Thermo Fisher Scientific’s diagnostic and healthcare end market sales jumped more than 70% in the second quarter fueled by soaring demand for COVID-19 tests.
The company said on a Wednesday call with investors that its life sciences unit generated three-quarters of its $1.3 billion in revenue from coronavirus-related sales. In particular, testing kits and instruments were the key growth drivers.
Thermo Fisher expects to maintain that momentum in the third quarter, with the company predicting the pandemic will add $1.1 billion to its revenues over that period.
Thermo Fisher has delivered better-than-expected results in its first full quarter of the pandemic. In the second quarter, total sales of $6.92 billion grew 10%, in large part due to a jump in revenues at the life sciences unit that sells test kits and instruments.
“The tailwinds were significantly stronger than we originally expected, driven by the increased scale and duration of the pandemic,” Thermo Fisher CFO Stephen Williamson told investors.
Thermo Fisher has scaled up its manufacturing to establish enough capacity to ship 10 million tests per week. Whether the company is able to sell that many products will depend on demand, which management noted is weakening in Europe. Thermo Fisher is also working to add a COVID-19 serological assay and a panel to distinguish infections with coronavirus and other respiratory diseases, such as influenza.
The development projects reflect a belief that the COVID-19 testing opportunity will continue over the coming quarters and into 2021. However, Thermo Fisher is uncertain about how the size of the opportunity will ebb and flow in the coming quarters.
The company opted against providing detailed full-year guidance but did share its current revenue expectations for the next quarter. With Thermo Fisher anticipating third quarter COVID-19 sales of $1.1 billion, management estimates organic growth of 15%. However, the company could come in above or below that estimate, in large part due to the potential for testing to exceed or fall short of expectations.
While increases or decreases in testing would have the biggest effect on Thermo Fisher’s results, the company faces uncertainties in other parts of its business. The extent of COVID-19 disruption is one issue. Sales in China fell 15% and the specialty diagnostics business was negatively affected by a fall in doctor visits and related testing. How quickly those headwinds subside for Thermo Fisher and what the financial impact will be remains unclear.
Thermo Fisher's second-quarter results come about a week after the company agreed to increase its offer price for Qiagen from €39 ($45) to €43 ($49) per share in response to the effect of COVID-19 on its outlook and the investor pressure it triggered.