% jump in broad-based COVID-19 response revenue, which includes testing and vaccine efforts as well as personal protective equipment sales.
Thermo Fisher predicts demand for COVID-19 products will continue into the fourth quarter, leading it to forecast that the pandemic will generate revenue of up to $3.2 billion over the back half of the year for a total of more than $4 billion in 2020.
Thermo Fisher expressed surprise at the strength of the tailwinds that enabled it to grow 11% organically in the second quarter. In looking beyond that bumper set of financials, in which the pandemic added $1.3 billion to sales, Thermo Fisher predicted COVID-19-related growth would level off in the third quarter. That has not happened.
With weeks to go until the end of the third quarter, Thermo Fisher expects COVID-19 to add sales of $1.6 billion over the reporting period. The rest of the business has performed close to flat, beating prior expectations. One growth driver is the demand for COVID-19 testing and sample collection; the company is now able to produce about 20 million PCR tests per week and 8 million viral transport media tubes, as flagged in a note shared by Cowen analysts following Thursday's event. And additional demand for personal protective equipment and biopharma services and products is significant enough to ensure growth will exceed historical levels.
Thermo Fisher averaged 4.6% organic growth over the past decade. On Thursday, the company forecast full-year organic growth of 13% to 16% for 2020, despite suffering a slow first quarter due to early disruption caused by COVID-19. The forecast reflects expectations that the pandemic will add up to $1.6 billion to sales in the fourth quarter, supported by slight growth in the rest of the business.
Exactly how strongly Thermo Fisher ends the year will depend on whether demand for testing stays high and the pandemic's pressures on its customers continue to ease. The uncertainty around those points led Thermo Fisher to share a broad, 13% to 27% organic growth forecast for the fourth quarter.
Thermo Fisher has begun to sketch out its expectations for 2021. Market growth will depend on how long the pandemic lasts and what impact it has on the finances of each country, management said. "It's likely to be a very strong year for market growth across the industry," Thermo Fisher CFO Stephen Williamson said at the virtual event. "We're going to have a meaningful impact [from COVID-19]. The exact scale of that will depend on ... how '20 plays out and then the impact of the pandemic."
The company expects its installed testing infrastructure to further generate a "meaningful revenue stream" from COVID-19 in 2021. Some tailwinds are tipped to continue even as the pandemic abates, for example due to the potential for an ongoing increase in diagnostics funding to better equip the world to deal with future outbreaks.
Analysts at SVB Leerink noted to investors following the event that CEO Marc Casper believes the pandemic will spur "renewed appreciation for strong life sciences investment," and that Thermo Fisher stands to benefit from new emphasis on national stockpiling and supply chain security.
Those trends could help Thermo Fisher continue to grow despite missing out on takeover target Qiagen. Thermo Fisher agreed to a price with the Qiagen board but was unable to persuade enough investors to sell, causing the takeover to collapse last month.