Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2025 First Quarter Conference Call. I would like to introduce our moderator for the call, Mr. Rafael Tejada, Vice President, Investor Relations. Mr. Tejada, you may begin the call.

Good morning, and thank you for joining us. On the call with me today is Marc Casper, Chairman, President and Chief Executive Officer; and Stephen Williamson, Senior Vice President, Chief Financial Officer. Please note this call is being webcast live and will be archived on the Investors section of our website thermofisher.com under the heading, news, events, and presentations until July 22, 2025. A copy of the press release of our first quarter earnings is available in the Investors section of our website under the heading financials. So before we begin, let me briefly cover our Safe Harbor statement. Various remarks that we may make about the company's future expectations, plans, and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's most recent annual report on Form 10-K, which is on file with the SEC and available in the investor section of our website under the heading financials, SEC filings. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the press release of our first quarter 2025 earnings and also in the investor section of our website under the heading financials. So with that, I'll now turn the call over to Marc.

Thank you, Raf. Good morning, everyone, and thanks for joining us today for our first quarter call. As you saw in our press release, we delivered very strong performance in the quarter. I'm proud of our team's ongoing focus to enable the success of our customers while demonstrating incredibly strong commercial execution and operational excellence. Our continued success is a result of our growth strategy, our PPI business system, and our proven capital deployment approach. And of course, all of this is against the backdrop of a more uncertain macro environment. So big thanks to the team for their efforts. In my remarks today, I'll first cover Q1, which was a strong quarter with clean execution across all dimensions. In the second part of my remarks, I will cover the expected impact of the uncertainty in the macro environment. And I'll provide a high-level view of our updated guidance for the year that incorporates the expected net impact of current tariffs and the changes driven by the current policy focus of the US administration. So to recap the financials, our revenue in the quarter was $10.36 billion. Our adjusted operating income was $2.27 billion. Q1 adjusted operating margin was 21.9%, and we grew adjusted EPS by 1% to $5.15 per share. Our team's excellent execution and strong focus on our customer success enabled us to deliver revenue performance ahead of our expectations. Turning to our performance by end market, we translated that revenue performance into earnings that were also ahead of expectations. As a reminder, there were two fewer days in the quarter than the same period last year. In Pharma and Biotech, we delivered low single-digit growth during the quarter, which included a two-point headwind from the runoff of vaccine and therapy-related revenue. Performance in this quarter was led by our bioproduction and pharma services businesses, as well as our research and safety market channel. In academic and government, revenue declined low single digits in the quarter, driven by the macro conditions in the U.S. and China for this end market. In industrial and applied, we grew low single digits during the quarter, highlighted by strong growth in our electron microscopy business. Finally, in diagnostics and healthcare, we grew low single digits during the quarter, reflecting strong performance in our healthcare market channel and in our transplant diagnostics and immunodiagnostics businesses. Wrapping up on our end markets, while there was more than originally expected, our team delivered on our financial commitments for the quarter. In terms of our growth strategy, we made terrific progress in the quarter. As a reminder, our strategy consists of three pillars: high-impact innovation, our trusted partner status with customers, and our unparalleled commercial engine. So starting with the first pillar of our growth strategy, high-impact innovation, we had an excellent start to the year, launching several outstanding new products that are strengthening our industry leadership by enabling customers to advance their important work. Let me first highlight a couple of new products and analytical instruments that demonstrate our continued market leadership. In electron microscopy, we introduced the Thermo Scientific Vulcan automated lab, a fully integrated AI-enabled solution that combines robotics and electron microscopy, helping to advance process development and control in semiconductor manufacturing. The Vulcan system speeds up transmission electron microscopy workflows, reduces labor, and delivers consistent high-quality data. This innovation improves manufacturing yields, enhances productivity, and seamlessly connects lab and fabrication operations. It's a major step forward for our semiconductor customers. In chromatography and mass spectrometry, we introduced the next-generation Thermo Scientific Transcend, a new ultra-high-performance liquid chromatography platform helping high-volume laboratories simplify sample preparation and increase efficiency in clinical research, forensic toxicology, food safety, and environmental testing applications, including for PFAS. Turning to our genetic sciences business, we introduced Olink Reveal proteomics kits that enable the identification of proteins related to inflammation and immune response, helping to advance precision medicine. It was a terrific quarter for innovation, and we're excited about the strong pipeline of launches slated for Q2, including those that will debut at ASMS. Our high-impact innovation is enabling an even brighter future for our company. During the quarter, we also continued to strengthen our industry-leading commercial engine and deepen our trusted partner status with our customers to accelerate their innovation and enhance their productivity. In our clinical research business, we continue to strengthen our leadership in real-world evidence to help our customers gain insights about the safety and effectiveness of current and future treatments. We launched new core Avitas patient registries in electron microscopy, announced a new collaboration, and ultimately improved patient outcomes in alopecia and lupus, enhancing our customers' ability to inform treatment decisions with the Chan Zuckerberg Institute for Advanced Biological Imaging. To advance the understanding of human cells by leveraging cutting-edge cryo-tomography technologies, this effort supports the development of the open cell Atlas, a groundbreaking initiative aimed at creating high-resolution 3D maps of human cells to drive biological discovery. It's another example of how Thermo Fisher Scientific is enabling large-scale collaborative research efforts that push the boundary of science forward. Our trusted partner status and industry-leading commercial capabilities enabled our customer success. They also provide us a unique opportunity to engage with our customers, helping them solve current challenges and plan for the future. As always, our PPI business system played a significant role in our success, enabling outstanding execution during the quarter. PPI engages and empowers all of our colleagues to find a better way every day. PPI is helping us to drive share gains and improve quality, productivity, and customer allegiance. It's a significant competitive advantage for Thermo Fisher Scientific as we navigate through the current macroeconomic uncertainty. Let me now turn to capital deployment. We continue to successfully execute our proven capital deployment strategy, which is a combination of strategic M&A and returning capital to our shareholders. In February, we announced that we entered into a definitive agreement to acquire SOVENTUM's purification and filtration business for $4.1 billion. The business is a leading provider of filtration technologies used in the production of biologics, as well as in medical technologies and industrial applications. Sovantum's innovative products are highly complementary to our leading cell culture media and single-use technologies, broadening our bioproduction capabilities to better serve the high-growth bioprocess market. The transaction is expected to be completed by the end of 2025 and is subject to customary closing conditions and regulatory approvals. We look forward to welcoming our new colleagues to Thermo Fisher Scientific. In terms of return of capital, during the quarter, we repurchased $1 billion of shares and increased our dividend by 10%. Let me now turn to our guidance. We've all seen a tremendous pace of change in the world since we provided our guidance on January 30. The two main elements of the macro changes since then are tariffs and the changes driven by the current policy focus of the US administration. As you would expect, we've been operating with agility to assess the changes as they come, and we're actively managing our business to mitigate the impact and capitalize on new opportunities. As a result, we're able to offset a large amount of the impact of the macro changes in 2025 and more fully offset them when the full impact of our mitigation actions is realized next year. While these recent macro changes are causing uncertainty and remain fluid, we thought it would be most helpful to the investment community to offer a best estimate of the impact of the known changes as of today and embed them in our guidance. Our updated guidance range for the year is revenue in the range of $43.3 billion to $44.2 billion and adjusted EPS in the range of $21.76 to $22.84.

As you know, during periods of change, we define a clear set of guiding principles on how to successfully manage the company. These principles have three elements. First, everything we do starts with our customers and ensuring that we're enabling their success. Second, we inspire our colleagues to bring their best every day to fulfill our mission. And third, we hold ourselves to an incredibly high standard to deliver differentiated short-term performance, all while identifying opportunities to enhance our long-term competitive position, which creates an even brighter future for our company. To enable that differentiated short and long-term performance in this environment, we're leveraging our PPI business system to aggressively manage our supply chain to counteract tariffs and to appropriately manage our cost base. You've heard us talk about our commercial intensity, and we're pivoting our commercial teams to the areas with the best opportunities to accelerate our share gain momentum. We're ensuring that our trusted partner status is driving tangible benefits for our customers. And one way we're doing this is by continuing to invest further to strengthen our capabilities for our customers. This includes increasing our investment in US manufacturing, R&D, in the range of about $2 billion. As the largest domestic life sciences player in every major market around the world, we're uniquely positioned to help customers navigate this environment. I'm encouraged by the fact that both our colleagues and our customers have never been more enthusiastic about our company. Our customer lead gen score is at an all-time high, and colleague engagement and retention are incredibly strong. So to summarize, our key takeaways from the quarter: We delivered a very strong quarter driven by our proven growth strategy and PPI businesses. Our trusted partner status and proven ability to enable our customer success is a significant competitive advantage. Looking ahead, we're acting with speed and agility to navigate the current environment, and we're incredibly well-positioned to minimize the impact and maximize new opportunities, creating an even brighter future for our company. With that, I'll now hand the call over to our CFO, Stephen Williamson. Thanks, Mark, and good morning, everyone. I'll take you through an overview of our first quarter results for the total company, then provide color on our four business segments, and I'll conclude by providing our updated 2025 guidance. Before I get into the details about financial performance, let me provide you with a high-level view of how that first quarter played out versus our expectations at the time of our last earnings call. In Q1, we had another quarter of excellent execution. This enabled us to deliver Q1 financials ahead of what we'd assumed in our prior guidance. Organic revenue growth was approximately $100 million or 1% ahead, and adjusted EPS was $0.04 ahead. This is driven by $0.09 of very strong operational performance, partially offset by $0.05 of higher FX headwind largely due to non-cash transactional FX. So a clean beat for the quarter. The team's execution was excellent, and we delivered a strong start to the year. I'll provide you with some additional details on our performance, starting with earnings per share. In the quarter, adjusted EPS grew 1% to $5.15. GAAP EPS in the quarter was $3.98, up 15% from Q1 last year. On the top line, Q1 reported revenue was flat year over year. The components of our reported revenue included 1% organic revenue growth, a slight contribution from acquisitions, and a 1% headwind from foreign exchange. For context, within our revenue growth for the quarter, we had a headwind of approximately 3% from the combined impact of two fewer selling days and the runoff of pandemic-related revenue. Turning to our organic revenue performance by geography in Q1, North America was flat year over year, Europe grew low single digits, and Asia Pacific also grew low single digits, with China declining mid-single digits. With respect to our operational performance, we delivered $2.27 billion with adjusted operating income in the quarter, and adjusted operating margin was 21.9%, ten basis points lower than Q1 last year. During the quarter, we delivered very strong productivity, which enabled us to fund strategic investments to further advance our industry leadership and largely offset the impact of unfavorable mix and a headwind from foreign exchange. Total company gross margin in the quarter was 41.7%. Moving on to the details of the P&L, adjusted SG&A in the quarter was 16.5% of revenue. Total R&D expense was $342 million in Q1, reflecting our ongoing investments in high-impact innovation. R&D as a percent of manufacturing revenue was 7.5% in the quarter. Looking at our results below the line, our Q1 net interest expense was approximately $100 million. The adjusted tax rate was 10%, and average diluted shares were 379 million, five million lower year over year, driven by share repurchases net of option dilution. Turning to free cash flow and the balance sheet, Q1 cash flow from operations was $720 million, and free cash flow was $370 million after investing $350 million of net capital expenditures. During Q1, we deployed $2.1 billion of capital to shareholders through $2 billion share buybacks, which were completed in January, and approximately $150 million of dividends. Also during the quarter, as Mark mentioned, we announced a definitive agreement to acquire Solventum's purification and filtration business for approximately $4.1 billion in cash. We expect the transaction to be completed by the end of 2025, and the business will become part of our Life Science Solutions segment upon close. We ended the quarter with $5.9 billion in cash and short-term investments and $34.2 billion of total debt. Our leverage ratio at the end of the quarter was 3.2 times pro forma adjusted EBITDA and 2.6 times on a net debt basis. Concluding my comments on our total company performance, adjusted ROI was 11.4%, reflecting the strong returns on investment we're generating across the company. Now I'll provide some color on the performance of our four business segments. As a reminder, in Q1, we had two fewer selling days than the prior year quarter, which impacted revenue growth in each segment by approximately one to two percentage points. In Life Science Solutions, Q1 reported revenue in this segment increased 2% versus the prior year quarter, and organic revenue growth was also 2%. Growth in this segment was driven by our bioproduction business. Q1 adjusted operating income for Life Science Solutions decreased 1%, and adjusted operating margin was 35.6%, down 120 basis points versus the prior year quarter. During Q1, we delivered very strong productivity, which was more than offset by the expected impact of the Olink acquisition, unfavorable mix, and strategic investments. In the Analytical Instruments segment, reported revenue grew 2% year over year, and organic revenue growth was 3%. The growth in the quarter was led by our electron microscopy business. In this segment, Q1 adjusted operating income was flat year over year, and adjusted operating margin was 23.2%, down 50 basis points versus the year-ago quarter. In Q1, we delivered strong productivity and volume pull-through, which was more than offset by strategic investments, foreign exchange headwinds, and unfavorable mix. Turning to Specialty Diagnostics, in Q1, reported revenue grew 3% year over year, and organic revenue increased 4%. In Q1, growth in this segment was led by our healthcare market channel and our immunodiagnostics and transplant diagnostics businesses. Q1 adjusted operating income for Specialty Diagnostics increased 3%, and adjusted operating margin was 26.5%, flat year over year. During the quarter, we delivered good productivity and volume pull-through, which was offset by foreign exchange headwinds and unfavorable mix. And finally, in the Laboratory Products and Biopharma Services segment, both reported revenue and organic revenue decreased 1% versus the prior year quarter. The runoff of pandemic-related revenue had about a 2% impact on revenue growth in this segment in Q1. This was largely offset by good growth in our Pharma Services business and our research and safety market channel. In this segment, Q1 adjusted operating income decreased 2%, and adjusted operating margin was 13%, which is flat to Q1 2024. During the quarter, we delivered very strong productivity, which was offset by unfavorable mix and strategic investments. So turning to guidance, as Mark outlined, we're updating our 2025 guidance to reflect the continued strength of the business, including the very strong start to the year in Q1, and to reflect the expected impact of recent changes in the macroeconomic environment. While these recent macro changes are causing uncertainty and remain fluid, we thought it would be most helpful to the investment community to offer our best estimate of the impact of the known changes as of today and embed them in our guidance. Let me start with a high-level summary of the change to the midpoint of the guide. I'll then provide more detail around each one of the changes so that you have the right context. Adjusted EPS is a dollar lower at the midpoint than our previous guidance. $0.70 is driven by the tariffs between the U.S. and China. We expect this impact will reduce very rapidly next year when the full benefits of our mitigation actions are realized. Non-China-related tariffs are assumed to have no net impact on the adjusted EPS for the full year 2025. Our mitigation actions offset the gross impact of the new costs within the year. And finally, the impact of changes driven by the current policy focus of the US administration has a $0.30 impact in 2025. Revenue dollars are unchanged at the midpoint. The volume-related impacts are offset by our mitigating price actions and more favorable FX. And we now expect organic revenue growth to be 2% at the midpoint of the range for the year. The guidance is prepared using tariff rates that are in place today and assumes no change in the current U.S. policy focus. So we're updating the guide to reflect the change in the macro environment and our highly impactful mitigation actions. It's important to note that all the rest of our guidance remains on track for the year.

Thank you, Steven. Operator, we're ready for the Q&A portion of the call.

Thank you. We will now begin today's question and answer session. The Thermo Fisher Scientific management team, please limit your time on the call to one question. Please go ahead, Michael.

Great. Thanks for taking the question, and thanks for the detailed comments, Mark and Steven. That was really helpful. I want to start on, Sunit, you both touched on sort of the approach to the guide methodology going forward given all the uncertainty in the broader market and, you know, especially on the policy side. Just trying to think about obviously, things have changed a lot in the last three months. Feels like they're changing every day, every week. You know, we noticed that for the guide, both for revenues and EPS, you're given a wider range than you have in the past. But just you talk a little bit about, you know, upside downside sort of the world looks like for the lower end versus what the world looks like for the higher end? Just if things keep changing as they have been, you know, levers you have to offset things if things deteriorate further or maybe just sort of what your actions would be if things improve a little bit. Just think about various scenarios going forward. Thanks.

Mike, thanks for the question. Super helpful question. So maybe I'll start with a little bit of framing and then think about some scenarios. Right? So I think that you start with we had a really good quarter to start the year. Right? And it was clean across all dimensions. Top line, bottom line, execution of the growth strategy. Actually really excited about customer leads and things that we don't talk as much as the best ever. Turnover rates of colleagues, the lowest that we've recorded. So things are good. Right? And from that perspective, right? And the market majority of our business is actually right on track in terms of what I would expect. The macro is, as you said, is quite changing and dynamic. And you know, if I think about how challenging it was to just go through and assess what would be the impact of also just what we have at this moment, we made the view that it's better to actually articulate that. So that, you know, people can model it. Right? And we think that's gonna be exactly right? Of course not. But do we think it's directionally correct? Yeah. We do. And what's hard to visualize is we are fully mobilized on mitigation actions. Navigating the environment that we see right now. And if you think about really, most of these changes started around April 10th, and we sit here, you know, less than two weeks later, and we're in full mobilization mode. If things change, we're gonna capitalize on opportunities that never saw coming. We will navigate risks effectively. We'll roll back access that are unnecessary as some of these things don't happen. So we'll be very agile and you I, you know, I feel good about our ability to do that. Actually, I think we're incredibly differentiated based on our ability to do that. So what are the broad scenarios? So the upside scenario is changes in the policies between US and China so that you don't have sort of this dramatic reduction of demand. Based in China for US-made products. It's a small minority of what we produce for China is actually made in the US, but our assumption is effectively it goes to zero until we can mitigate supply chains, which we can do quite aggressively. This takes some time to move production to other sites. So that's the most obvious scenario. That would drive short-term actions. It was actually a good, you know, set of commentary from the FDA commissioner about what he's trying to do, and I know the biotech community is all good about those changes. So you could envision a more robust biotech environment. Those are kind of both scenarios. There's probably some other ones I'm not thinking about. The negative is, you know, if tariff rates or other things like that or the macro gets affected by these things, that'd be the negative scenario. And many levers that we can pull but it's hard to know exactly what the impact would be because we don't know the magnitude of the challenge that we faced. So hopefully, that helps you think about it. And the important reminder in a period of volatility, there's no place that's better to be than life science tools, right, in terms of you think about this level of change and in the scheme of things, very small changes to our outlook. We're still growing nice and you know, our plan is to grow EPS. So it's a nice haven in a little bit of challenging environment. Thank you, Mike.

Sure. Thanks so much, Mark. That's really helpful. And then for my follow-up, I wanna touch a little bit on sort of the long term beyond 2025. I think you guys addressed the tariff situation really well saying that you'll be able to mitigate things, and it's really not gonna be an issue next year. But thinking about NIH, US government funding, policy there, obviously, that's an important market. So any thoughts I know it's really early, but any thoughts on what your view is of the underlying tools market growth rate that, you know, four to six percent, is that still viable going forward in the future? Do you think that there'll be enough offsets and ability to find new funding sources, or does this sort of dampen that longer turnaround look for the market? Thanks.

Yeah. So Mike, I think right now, we're focused on the super short term. Right? Because, obviously, you know, we're addressing that. I'm super optimistic about the long-term health of our industry because if you go about what's driving it, right? What's driving it is we're getting older. There's big demand for health care, and the scientific breakthroughs, they're awesome. Right? The pipelines in the pharmaceutical biotech industry are compelling. Right? And those things generate the fundamental underlying growth. I think about the long term, I feel very good about the long-term growth. Right? What underlies that is obviously GDP growth. So if the GDP growth in the world is better, that actually puts an upward pressure on growth in the long term. If GDP growth is depressed, it puts a downward pressure. It affects every part of the economy, but that's always a driver that we don't talk so much about. On the academic funding, when I think about sort of US NIH, when you're thinking about, you know, a few points of our total revenue, you have a one-point, you have a one-time reset if this never changes in policy. But ultimately, it grows from there. When I actually think about what is the practical aspects of the government, you know, environment or the academic environment, I should say, the next step actually is what does the appropriations happen in the budget. Congress has historically been strong supporters of NIH. We'll see how that plays out. And then from there, it'll go going forward. So hopefully, that's helpful. I'm excited for what the future holds. And right now, just gonna navigate the environment that we're in.

Thank you. The next question comes from Matt Sykes with Goldman Sachs. Please go ahead, Matt.

Good morning. Thanks for taking my questions. Really do appreciate all the detail you've given so far. I guess for my first question, just given how close you are to your customers, as we think about the large biopharma end market, could you maybe talk about any changes in order behavior or patterns where there's been a pull forward of inventories just to get ahead of tariffs? And if you haven't seen that yet, do you expect that to happen? And how do you work with your customers to ensure not a significant amount of supply chain disruption in that event?

Yeah. So, Matt, it's a great question. And thanks for it. Given how short the announcement implementation of the tariffs, I don't really believe customers had any opportunity to pull forward. Right? It would have been we didn't see something, like, funky in the first quarter in terms of some bolus of things happening later in the quarter. We sort of got out of the normal process. And, you know, the tariffs are in effect. So I don't see really any meaningful changes in the patterns that we're expecting. And so, hopefully, that's helpful.

Great. And then just for my follow-up, when you talk about manufacturing flexibility and the ability to mitigate, could you maybe at a high level just kind of talk about how flexible different types of products are? Meaning, like, is it easier to flex an instrument manufacturing facility versus, say, consumables and reagents? And how do you think about sort of the order of priorities in terms of flexing in manufacturing? I just think we all wanna get a sense for timing of truly how flexible you can be given the diverse set of products that you offer.

Yeah. Matt, when you think about what we've said in that guide and how fast we're able to mobilize, you can see the short time duration it takes to actually get the full impact of that, and it's complex. It takes a lot of hard work. The team's doing an awesome job of thinking about the implications and then putting the right action plans in place and then executing. So we're on the execution stage, and it's different by different businesses, by different product types. And we have flexibility in our system that you see the net impact is that. So I think that's the best way to put it, and the team is just working with the benefit of the PPI businesses and executing on that. So the other thing that will be challenging, I think, for the analysis of the industry is scale is just an enormous advantage here. Right? Because if you're narrow, and you ship from the world from a single site for your products, you might be massively disadvantaged. You might be advantaged. You may change. Your ability to be flexible is incredibly hard. We have scale facilities in every major market, but the capabilities are robust. We have a lot of twin factories where the factories do the same thing in different geographies. So our ability to move with speed is enormous, and that actually is a great share gain opportunity for us as well. Alright? So I feel very good about our competitive position, especially how strong the PPI business system is on our operational execution. And, hopefully, that's helpful. Great. Thanks, Matt.

Thank you. Our next question comes from the line of Jack Meehan with Nephron Research. Please go ahead, Jack. Your line is now open.

Thank you. Good morning. First, I appreciate the very comprehensive guidance update that you guys provided. Marc, one follow-up, one to ask on the policy side is related to pharmacy tariffs. Curious what you're hearing from customers and then just talk about the risks and opportunities there for Thermo Fisher Scientific. I'll leave it open-ended, but then I have a follow-up.

Hey, Jack. Thanks for the question. So we interact obviously with our pharmaceutical and biotech customers continually. You know, obviously, there's nothing been formalized on the tariffs at this point. I think there's both advocacy that those customers are doing and planning as well. One of the things that we're doing is we're seeing a lot of interest in leveraging our scale US manufacturing capabilities within our pharma services business. So there's quite a bit of demand for our footprint here. And part of the reason that I talked about the investment, which is a $2 billion investment over the four-year period ahead of us, is really to actually have added capacity for pharma services, for analytical services, or laboratories, and additional R&D done in the US. And I think we just believe that there's gonna be more activity here. Whether there's tariffs or not, and that's the direction of travel. And we're gonna enable our customer success. And once again, we'll be able to capitalize on that opportunity to help our customers be extraordinarily successful.

Great. And you kind of walked me to where I wanted to go, which is on the pharma services business. So that got a few callouts in the scripts. We'd just like to get your thoughts on what inning you think this business is now in kind of in the post-COVID recovery, confidence that continues. And when you have these discussions with customers, is it more API related or fill-finish, just like where you're seeing the demand for help?

Yeah. So it's the biggest area. It's across the board, but the biggest area is really in fill-finish. Right? As well as, interestingly enough, drug product on the tableting side of things as well because there's an interest in having more done in the US. Right? So the front product is seeing the fastest thing because it takes a long time to move drug substance actually in terms of, you know, that happening. So I think that's where we'll see it first. And in terms of the COVID thoughts, you know, we've won significant business to backfill the old COVID-related capacity. So that's pretty much all. That is actually all signed up. And we're just ramping up production. Right? And we have new lines coming in. Gonna have even more lines being added with the additional investments in the coming years. So from that perspective, the COVID's in the rearview mirror, and now you're starting to see the ramp of the activity on what we backfilled with. So it's a pretty exciting time in pharma services. Great. Thanks, Jack.

Thank you. The next question comes from the line of Rachel Vatnsdal with JPMorgan. Rachel, please go ahead.

Thank you, operator. Good morning, and thanks so much for taking the question. So I wanted to dig into the policy changes that drove a portion of the updated guide. You highlighted that $500 million of that guidance reduction was related to those policy changes. You specifically call it the weakness in academics and government, but then you also highlighted some of the clinical trial weakness in light of lower expectations related to vaccines. So could you break down for us what percent of that $500 million update was related to ENG versus the CRO? And then alongside the academic and government, what are your updated expectations for how that market should perform for the full year?

Thank you. I just wanna make sure I answer the right question. So thanks for the question. So the split is really quite straightforward. On the policy changes, within the clinical research business, we've seen $200 million of studies canceled or put on hold, specifically vaccine-related. Half of that is directly funded by the government through innovators, and about half of it is just from the innovators themselves. Every other aspect of clinical trial-related activity seems to be normal. So that's been fine. Actually, there's a lot of interesting strength in the biotech authorization. There's a lot of good things going on there. But we have seen very specific actions, and I suspect that others that do that particular activity in the short term will figure that out. I also believe that ultimately, as the policy people get in place, it's actually good medicine that's actually on some of those studies. So it's just a question of, you know, do they come back and if so, when? So that's how I think about that. It's kind of a one-off. In terms of the academic and government view, the balance of that, in terms of the phase in that machine, we don't guide by end market or that. The way I would just think about it is, you know, customers are putting in their mitigation actions. Would expect that US academic would be relatively soft, the balance of the year. That's what we embedded in our guidance going forward. And that, you know, it could improve based on the appropriations dynamics this summer. We haven't assumed that that creates a tailwind, but I would say we just affect put it in effect right throughout the balance of the year pretty much pro rata in terms of the impact.

Great. And then for my follow-up, I just wanted to push on pricing assumptions. You called out just in light of tariffs that you can see some potential pricing offsets there. Can you walk us through your broad pricing assumptions, expectations for this year? How much do you really think you will be able to mitigate? How conservative are you being on those assumptions as well? And then what business days are you expecting more pricing and ability to pass that on through tariffs versus other areas where you maybe take less price in this environment?

Yeah. I think it's important to note that with thinking appropriate pricing actions, we're not trying to take advantage of a situation, and this is exactly what we've done in prior times and appropriately passing price on. And we're thinking about for the year, we were assuming year, we've had just over a percentage point of price. This is kind of getting to that to close to 2%. So it's not a significant price change. It's just appropriate given we're in an inflationary environment given by what's happening in the change in the world in terms of tariffs. So that's the approach we're taking. We'll do that appropriately across the portfolio. So there's no area of concentration when I think about that pricing implication. Thank you, Rachel.

Thank you. The next question comes from the line of Doug Schenkel with Wolfe Research. Please go ahead, Doug.

Hi. Good morning. Mark, I appreciate your answers to Mike's questions and a few others along the way earlier on, you know, essentially the LRP. And, you know, listen. I think a lot of us on the line, you know, know the history here of, you know, bio innovation and steady academic funding. You know, that said, this seems different. Thus far, assuming that the White House doesn't really mean it, you know, has not been a good policy. It's clearly not a business-friendly environment right now. Major pharmaceutical companies such as Lilly are, you know, publicly talking about reducing the trajectory of R&D and CapEx investment. And then even, you know, beyond these recent developments, you know, the reality is that it's been a tough five years for the group. You know, you and I have been doing this for a long time, Mark, and I we believe in the greatness of this industry and the greatness of Thermo, but, you know, I'll tell you, a lot of the investors I speak with, you know, if you're newer to the industry, but I don't mean just last year, I mean over the last five years, you've never seen tools be a good group. So with all that in mind, I would think you have to at least contemplate a scenario where the market growth rate is structurally lower and, you know, while what we're doing now isn't normal, it may be normal-ish. In that scenario, what do you change? You know, if growth rate's lower, do you actually pick up more share than three points? Do you think about altering the portfolio? And how does that impact M&A? So I want to start there and then I actually want to come back to maybe a more positive question in my follow-up.

So, Doug, I'm smiling. What I would say is if I look at the last five years, there have been aspects of the greatest that this industry has ever been. In terms of enabling a global response to the most challenging pandemic that any of us have lived through and certainly since 1918. And that was only really regional between US and Europe in terms of the impact. This industry enabled amazing things. So there are some great things that have happened. And in the five years, there's been some of the greatest innovations that have come out of our industry, let alone so that and been incredible overhang from the pandemic that has been extraordinarily painful. Right? So I'm very realistic about the ups and downs, but if I look back at the last five years, it basically says the relevance of this industry to have a very bright future and have really quite small movements up or down on the volumes. Right? I think that shouldn't be lost. And when you think about in a period of really since January 30, lots of new uncertainty. And in the scheme of life, very small changes to the top line. It talks about the resiliency of our company, actually the attractiveness of the industry. Right? And I think that gets lost when, you know, there's not been a lot of headlines that are positive right now on some of these dimensions. But as the largest US player and the largest player in the field, with a policy set of actions that want to make the US stronger, we're gonna benefit from that disproportionately, and that's a good time. Right? And so I see all that. When I think about the long term, I know what the drivers are. If GDP growth or if you take the views that you have or others are saying, that the world's GDP growth is less going forward on a structural basis because of the changes, then the market growth likely will be somewhat less. It'll be much less effective than other parts of the economy. But, yeah, if you believe that the world is just fundamentally gonna grow less, and then you can say that's less business policies, whatever it is. And, yeah, there'll be some sort of changing in growth rates. But if you also say that the US economy is ultimately gonna be better positioned, I have no idea whether or not. If you think the bookcase, then you could actually articulate that. It could actually get better over time. What I do know is Steven and I have lived our careers through transparency. If our views change on the long-term growth of the market, based on the facts as we see them, we will be the first to say it. We're not hanging on to a number. Right? We're not we're just literally putting the numbers that we think are best at this moment in time. We don't look at them every day in terms of long term, but we look at them periodically. And if our views change, our investor will understand it because we're being candid. So hopefully, that's helpful, and I've spent, you know, thirty years in this industry. I've lived through every environment. I'm pumped for the future knowing that a lot of the short term is challenging, and we'll get through that just fine.

Alright. Fantastic. Perks back Mark. Thank you for that. And maybe to kind of build into something that might be a little more positive, relative to the question I asked. You know, some larger pharmaceutical companies and biotechs, you know, I think most recently this week, you know, Roche. But there have been others that started to talk about major build-out of infrastructure in the US. You guys are as close as anybody to your customers. I'm curious what you're seeing in terms of movement towards reshoring in the US and for that matter elsewhere in the world. And, you know, what form do you think this takes for Thermo? You know, if you're starting to hear more about this, where do you think you're gonna benefit most? How quickly can you can this happen? And, you know, is there any chance that you'd be willing to size up this opportunity for you? I know it doesn't happen tomorrow, but it could be a really important growth driver moving forward.

Yeah. You know, Doug, just to give first question was an important question. The second one is as well. So when I actually think of a new facility gets announced, let's forget about the last couple of months. A new manufacturing facility gets announced, it is a meaningful revenue for us in terms of, you know, helping, you know, many, many, many millions of dollars of equipment, the lab infrastructure, the new consumable supplies, the inventories, but it really is great. I was thinking about a customer last year. Big new facility came online. Huge order, right, in terms of what they do broad-based across bioproduction, bioscience, and so on and so forth. So really quite meaningful. In the dialogue we've had with our customers about new facilities that are being discussed, that is really a nice tailwind. We're in the conversation, and we'll certainly help our customers ramp up their, you know, their capacity. So I think it's a nice tailwind. Don't know how many plants ultimately gonna be built yet, so we'll kind of go one at a time and incorporate it into our guidance as we know it. You know, just given how long it takes to break ground, just really a 2026 and beyond. But super exciting.

Operator: Thank you. Our final question today comes from the line of Tycho Peterson with Jefferies. Tycho, please go ahead.

Hey. Thanks. Mark, I want to probe into, you know, the pharma services a little bit more. You know, setting aside the $200 million in vaccine cancellation you flagged for PPD, you talked about activity remaining normal, good strength in biotech authorizations. Can you maybe give a little bit more color there? I mean, anything around order growth? Is this mostly share gains from your perspective? Much of this is bundling, you know, with Patheon and the combined offering? And then it sounds like you don't really have concerns over pharma cuts in response to tariffs and in particular around R&D. I just want to make sure that's the case. And then I have one follow-up for Steven.

So Tycho, given the hour, we'll probably just get to the first one today. But in terms of what's going on in clinical research and sort of how it's performing, actually, you know, the biotech part of the business is quite robust. Accelerated drug development, which we announced, you know, sort of to really go announce it late last year and into this year. Incredibly compelling. And what does it really mean? I was thinking about trying to so how do I visualize this? Right? Our biotech customers outsource this work. Right? Because they are doing one or two studies, whatever it is, or one in one medicine. Right? So you're working with CROs. The capabilities and insights we get from our combined suite of capabilities are truly differentiated, which means that we can be faster and more cost-effective. Whether that's letting a customer know that this trial is not gonna work out, or letting the customer know more quickly that it's gonna work out and maximizing their length of exclusivity. These are super compelling things, and interest level and the wins here are meaningful, and we're very well positioned in terms of the outlook on clinical research. I feel very good about what the outlook is there, and, you know, the vaccine one was just the kind of one-off on the policy changes. What I would also say is that on some of the direction of travel, with the FDA on, you know, experimenting with less animal studies around monoclonals. That would be the if you were wanted to try that out, that's the area where animal models are less relevant. They're trying to modernize, which means anything that the industry has less cost on low-value-added activity means that they'll put money where it's gonna make a difference. So where we play in the human part of the trials, I feel we're very well positioned. Pharmaceutical companies, how they'll respond to tariffs, they're planning, but I don't know ultimately how they're ultimately gonna respond because they're not sure what is gonna get implemented. So as we know that, we're gonna help them navigate it, and we'll figure out ultimately what does it mean for us. So thank you for the question. Let me wrap up with just a quick comment. First, thanks to everyone for joining us. We're pleased to deliver a strong first quarter. And we're very well positioned to deliver differentiated performance as we continue to create value for all of our stakeholders, building an even brighter future for our company. And I hope that you value the transparency that we embedded into our guidance. And we look forward to updating you on our second quarter results in July. And as always, thank you for the support of Thermo Fisher Scientific. Thanks, everyone.

Thank you, everyone, for joining us today. This concludes today's call, and you may now disconnect your lines.