Thermo Fisher Scientific Stock

Amazing. Thank you, everyone, for joining us Day 2 of Morgan Stanley's Global Healthcare Conference. I'm Kallum Titchmarsh. I run the Life Science Tools and Diagnostics team. Really pleased today to be joined by Marc Casper, Thermo's CEO. We have a lot to discuss, I think, Marc, today.

But maybe we can just kick off with a state of the union. We've seen, obviously, growing momentum throughout 2026 following perhaps a more dynamic few years. Q2 performance obviously came in ahead of guidance and obviously, the strongest growth we saw organically since 2021. So before we dive into each of the end markets and the segments specifically, how do you see the business today? And how has that environment evolved from your vantage point?

So Kallum, thanks for having us, and I'm joined today with two colleagues from Thermo Fisher, Raf Tejada, who is responsible for Investor Relations; and Sandy Pound, our Chief Communications Officer.

When I think about 2026, it's setting up to be really an outstanding year. And it is a combination of improving end markets in the direction that we've expected to see that progression and very strong operational performance by the company. So as we exited the second quarter, it was good to be back to 5% organic growth, and we grew our EPS by 13% in the quarter. We're able to raise our outlook for the full year and now expect organic growth to be about 4% this year. And actually progressing nicely in that range that we said it would happen getting to a period over this year and next range from 3% to 6%, and you're seeing it progress higher in the range.

I'm sure we'll delve into a lot of the different details. But if I'd say one of the things as I reflect on the first quarter or the first half of the year, I should say, is the strength of the customer relationships that we built is really paying off in a really strong way. The acquisitions that we've done are performing well because customers want to adopt the technologies that we've added. So it's a super exciting time in our industry and an even more exciting time at Thermo Fisher.

Amazing. Maybe just turning to pharma and biotech, I think demand from pharma remained pretty strong. And more recently, we've started to see improvement in the earlier stage kind of biotech funding, too. And I think that's starting to show up as well in the revenue base. Can you just give us a perspective on the health of that end market today of both and what you're hearing from customers? And what is driving that improving trajectory?

Yes. So when I think about pharma and biotech, it's the largest customer set that we serve. It's about 60% of our revenue. We grew mid-single digits in the quarter and that Q2 has followed the progression that we've now seen for several quarters, which each quarter is actually a little bit stronger in terms of the organic growth versus the prior quarter. So you're seeing it strengthening. And the business is performing in a logical fashion. So what we're seeing is the pharmaceutical customers are quite positive. They're building their pipelines. They're excited about the science that's happening now and the understanding that they have the benefits of AI to drive stronger impact on the returns within drug development, and that is definitely fueling an investment cycle.

And at the same point in time, you're seeing biotech also in a much better part of the cycle simply because funding is improving, the confidence has been improving and you're seeing the spending. And we saw broad strength. When I think about Q2, you saw strength in clinical research, you saw strength in our research and safety market channel, you saw a very strong performance in bioproduction, all driving very positive growth.

And how should we think about that lag, I guess, between biotech getting funded to them actually spending money and for them generating revenue for you? Because it feels like those funding dollars have sustained themselves pretty well throughout the year. So how are you just thinking about that relationship between funding and revenue generation?

Yes. As our investors know, we spend an enormous amount of time as a management team with our customers. And if I think about in 2025, a lot of what the commentary you heard from us was the tone, the sentiment is improving. Even though funding wasn't super strong, it was improving, but the confidence from our customers and the emerging biotech companies really was picking up. You saw funding start to improve as 2025 progressed, has stepped up even further in 2026. The M&A that's happened in the industry has fueled an investment cycle from VC. You've seen IPOs. So you're seeing a much healthier end market. And that sentiment has now translated into spending, right? And it follows a logical pattern, right?

And usually, when funding happens, it usually takes 2 to 3 quarters depending on the business for that funding to flow. Funding typically will first go into clinical research because that's ultimately how you get to your next milestone in terms of the next funding round. You've seen that in very strong authorizations growth in our clinical research business. You've also seen it in the strong revenue growth that we've been delivering. And now what you're starting to see as it progresses as those companies are now working on how do they refill their research pipelines, and you're starting to see that growth pick up first in our research and safety market channel, Fisher Scientific. That's the next natural thing to happen. You're starting to see lab spend go up. And then the next step you would see is kind of the high-tech reagent business would be the next part of the progression that you would expect to strengthen over the next couple of quarters.

We've had some quite exciting data intra-quarter on personalized mRNA cancer vaccines. Obviously, had been a market more broadly vaccines that were perhaps a bit softer post-COVID on that roll-off. So how are you thinking about the opportunity created from that? And just given the breadth of your capabilities across the drug development cycle, where can you play the most meaningful role?

Yes. So when you think about a significant event from a new approach for a therapy, it spurs a huge amount of interest, right? So it's -- in a certain respect, it's less about the Moderna and Merck specific spending in two important customers but more about the interest in the area, which then spurs a reinvestment cycle. And if you think about -- really, it is a therapy, I mean, less of the marketing, but effectively, it's to address an individual's specific cancer, and it really is very exciting. And what ultimately will be is that it will benefit patients, and that will then see capital flow to support that area. Just like it has in ADCs and some of the other areas that maybe 2 or 3 or 4 years ago, the industry was talking about being a positive, this is yet another leg to drive growth in the industry.

And just sticking with pharma and biotech, checks have suggested that we're starting to see increased activity around reshoring to the U.S. And I think a number of companies have spoken more proactively to it during the second quarter. That seems like it could be a multiyear investment cycle that you have opportunity to benefit from. So maybe just talk through how you're going to be participating in that trend and what you're seeing from those customer discussions today.

So Kallum, when I think about reshoring, it's worth delving into a little bit of the context on it. And it's all positive, but I think it's helpful to understand, right, which is today, certainly serving the U.S. a large proportion of medicines are made in Western Europe or made in Asia Pacific, depending generics, mostly in India, but a lot of the innovative medicines are made in Western Europe. And what you're seeing with the administration's policies is there's real economic benefits to produce in the United States and create more jobs and supply chain resiliency.

And the activity that it's spurring is really in three different ways, right? To meet the U.S. government's requirements, you can sign CDMO contracts. You don't have to build a factory. You can just commit to U.S. production. And when you look at that, we've secured a number of large contracts for our capability to produce in the U.S. And in fact, in March of this year, President Trump visited our CDMO site in Cincinnati, one of the beneficiaries of those jobs moving back to the U.S., where we have a very high-tech facility in the oral solid dose category. And that's the first phase because in a way, factories exist, we're producing medicines, customer might have produced those medicines somewhere else. They sign a contract with us, we tech transfer and we start to create jobs, it creates more growth for us.

The second area is expansions of existing facilities. And in that case, that happens next most quickly, if you will, which is they're buying equipment. They're moving medicines into the U.S. You'll see the onetime demand for that equipment. You'll see the onetime demand to stock labs or stock supplies. You're seeing activity pick up there, and that's probably more of a '27 time frame when it really steps up, that's kind of consistent with what we've been saying. And then the final one is the one where you see most of the announcements, most of the dollars is the brand-new facilities, the greenfields that are being built, they will have more onetime purchases, right? They will buy more equipment, they'll equip the labs. We will supply to Fisher Scientific, all of the labs, all of the inventory to get those facilities up and running. And that should be a '27, '28 type time frame in terms of when that plays out.

When it's all said and done, we're still producing exact same amount of medicines, right? So it is a onetime benefit. It's sort of in a way, additive to how we've thought about our growth outlook. It's a good thing, and it will normalize over time. You're just starting to see it now, and we'll take it. And then ultimately, you get back to volume growth in the industry. So it should be a nice positive over the next couple of years.

That makes sense. Maybe just turning to aca/gov, started to see some signs of stabilization. It was a pretty dynamic period for that end market, particularly in the U.S. How would you characterize the health of that end market today? And what are you hearing from customers on the ground? And I guess more importantly, what do you think is needed to drive a more meaningful recovery here?

Yes. So we had a strong quarter in the second quarter in academic and government. We returned to low single-digit growth. We had strong growth in Europe. The U.S. returned to growth, slightly positive. China is still a headwind in terms of academic spending, but it was a better quarter, largely driven by the adoption of our high-end instrumentation in terms of innovation. Our chroma mass spec business did very well. You saw strong adoption there.

The way that I see the market is funding has been okay, right, but anxiety has been high, right? And it's really, in a way, academic and government over long periods of time, spending just follows the flows of funding, right? And -- but over the 2025 time frame, there were so many pronouncements about changing or potentially changing policies, that customers got cautious. Our view in '26 is it's stabilizing, but it's still a muted market, but the funding is flowing. And our expectation is that will continue to progress, and it should return to growth in 2027 is the way I would think about it. But we'll take a good Q2 in terms of the performance that we had.

And then maybe just unpack a little regionally, what you're seeing in aca/gov, I think you briefly touched on it. But like what do you think is driving that difference in performance and perhaps the relative anxiety, I guess?

Yes. I think the anxiety is literally only a U.S. dynamic, right, in terms of it. In terms of the way I would think about -- we have very strong adoption of our technologies, particularly in our mass spectrometry category. And what you're seeing is Europe was even stronger because they don't have -- they have less of the sort of policy things that they're working through. The U.S. was positive. China continues to be muted as government has been quite restrained on spend in academic and government.

Maybe just implied in industrial. I think it was one of the stronger end markets in Q2. It seems that's improving on the up as well. What are you seeing from customers on the ground here? Would love as well a bit more color on the electron microscopy business. I think that -- and semis has been an interesting topic from our discussions with investors as well.

Right. So about 15% of our revenue is the industrial and applied markets. And when you look at the drivers of the mid-single-digit growth that we delivered in Q2, we actually had broad strength, right? And we had a very strong performance in our electron microscopy business. We saw chemical analysis return to growth and the research and safety market channel had a strong quarter. When I think about the individual drivers, chemical analysis, which is the smallest of our 3 instruments business, really is benefiting from two things: safety and security spend, things like radiation detectors, explosive detectors, things of that sort where we have deep expertise from a technological standpoint has returned to growth; and high commodity prices drives a lot of demand for spectroscopy instruments, and that's driven growth there as well. So that's that part of the business.

Electron microscopy, which is a much bigger business, has got good momentum, really driven by semiconductor. We have a very leading set of technologies, an essential set of capabilities for the semiconductor industry, where if you are developing the next generation of a semiconductor or thinking about chiplets and some of the other technologies, you need the electron microscope to actually understand what's going on at the atomic level to make sure that you're developing the right product and you use our technologies more and more in the yield ramp of production, and you're seeing more automation that we have provided, so that you can literally take off of the fab and near line actually test what are the quality issues that might be in the factory, and that's allowed for a faster ramp of a new fab. So you're seeing very strong demand.

And it's long-cycle business, meaning that our orders are far outstripping revenue, and that bodes well for the future in terms of growth in the semiconductor industry and the number of new fabs being built will continue to drive strength in that business. So strong technology business, very well respected by the customer base and business is performing at a good level.

Great. I want to hit on China. You obviously recently visited China, met with customers, key stakeholders there. What did you take away from the visit in terms of the environment on the ground and customer activity? And I guess, looking ahead, what do you see as the key drivers for spending to be again, more proactive and more speculative than perhaps it had been in the past?

Yes. So Kallum, when I think about China, one of the things as a company, we've been in China for over 40 years, right? And I've had the good fortune of working with our Chinese colleagues and our customers in the 25 years that I've been at the company. And I'm a regular visitor, meeting with customers, governments, our colleagues and just continuing to ensure that our business has a bright future there.

Over the last few years, China has been a drag on the industry growth. And while our business generally has performed better than others, it's been a flattish to down type business. You saw our business return to growth in the second quarter. And when we talked about our mid- and long-term guidance, what we've said consistently is that China doesn't need to be a meaningful contributor to our growth for us to progress through the 3% to 6% range and then ultimately to the 7% plus range in 2028.

And when I came away from my visit in August, which is my second trip of the year, actually came away more positive on China. And one of the trends that has really picked up in a way it's obvious, but actually hear it firsthand helps crystallize it, which is the innovative biotech industry that has been developed in China is really investing heavily in R&D, and they are looking to work with Western companies, right? They want to, in a way, derisk a licensing deal because effectively, if we're putting our name behind the product or technology, then the customer that might be licensing from them will understand that it works.

If our clinical research team is running a trial, we're putting our brand about the quality of the information being generated. Those things are really quite valuable, and you're seeing our business return to growth. So I actually came away more bullish on China and believe that over time, it can return to be at least growing at the company average, if not better. So I'm quite encouraged about what the opportunity set is. I still think academic and government will be challenged there until the government has a different policy about fiscal spending, but I don't think that matters all that much.

Understood. Maybe just shifting from end markets to a few of the individual businesses. Let's maybe start with bioproduction been delivering really strong growth there, I think, outpacing that of the market from our data. What do you think is driving that outperformance? And how does the addition of that purification and filtration business from Solventum change the trajectory looking ahead?

Sure. So we have a strong bioproduction business, has had a very long track record of gaining market share, right? And the way that customers buy in the bioproduction segment, is a best-in-breed approach, meaning that they will optimize the various technologies to produce their medicine that gets the most cost-effective way to produce. Our growth has been driven by our leadership position in cell culture media and single-use technologies, where our technologies have been widely adopted and continue to drive adoption.

We've had great strength in our DynaDrive single-use technology bioreactor, and that really is a very efficient way to produce medicines, and you're seeing the adoption. We have a rapidly growing purification business or resins business that we've had for many years. And we won many molecules years ago. When you win a molecule, it's an infinitesimal amount of revenue, right? It's a long journey, but you're seeing the benefit of the wins over the last 5 to 7 years, actually materializing into revenue growth.

And then finally, a year ago, we just had -- we just celebrated our 1-year anniversary. We acquired the filtration business from Solventum. And the view there was great technology, didn't have strong commercial reach and that our customers were looking for a trusted partner to be able to support their filtration needs, and we've had very high level of customer interest, so -- in that business. So that acquisition is off to a good start. We're excited by that. It will now become part of our organic growth.

We expect that business to continue to be a mid- to high single-digit growth business, which actually means it's a little bit of a drag on the organic growth of bioproduction sort of mathematically, but it's accretive to the company's organic growth. And over time, as we build the pipeline and expand capacity, it will become in line with actually the bioproduction growth as well. So -- it's a great business. It's performing well, and it will be highly accretive to our EPS. And -- so we have a really good business. And I would say that we're well positioned in the long term to continue to have strong growth.

And how do we think about, I guess, the timing of benefit from that fully integrated bioproduction portfolio that you have? Because I think it seems you get the benefit from when new molecules come online because now you have this broader suite. So maybe just help us understand the cadence of benefits there.

Yes. I mean when I think about the long-term growth for this business, I always think about it as a high single, low double-digit growth in aggregate. And we've been able to -- coming through 2019, sort of in that period, we were able to grow at that rate for a long period of time. We had supersized growth in the beginning of the pandemic. The whole industry had the hangover effect, which we all want to forget, and now you're seeing the market stepping up. So I think about long term, the business is bigger with the addition and it will be a more meaningful contributor to growth over time.

Great. Maybe just turning to Pharma Services, growth a little more modest there in the second quarter, but you've expressed confidence in that bouncing back in the second half. It feels like one of the businesses where lead times should be a little longer, so you perhaps have visibility into customer patterns. So as you look ahead, how are you thinking about the growth path in '26 and into 2027 there?

Yes. So when I think about Pharma Services, we're an industry leader in that segment. And when I look at the phasing of the year, and I go back to what we said in January, we said that Pharma Services would have more modest growth in the first half, a step-up in the second half as we were giving the color back in January because we actually have quite a bit of visibility to when customers are expecting production from us. So you don't have perfect visibility, but you have the best visibility of any of our businesses.

And actually, it's been playing out as we expected. When I think about -- we would expect the second half to see a nice step-up from the first half, and the activity supports that in terms of the contracts and the shipment schedule. So that business is well positioned. When you think about what we do in the space, we're the leader in clinical trials, packaging, logistics, distribution, which means that roughly 40% of all experimental medicines in some way are touched by Thermo Fisher in terms of the physical side of that process.

We also have a strong position in drug product, which is primarily our sterile fill finish business, which is the dosage form that you would administer a medicine. And we have a drug substance business, where we're one of the largest of the single-use technologies producer of biologics. Those are the three businesses, and we look forward to the growth stepping up in the second half as we ship the demand that we have. And -- we've been expanding capacity, particularly in sterile fill finish. So that business should be a nice growth business in '27, '28 as well.

It looks like that could be a nice beneficiary of reshoring.

It is. And we won some nice contracts. You'll see that in our drug product business, and you'll see that a bit in drug substance as well.

Great. Maybe turning to clinical research, another one of the standout performance. You've spoken, I think, to a very competitive book-to-bill as well relative to what's out there in the market. So I'm curious how that business has been evolving, how you feel competitively stacked there. And then Clario as well, I think, was really interesting as an add-on there. So how has reception been on the back of that?

Yes. So the business is performing very well, right? We've had very strong authorizations growth, which is the new wins that you get, growing well in excess of our revenue. So that bodes well for what the trajectory of the business is.

When I think about the whys, we have been very aggressive at the capabilities, what we call Accelerator Drug Development. And what that is all about is time to market. And ever since we acquired Patheon 5 years ago -- Patheon PPD 5 years ago, we've been leveraging some of the combinations with Patheon to help our clients actually shave time out of the process. And in clinical research, you want to know very quickly whether something is going to fail because it's a lot less expensive if you do that. And you want to get the products that are going to be successful to market as fast as you can, so you can have the longest time of exclusivity to drive returns on it.

So time matters. We've demonstrated the benefits of Accelerator, and you're seeing incredibly strong demand for our capabilities. We have deployed AI quite aggressively in the business to, again, further take time out of the process and these things are really very relevant for our customers. And ultimately, our customers benefit and we benefit from the improvements that we're seeing from AI.

And then we bought Clario, right, one of our larger acquisitions we closed in March, a $9 billion investment because what Clario is, is a technology platform for generating and managing the endpoints that are generated in the clinical trial. And it has leading position in three of the four major endpoints. And because we're a large CRO, we use all of the different providers. We actually understand the business fundamentally. We understood the benefits of what Clario's technology was. We have a large central lab, which is the fourth of the major endpoints. We will bring those capabilities together and make it more seamless for our sponsors and more seamless for the investigational sites so that our goal is to be the standard on whether we're doing the clinical research, whether another CRO is doing the clinical research, whether a sponsor is doing it themselves, we want to be the best technology platform that's AI-enabled to be able to support the drug development process and help shave time and cost out of the process and ultimately build a really big business. We've had a great first 6 months in terms of the performance of the business since we've owned it. So we're very excited about what the future holds in that combination.

Also it feels like one of the businesses where you perhaps have more of that visibility into that path into later this year into next year as well.

Right, right.

Yes. That makes sense. You also have, I guess, a unique view with the CRO of early-stage innovation, new indications coming through. Anything that's exciting you in that pipeline that you're perhaps hearing of that perhaps could evolve into something more meaningful as we look multiyear out?

Yes. There's huge interest in the areas that all of the investment community would understand. Neurology, there's incredible level of work being done, progress slowly being made, which is such an important area for progress and oncology continues to be a big driver. So we're seeing high level of interest and you're seeing new modalities being adopted, which is exciting. So I'm super excited about what's going on in the drug development business and the investment cycle that will spur, but most importantly, is the benefit for patients, right? We all know somebody that has either had a neurological disease or cancer and the breakthroughs that are coming out are going to make a huge difference in patient life. And that's ultimately what gets all of our colleagues fired up to do their best work.

Yes. Maybe just turning to capital deployment. You've spoken about an attractive M&A environment, active pipeline as well as opportunities. Just given the capital you've already deployed and where leverage sits today, how are you thinking about capital deployment priorities from here? And how does the current balance sheet factor into your appetite for M&A?

Yes. So Kallum, when I think about it, we're always going to focus on delivering a very strong investment-grade rating. We have plenty of financial capacity from where we sit from a leverage standpoint. We have managerial capacity as well. And we serve a very fragmented industry. And despite our industry leadership and the strength that we have, there are many things that we can buy. So we're always very active. We're very active at evaluating different acquisitions.

And this has been a really active year for us actually because -- if you think about it, we spent $9 billion on M&A. We bought back $4 billion worth of share. We raised our dividend by 10%. And we divested our microbiology business, which we closed in August as well, just to be able to redeploy the capital into higher-value areas. So it's been exciting, and we're continuing to be very active in developing our pipeline and looking for the right fit with our company.

Just turning to the outlook. The guidance implies roughly 4% organic growth in the second half, pretty balanced, I think, between Q3 and Q4. Just given that improving outlook that we've started to see across several of those end markets and what you've covered already across the different businesses, what are the key puts and takes that inform that outlook? And how are you feeling as we work our way through the back part of Q3?

Yes. A lot of -- we feel very good about the 4% outlook for the second half of the year. And in terms of phasing, we would expect the quarters, as you said, to be pretty similar in terms of the organic growth. And what you see, we think of our business more on an annual basis and more on a 6-month basis than any particular quarter. So the first half of the year grew 3%. The second half of the year is going to grow 4%. We will expect to go forward for the full year. And we're seeing our orders running ahead of revenue, so that bodes well for the future.

In terms of the puts or takes, it's really going to be largely the execution against the backlog that we have and the continued strengthening of the end markets, which are playing out as we would expect. So we feel very confident in our ability to achieve our outlook for the year and enter 2027 with very solid momentum.

And stepping back a little looking beyond 2026. At the Investor Day, you outlined 3% to 6% organic growth over the medium term and the path to 7% over the longer term, just given how the sector itself has evolved over recent years. I think investors we speak of want to know how that midterm outlook could evolve in a bit more detail. So -- what just gives you confidence in the building blocks to deliver that growth progression? And what should investors be watching as the business continues to evolve?

Yes. So when I think to our Investor Day back in May, a couple of the key themes were -- this is a great end market, right? It's been a painful last few years. No one is confused about that. But if I actually think about the drivers of an aging population, the importance of scientific breakthroughs, what medicines will do and ultimately, the demand it will drive for Life Science tools and Pharma Services, it really is an outstanding neighborhood to live in. And we're very proud to be the industry leader, and we got to keep earning that.

So our progression because we have some reasonable level of visibility to how our customers are thinking, we expect that this year and next to somewhere be in the 3% to 6% range. And as a reminder, we said this year, probably 3% to 4%. It's likely to be 4%. And we would expect just based on orders that, that will continue to strengthen into 2027. That's at least our view as we sit here now. Nothing surprising about that.

And we believe that '28 and beyond, we should be operating in the 7% range and that the cycle that we're seeing that academic will continue to stabilize. Biotech funding is continuing to improve, and that will flow into our end market will support that growth. So the big drivers are stabilization in academic, improving biotech. You're seeing both of those dynamics play out. Upsides or tailwinds is probably China, given that we've been relatively modest in our assumptions there. Headwinds would be some mess in the world, right? It's less about life science tools issue is that if there's something that really throws the economy off track or something like that, that would be the thing that could be a headwind to that. But things feel good, and we feel like we're well positioned to return to that 7% growth. And what now doesn't feel like very far from today's date. So that's what we're focused on.

Great. And maybe one more just thematically. We've had a question quite recently just on how you think broader AI spend from pharma is impacting spend on traditional tools. Is that something you think could impact spend on traditional life science tools? Or you expecting kind of investment to be pretty important as part of this broader ecosystem?

Yes. So it's a common question and it's a good question, right? If you think about the industry we serve, pharma and biotech, what drives investment is actually the ROI on the drug development process. And as AI improves the ROI, customers will fuel their pipeline to capitalize on that. And you will see more indications going in parallel on clinical research. You will see insights from better biological understanding in the research spend. So I'm actually quite bullish that AI will actually be a facilitator of industry growth.

You're seeing demand pick up in some of the early research spend because there's new activity happening, which would not have happened in the past, which is you're seeing large-scale lab experimentation being done just to populate biological models, right, which is just to create that foundational biological model. You're seeing these high-throughput labs actually executing and consuming a lot of reagents. So it's really a quite dynamic and exciting time. And ultimately, as the industry leader, we have the most data, the most customer relationships and insights, and we view it as an accelerator of our competitive position. It's an incredibly exciting time. It's dynamic, and -- we think it's another tailwind for Thermo Fisher Scientific.

Amazing. Thank you so much, Marc.

You're very welcome. Thanks for having us.

Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2026 Second Quarter Conference Call. [Operator Instructions] 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, our Chairman and Chief Executive Officer; and Jim Meyer, Senior Vice President and 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 October 20, 2026. A copy of the press release of our second 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 within the meaning of applicable securities laws. Actual results may differ materially from those indicated by these forward-looking statements as a result of various risks and uncertainties, including those discussed in the company's most recent reports on Form 10-K and Form 10-Q under the heading Risk Factors. These forward-looking statements are based on our current expectations and speak only as of the date they are made.

While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even in the event of new information, future developments or otherwise. Also, during this call, we will be referring to certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP.

A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the press release of our second quarter earnings and also in the Investors 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 second quarter call. As you saw in our press release, we delivered an outstanding quarter. Customer activity across our end markets continued to strengthen. Our proven growth strategy is enhancing our capabilities, further advancing our trusted partner status with customers and continuing to drive share gain. And we're continuing to actively manage the company, leveraging our global scale and strength of our PPI Business System to create value for our stakeholders and build an even brighter future for our company.

To start, let me recap the second quarter financial results. Our revenue grew 10% to $11.99 billion. Adjusted operating income grew 15% to $2.73 billion. Adjusted operating margin expanded by 90 basis points to 22.8%, and we grew adjusted EPS by 13% to $6.03 per share. Turning to our performance by end market. It was good to see customer activity continue to strengthen across our end markets during the second quarter. Our team's excellent execution enabled us to capitalize on these opportunities and deliver outstanding performance in the quarter.

Let me provide some additional details. Starting with pharma and biotech. We delivered mid-single-digit growth during the quarter. Performance was led by our bioproduction and clinical research businesses as well as our research and safety market channel. In academic and government, we grew low single digits in the second quarter, driven by our chromatography and mass spectrometry business. In industrial and applied, we delivered mid-single-digit growth during the quarter. Performance was led by our electron microscopy and chemical analysis business as well as the research and safety market channel. Finally, in diagnostics and health care, we grew in the mid-single digits in the quarter, driven by our health care market channel and immunodiagnostics business.

Overall, it was great to see both sequential improvement and strong revenue growth across each of our end markets. Let me now provide some highlights on the execution of our growth strategy this quarter. As a reminder, our growth strategy consists of 3 pillars: high-impact innovation, our trusted partner status with customers and our unparalleled commercial engine. Starting with the first pillar of our growth strategy, it was another excellent quarter of high-impact innovation. Our innovation enables customers to accelerate scientific discovery and advance their important work.

During the quarter, we launched a number of new technologies across our business that strengthened our industry leadership. At this year's American Society of Mass Spectrometry Conference, we launched next-generation Orbitrap platforms and AI-driven capabilities that enable new scientific discoveries and deeper insights. These will help scientists solve increasingly complex analytical challenges with greater speed and confidence.

This was highlighted by the launch of our Thermo Scientific Orbitrap Tribrid Apex Mass Spectrometer. It enables scientists to study complex biology across multiomics, structural biology, biopharmaceutical characterization and small molecule analysis to help accelerate research across a broad range of scientific applications. We also introduced the Thermo Scientific Orbitrap Excedion Mass Spectrometer, which enables scientists to reduce drug development risk and accelerate time to market for our pharma and biotech customers. Another highlight this quarter was the launch of our Thermo Scientific Vanquish Amplify UHPLC system, which helps scientists analyze highly sensitive biological molecules with less sample loss and better reproducibility, enabling greater confidence in method development through quality control. This is an important addition to our liquid chromatography offering.

These innovations are complemented by our expanding suite of AI-powered software, including new solutions that deliver smarter workflows and accelerate proteomics research. Another example of our high-impact innovation is in Life Science Solutions, where we introduced the Applied Biosystems PowerFlex Thermal Cycler, a next-generation PCR platform that helps molecular biology laboratories improve workflow flexibility, increase productivity and enhance reproducibility. It was an outstanding quarter of innovation, and we're pleased with the adoption we're seeing from our customers.

Let me now cover the remaining 2 pillars of our growth strategy, our industry-leading commercial capabilities and trusted partner status that enable our customer success. During the quarter, we continued to strengthen our position in both of these areas. In April, we opened our flagship U.S. bioprocess design center in Massachusetts. This new facility expands our global network of collaborative innovation centers, where we work side-by-side with pharma and biotech customers to accelerate drug development, optimize manufacturing processes and help bring life-changing therapies to patients faster.

To advance population scale research, we announced a strategic collaboration with Precision Health Research, Singapore to support their population health study. By combining our integrated proteomics capabilities, including our Olink technology with our Orbitrap Astral mass spectrometry platform, we're continuing to help advance precision medicine through one of the world's leading biobank initiatives. These examples provide a unique opportunity for us to engage with our customers, helping them solve current challenges, accelerate innovation and move science forward.

Wrapping up on the growth strategy, we made great progress during the quarter, continuing to strengthen our leadership position. Turning to capital deployment. We continue to successfully execute our disciplined approach to capital deployment, which is a combination of strategic M&A and returning capital to our shareholders. Let me start with an update on our recently closed acquisitions. First, we're very pleased with the progress we're making since completing the acquisition of Clario in late March.

Clario's market-leading digital endpoint data solutions enhance our ability to deliver even deeper clinical insights to our pharma and biotech customers. This outstanding strategic fit further strengthens our position as the trusted partner to our pharma, biotech customers, delivering important benefits that enable their success and help improve the productivity of the drug development process. The business delivered a strong second quarter. The integration is progressing smoothly and the funnel of revenue synergies is building nicely. We also continue to see great performance from our filtration and separation business. The integration continues to progress well. Customer feedback has been very positive, and we're excited about the long-term impact these capabilities will have for our customers and for our company.

Both of these acquisitions demonstrate how our disciplined M&A strategy is creating value for our customers and shareholders. And finally, you saw our announcement in late April that we entered into an agreement to divest our microbiology business. This transaction, which we expect to close in the third quarter, reflects our active management of the company. We deployed the anticipated net proceeds from this transaction to repurchase $1 billion of our shares in the second quarter. As you know, our capital deployment strategy continues to prioritize strategic M&A complemented by return of capital to our shareholders. We continue to have an active pipeline of M&A opportunities in our highly fragmented industry.

Now let me spend a few minutes on our PPI Business System, which engages and inspires our colleagues to find a better way every day. PPI enabled another quarter of outstanding execution, which you can see in our strong profitability and free cash flow. Through PPI, we're continually improving quality, productivity and customer allegiance while creating capacity to invest in innovation and strengthen our leadership position. We are actively deploying AI across the company to further accelerate PPI's impact. PPI enables outstanding execution today and positions us to create even greater value over the long term. Before I turn to guidance, I'd like to highlight the latest updates to our CSR efforts, and they're now available. I encourage you to visit our website to learn more about our performance and the progress we're making towards our long-term goals. As you'll see on the website, we continue to execute our net zero roadmap, increasing the use of renewable electricity.

We also increased the number of zero waste certified sites as well as expanded the reach of our STEM education programs. These programs benefit more than 185,000 students annually and help to inspire the next generation of innovators. Now I'd like to review our updated 2026 guidance at a high level. We are raising our guidance for the full year on the top and bottom line reflecting our strong operational performance in the second quarter and increased outlook for the second half of the year, and we're also incorporating the expected impact of the pending divestiture of our microbiology business. We are raising our revenue guidance to a new range of $47.4 billion to $48.1 billion, representing 6% to 8% reported revenue growth over 2025.

Our expectation for full year organic revenue growth has increased to about 4%. Our guidance range remains 3% to 4%, and we now expect to deliver at the upper end of that range. We're also increasing our adjusted earnings per share guidance to be in the range of $24.93 to $25.33, which now represents 9% to 11% growth over 2025 and a $0.25 increase from our previous guidance at the midpoint. Jim will take you through the details in his remarks. So to summarize our key takeaways, we delivered outstanding performance in Q2 with a clean top and bottom line beat with organic revenue growth of 5% and adjusted EPS growth of 13%. It's great to see customer activity continue to strengthen across our end markets.

We're raising our full year revenue and adjusted EPS guidance. Our proven growth strategy is resonating more than ever with our customers and driving meaningful share gain. Our recently closed acquisitions are performing very well. And at the halfway point in the year, we're well positioned to deliver a great 2026 and build an even brighter future for our company.

With that, I'll turn the call over to Jim.

Thank you, Marc, and good morning, everyone. I'll take you through an overview of our second quarter results for the total company and then provide color on our 4 business segments and conclude with details on our updated guidance for the year. Before I get into the specifics of our financial performance, I'll provide a high-level view of how the second quarter played out versus our expectations at the time of our last earnings call. As you saw in our press release, we delivered an outstanding quarter with 5% organic revenue growth and 13% growth in adjusted earnings per share.

These results are significantly ahead of the assumptions included in our previous guidance on both the top and bottom line. This reflects excellent execution by our team and stronger customer activity across our end markets. Q2 revenue was approximately $300 million ahead of our previous guidance, including 2% stronger organic revenue growth, a higher contribution from acquisitions and favorability from foreign exchange. Adjusted EPS was $0.30 ahead of our previous guidance, driven by the expected pull-through from our revenue beat, strong cost productivity and excellent performance from our acquisitions, including Clario.

So a very strong quarter of execution by the team, delivering results well ahead of our guidance and positioning us incredibly well at the halfway point of the year. Let me now provide you with some details on our performance. Starting with earnings per share. In the quarter, adjusted EPS grew by 13% to $6.03. GAAP EPS in the quarter was $4.68, up 9% from Q2 last year. On the top line, Q2 reported revenue grew 10% year-over-year. The components of our reported revenue change included 5% organic growth, a 5% contribution from acquisition and a slight tailwind from foreign exchange.

Turning to our organic revenue performance by geography. In Q2, North America grew low single digits, Europe grew high single digits and Asia Pacific grew high single digits with China growing low single digits. With respect to our operational performance, we delivered $2.73 billion of adjusted operating income in the quarter, an increase of 15% year-over-year and adjusted operating margin was 22.8%, 90 basis points higher than Q2 last year. In the quarter, we continued to deliver strong productivity and generated favorable volume leverage. This enabled us to offset the impact of unfavorable mix and fund strategic investments to further advance our industry leadership. Total company adjusted gross margin in the quarter was 41.4%.

Moving on to the details of the P&L. Adjusted SG&A in the quarter was 15.6% of revenue. R&D expense was $360 million in Q2, reflecting our ongoing investments in high-impact innovation. R&D as a percent of our manufacturing revenue was 6.9% in the quarter. Looking at our results below the line, Q2 net interest expense was $190 million. The adjusted tax rate in Q2 was 11.6% and average diluted shares were 371 million in Q2, 7 million lower year-over-year, driven by share repurchases net of option dilution. Turning to free cash flow and the balance sheet. Year-to-date cash flow from operations was $3.3 billion, and free cash flow was $2.5 billion after investing $800 million of net capital expenditures. In Q2, we also deployed $1.2 billion of capital to shareholders through $1 billion of share buybacks and approximately $175 million of dividends.

We ended the quarter with $4.1 billion of cash and equivalents and $42.5 billion of total debt. Our leverage ratio at the end of the quarter was 3.6x gross debt to adjusted EBITDA and 3.3x on a net debt basis. Concluding my comments on our total company performance, adjusted ROIC was 10.9%. Now I'll provide some color on the performance of our 4 business segments. In Life Sciences Solutions, Q2 reported revenue increased 13% versus the prior year quarter and organic revenue growth was 3%. Growth in this segment was led by our bioproduction business, which had another quarter of excellent organic growth. Q2 adjusted operating income for Life Sciences Solutions increased 13% and adjusted operating margin was 37.0%, up 20 basis points versus the prior year quarter.

During Q2, we delivered very strong productivity, which was partially offset by the expected impact from the acquisition of our filtration and separation business and unfavorable mix. In the Analytical Instruments segment, both reported revenue and organic revenue increased 7% versus the prior year quarter. We delivered good growth across all 3 businesses, led by our electron microscopy business. In this segment, Q2 adjusted operating income increased 30% and adjusted operating margin was 23.0%, up 420 basis points versus the year ago quarter. In the quarter, we delivered strong productivity, generated good volume leverage and benefited from the impact of foreign exchange and favorable mix.

Turning to Specialty Diagnostics. In Q2, reported revenue grew 6% year-over-year and organic revenue grew 5%. Growth in this segment was led by our health care market channel as well as our immunodiagnostics and transplant diagnostics businesses. Q2 adjusted operating income for Specialty Diagnostics increased 9% and adjusted operating margin was 27.7%, 70 basis points higher than Q2 2025. During the quarter, favorable volume leverage and good productivity were partially offset by unfavorable mix. Finally, in the Laboratory Products and Biopharma Services segment, reported revenue increased 12% and organic revenue growth was 5%. In Q2, growth in this segment was led by our research and safety market channel and our clinical research business.

Q2 adjusted operating income in this segment increased 13% and adjusted operating margin was 14.0%, 20 basis points higher than the prior year quarter. In the quarter, good productivity and strong performance from the recently acquired Clario business were partially offset by unfavorable mix and strategic investments. Turning to guidance. As Marc outlined, we're raising our 2026 full year guidance to reflect the strength of our performance in Q2 and an improved outlook for the second half of the year, while also incorporating the expected impact of the announced divestiture of our microbiology business. We now expect revenue to be in the range of $47.4 billion to $48.1 billion and adjusted EPS to be in the range of $24.93 to $25.33, now representing 9% to 11% adjusted EPS growth. Let me walk through key assumptions underlying our updated full year guidance.

For organic revenue growth, our expectation has increased to about 4% for the year. Our guidance range remains 3% to 4%, and we now expect to deliver at the upper end of that range. The increase in our full year organic revenue growth outlook includes all of the Q2 overperformance plus a modest improvement to the second half. Updating for FX, we now expect a $200 million revenue tailwind from foreign exchange, which is $100 million lower than our previous guidance. Our updated guidance also incorporates the expected impact of the pending divestiture of our microbiology business, which we expect to close in the third quarter. As a reminder, the business had revenue of $645 million in 2025, with roughly 1/4 of that revenue selling through our channel businesses.

We'll retain our channel relationship and continue selling these products after the divestiture. With an expected Q3 close, the divestiture reduces 2026 revenue by approximately $200 million, net of the retained channel business and reduces 2026 adjusted EPS by $0.05. We continue to expect the transaction to be dilutive to adjusted EPS by approximately $0.15 in the first full year following the close. In aggregate for adjusted EPS, we are increasing the midpoint of our full year guidance by $0.25 comprised of the following: $0.30 from the strong performance in Q2, $0.05 from an increase to our revenue outlook for the second half of the year, partially offset by the impact of the divestiture of our microbiology business of $0.05 and a second half headwind from recent changes in FX rates of $0.05.

Embedded in the guide is stronger performance from our acquisitions on both the top and bottom line compared to our previous guidance. Acquisitions are now expected to contribute $1.6 billion of revenue and $0.32 of adjusted EPS for the year. In terms of adjusted operating income margins, our guide has increased to 80 basis points of expansion. We are continuing to actively manage the company and drive excellent operational performance, enabling us to increase our top and bottom line guidance for the year. To help you with your modeling, here are a few additional assumptions within the updated guide. We continue to expect approximately $660 million of net interest expense in 2026.

We continue to assume that the adjusted income tax rate will be 11.5%. In terms of free cash flow, we continue to expect that to be in the range of $6.9 billion to $7.4 billion for the year, including between $1.9 billion and $2.1 billion of net capital expenditures. In terms of capital deployment, we're assuming $4 billion of share buybacks with $3 billion completed in January and an additional $1 billion completed in the second quarter. The second quarter share repurchase represents the use of expected net proceeds from the pending microbiology divestiture. We elected to use the proceeds for share repurchases and to complete the repurchase ahead of the transaction close based on an assessment of our valuation at that time. And we're assuming that we'll return approximately $700 million of capital to shareholders this year through dividends.

We estimate that full year average diluted share count will be between 370 million and 373 million shares. Now let me provide some color on phasing for the remainder of the year. We grew 3% organically in the first half in total and expect that to step up to 4% for the second half with both quarters being similar in terms of organic revenue growth. And we expect Q3 adjusted EPS to be $0.35 to $0.40 higher than in Q2. So to conclude, we executed very well to deliver an outstanding second quarter, and we are raising our full year outlook on the top and bottom line.

With that, I'll turn the call back to Raf.

Thank you, Jim.

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

[Operator Instructions] Your first question comes from the line of Michael Ryskin with Bank of America.

Congrats on a very strong print. Marc, maybe I'll start with a high-level one to you. You called out a couple of times in the prepared remarks, customer activity continues to strengthen, end markets continue to strengthen. You called out share gains a few times. It seems like it was a pretty broad-based beat in the quarter across segments, across end markets. But maybe if you could just drill in on 1 or 2 things that are maybe driving that, whether it's pharma and biotech or a little bit more stability in academic markets. Would just love to get a better sense on where you saw some of the big improvement from where we stood 3 months ago, especially as you look into the second half of the year.

Yes, Mike, thanks for the question. It's good to have a good quarter behind us and a strong first half. So when I think about our end markets, as the way you described it, customer activity actually picked up across our end markets. And if you recall, what we said during the course of this year is we expected that activity would pick up from the 2025 levels as this year progressed. And we saw that getting to that level in Q2 with a much better set of activity. Very encouraging to see the continued progression in pharma and biotech customer base.

Definitely good momentum continues in pharma, but also biotech, clearly, we saw spending pick up. We've talked a lot about how activity had been picking up. But now it's good to see that's translating into the revenue as well. And across the various segments, you saw that trend across broadly. But our biggest end market, about 60% of our revenue, really progressing in a nice direction.

Okay. And Jim, maybe just drilling in a little bit on the guide. Encouraging to see the full year organic raise and you kind of bumped up the second half a little bit, but I got a comment towards the end there where you said you expect kind of similar organic growth between 3Q and 4Q. I think we were expecting 4Q to be a little bit higher previously because of the days tailwind. Is this just some conservatism as you're kind of looking out to the rest of the year, keeping something in the back pocket? Or is there anything else that's notable in terms of phasing we should be keeping in mind?

Yes, Mike, thanks for the question. So we look at it, we grew 3% in the first half, and we're stepping it up to 4% in the second half, and that includes a modest improvement to the outlook for the second half. And right now, we've outlined the way we see the quarterly phasing playing out, which has really not meaningfully changed versus our original assumption.

The next question comes from the line of Tycho Peterson with Jefferies.

Nice quarter. Maybe just starting on the services side. Curious, any incremental color you can provide on PPD. We've obviously seen pretty strong book-to-bills from some of the peers. And it sounds like maybe some of the biotech funding starting to really convert there. So any metrics on PPD, anything on Clario that you can give us a little more specifically? And then similarly with Patheon, just curious what you saw in the quarter.

Tycho, thanks for the question. So Clinical Research really had an excellent quarter. Strong organic growth in revenue, strong organic growth in authorizations. Business is doing very well in the market, and the market conditions are improving. So you have really both good results in the quarter and encouraging progression going forward, which is largely as we expected it would be playing out. So it's good to see that translating. Clario had a very good quarter. Obviously, it doesn't show up in our organic results, but our first full quarter of ownership of the business was very strong. It had good performance on its authorizations, its revenue growth, earnings. So really a nice contribution.

And it was good to see both that and with our combination with our filtration and separation business we were able to raise our contribution from acquisitions for the full year on both the revenue and earnings line. So that's very positive. When I think about a couple of other highlights within our broader services business, accelerated drug development, incredibly well received. And that really shows up in our biotech customers where you have -- where a customer can get their arms around the whole program from how they outsource their development of the actual medicine through the scale-up of that medicine as well as designing the clinical trials and the interplay between those activities allows you to save time and cost. And that's been very compelling and has really helped us drive very strong authorizations. When I think about the performance of our pharma services or what you would call the Patheon business, we had modest growth in the quarter, in line with our expectations.

The second half, as we've talked about all year, will be stronger for that business just based on when we're actually shipping the activity. And that business obviously has benefited earlier in the year from a number of wins around reshoring that has been embedded in the outlook for the business. So I feel very good about the position for Pharma Services in terms of how we execute commercially and what the outlook looks like for the coming quarters and years ahead.

Great. And then just a follow-up on the revised outlook for the back half of the year. I guess where else are you feeling better across the portfolio? What's kind of leading to the incremental uptake?

Yes. So when I think about the quarter, right, we took all of the beat in Q2, embedded that in our outlook. And then we increased our organic revenue growth modestly, but did increase it. It's really driven by -- that the forward look is really driven by pharma and biotech. It was nice to see in the quarter that academic and government returned to growth. And we saw the U.S. slightly positive, and those things are very, very good. But we still think the market is going through a stabilization period. So we didn't change the outlook for academic and government. We really focused it on pharma and biotech. And then obviously, we'll see if we see the very positive trends in academic and government sustain, and that would obviously be an upside over time.

The next question comes from the line of Jack Meehan with Operon Research.

I wanted to get a little bit more color on your thoughts on pharma, biotech spending patterns. I got a lot of questions this week about, inventory levels, trade, tariff reshoring dynamics. As you look at your customer class and product portfolio, how are those things progressing? Anything that stands out?

Yes, Jack, thanks for the question. Clean quarter, right? When I think about business progressed nicely. And as we look to the second half for pharma and biotech, we actually think it will be a little better even though we saw a nice step-up in the quarter. For us, we had broad-based momentum and bioproduction had a really excellent quarter. It's nice to see the continued momentum in that business, very strong growth. Obviously, we talked about clinical research with Tycho's question. And in addition, research and safety market channel had a very strong performance.

So there really was not a lot of -- as you parse through all of the details, it was just a clean, good quarter and actually quite encouraging to see biotech picking up as well. Again, we're not surprised by it. And I think how Jim articulated in our Investor Day, the progression for the stepping up of growth in our business. The big drivers are recovery in -- recovery in biotech and recovery in academic and government. You saw the real signs of the biotech recovery in the results. You saw a good quarter in academic and government. We're not calling yet that that's the new level yet, but it's progressing in a nice direction.

Great. Can you dig a little bit more into the channel for me? On the Research and Safety side, it seems like it stepped up. How much of that do you think is just market versus share? And on the health care market side, it seems like that rebounded versus what you put up in the first quarter. Just anything you would call there? Was it timing or something else?

Yes. So if I think about -- let's do health care first. The first half of the year was representative for the health care market channel. The first quarter had very specific headwinds. The second quarter was incredibly strong. I actually think the average of the 2 is the right way to think about health care market channel. I think you're doing a good job. The business is well positioned. So I feel good about the performance there. So that one is really just take the average of the 2 quarters when we report our results in the Q. When I think about research and safety market channel, you see really 2 dynamics.

Really very strong competitive position serving pharma and biotech. And as demand picks up there, that's good. Wins also with account wins also drives some of that performance. So I think it's -- the wins are really the share gain part, the market improvement shows up broadly. So that business is doing quite well and a better quarter in academic and government helps that business, but not really the big driver, if you will, of the step-up.

Your next question comes from the line of Matt Larew with William Blair.

The biggest delta versus our model was on analytical instruments and acknowledging that the comparable was easy, that certainly stood out. You've had a number of product launches across the category in the last 12 months. You also have referenced interest on sort of the autonomous lab, lab in the loop side. But then perhaps as biotech activity or just pharma activity has picked up, maybe that's an area that dollars have been allocated to. Just curious if you think through the various moving pieces, how do all those kind of play into the performance in the quarter?

Matt, thanks for the question. So in terms of analytical instruments, really a very nice quarter, high single-digit growth. All 3 businesses delivered strong growth in the quarter. So it was really nice to see that. When I think about the drivers, innovation is the most important driver. We launched a suite of products, we had a great American Society of Mass Spectrometry Conference in June with 2 mass spectrometers, a number of AI-enabled software offerings that really help customers have greater insights into their research. We saw strong adoption of our high-end instrumentation broadly and especially actually globally in the academic customer set.

So you've heard me say in the past that irrespective of funding environments, if you have really relevant innovation, customers get money. And we saw that show up very nicely. We also had a very important launch in our UHPLC product offering, which bodes well for the future. And those are really the biggest drivers. And then within electron microscopy, another really good quarter. Semiconductor, we play a key enabling role there and as well as advanced materials, and we saw a very strong growth in our business and very strong bookings growth as well. So a very nice performance for analytical instruments in Q2.

Okay. Great. And then China was up low single digits, and it has obviously been down for some time. But Marc, you've been in China in March, and I know you left more positive. I just would be curious if you could dig a little bit into what you've seen there and how much you think maybe you're kind of at a turning or inflection point for that geography.

Yes. So when I think about China, as a reminder, it's about 7.5% of our revenue. We grew in the low single digits, great to return to growth in the business, really driven by a blend of pharma and biotech and industrial and applied markets. So those were both very strong. Academic and government within China remains quite muted, not different than what we've seen, but not improving either. And so what we're doing is capitalizing on where the money is, and it's nice to see the team deliver growth, and that obviously helped contribute to our overall growth in the overall performance of the company.

I'll be spending more time again in China in the second half of the year. I'm looking forward to that and spending a lot of time with customers and government relations topics as well and continue to stay close to what's going on there. But the team is doing a good job, and I feel good about that progressing a little bit better, but still not -- it's not accretive to our organic growth as a company yet, but we're taking the steps to put ourselves in a good position.

The next question comes from the line of Dan Arias with Stifel.

Marc, you called out chemical analysis is doing well. That's been one of the areas that people just had some concern broadly across the space. Can you maybe just touch on that? What's doing well? And then how do you feel about the macro sensitive parts of the business at this point? Obviously, still choppy out there globally.

Yes. So Dan, thanks for the question. I haven't done a chemical analysis question in a long time, so it makes it happy. It's nice to have a good quarter in the business. It's not a huge business, but we have some really key technologies. The 2 drivers of the growth were, I would say, the higher commodity prices. You saw that in the demand for industrial customers that are commodity sensitive. So that was good.

And we also saw an increase in demand for safety and security applications as well, given the amount of conflict going on in the world, not surprised that that's picked up. For us, it's largely radiation and explosive detection, and we saw good demand there. So market conditions are getting better, and the team is doing a good job.

Okay. And then maybe back on pharma services and Patheon specifically. Is it right to say that the stronger back half also includes some sequential strengthening each quarter just based on the booking timing? I mean it sounded like 4Q could end up being the strongest quarter of the year just given the way that revenues are expected to fall. I just want to make sure that, that's the right assumption.

Yes, Dan, I wouldn't reach that assumption. We've been saying all along the second half steps up versus the first half. First half was low single-digit growth and then it steps up meaningfully in the second half. It's all aligned to production schedules and with customer campaigns, but it doesn't necessarily imply that the fourth quarter grows over the third quarter.

The next question comes from the line of Dan Brennan with TD Cowen.

Congrats on the quarter. Maybe just on the bioproduction business, you've had a few really good organic growth quarters there from the Qs, which we could see. You're growing above market, it appears. So just any color about where that above-market growth is coming from? And obviously, your largest peer saw some customer delays. I'm wondering, did you see any delays at all this quarter or anything expected in the back half?

Dan, thanks for the question. The business had a really strong quarter. It's performing well. It's a very well-positioned business, right? And we have a differentiated set of capabilities that span the upstream and downstream workflow. And as a reminder, we're a leader in cell culture media and single-use technologies. We have a growing position in purification and obviously, through the acquisition of Solventum's filtration and separation business, we have a nice position in filtration as well. So when I think about the quarter, we had good strength in our business and the team did a good job broadly across.

While it doesn't show up in our organic growth in the quarter, filtration and separation business is doing very well. And demand has been strong, and we're actually increasing capacity, which will bode well for the future of that business. So broad-based, very good, and we're looking forward to our competitive position and doing a great job for our customers in serving that market.

Great. Maybe I'll just stick on pharma, just kind of large pharma. Could you just zoom out a little bit, Marc? I mean there's been so much noise in the past few years with IRA, MFN, reshoring, now AI, can you just kind of speak maybe just broadly across your business, kind of what you saw in the quarter maybe versus [ first half? ] Like are things changing there? Is the tone getting better? Like did your updated guide leave room for upside potentially depending upon what the trends are there?

It's a good multipart question, Dan. So what I would say is when I think about large pharma, I interact with these executives regularly. And I think I said to get breakfast yesterday with one of our key customers. And just -- there's a lot of excitement about their pipelines, right? And the discussion is about what's the strategy to help them accelerate their innovation, how do they do it productively, why are we investing where we're investing, how do they can deploy our capabilities to help them. Our trusted partner status, I mean, it sounds cool, but the reality is that's how we work with these customers every single day to help them be successful. And this is quite a positive tone.

For those customers that have larger exclusivity cliffs that come up, they're really working their pipeline, and we're helping them with that. So it's really quite an encouraging time. They have their arms around the macro, right, in terms of things like the IRA and MFNs and tariffs and these different factors. And we've said for a while that our customers felt like they were going to navigate that successfully. And I think they feel very good about what the outlook is. And so it's an exciting time in serving that customer base.

The next question comes from the line of Patrick Donnelly with Citi.

Marc, maybe one for you. You touched a little bit on the academic, government market, but I wanted to drill in a bit. How would you characterize where we are in that cycle? It sounds like things have improved at least a little bit. What are you seeing and how those customer conversations are evolving? Is it certain areas of instrumentation more than others? Would love to dive into that ACA/GOV piece a bit more.

Sure. So let me start at a high level, and then I'll click down a little bit, right? So Patrick, when I think about it, we had low single-digit growth in the quarter. So it was nice to have a positive quarter, really driven most significantly by chromatography and mass spectrometry and the launches of products over the last year, we saw strong adoption globally for those products. It's a very important set of research tools. And as you know, if you're an academic researcher, if you don't have the best tools, then effectively, it's very hard to have the cutting-edge publications and breakthrough research because another scientist elsewhere has a better tool.

So you've seen money deployed in that area. From a geographic perspective, we actually had a very strong quarter in Europe. U.S. returned to growth. China, as I mentioned on the China commentary, was more muted environment, not relative to the past, but kind of at the same level. And when I think about the second half, we're not calling a new trend based on Q2, we're very encouraged by it, but we'd like to see the activity continue to be more broad-based before we say that, that one is behind us. There's good support in the government. I spent enough time with Congress to know that in the U.S. around supporting academic research, there's very good support for that. So I feel good about the market stabilizing. And I think our customers are getting their arms around -- it's less about the headlines than it is actually about funding flow and the funding flow is improving. So I feel good about the slow stabilization of that end market.

Okay. That's helpful. And then maybe just a follow-up on PPD. It sounds like things are trending pretty well there. Can you just talk about, I guess, the visibility given the recent bookings, how you're thinking about the second half improvement there? And are you starting to see that early-stage biotech pick up? Obviously, the funding has been healthier for a good stretch here. It would seem to be lagging in terms of when it shows up for the group overall. Are you starting to see any signals that, that piece could pick up and just the PPD visibility overall?

So harder for me to comment on the group overall. We've seen biotech activity pick up for a few quarters now, actually in our authorization. So that's actually been strong for us. And there's -- for simplicity, a 6-month lag or so from authorizations to revenue, and it varies a little bit. But -- so that's picked up. Authorizations have been strong for a while now in the business.

And actually, the business is performing as we expected, and that's a good thing. We expected to have a really good year in clinical research, and that's actually playing out that way. So that's very encouraging. And there'll be a lot of excitement around the Clario capabilities from our endpoint data business, and that's gone well in the first full quarter of ownership. And there's a lot of customer interest in that because whether you're using our CRO or anybody else's CRO, it's really a great set of capabilities that can enable great clinical research. So a good time for that business.

Operator, we'll take one more question.

The last question comes from the line of Luke Sergott with Barclays.

I just want to kind of touch back on the bioprocessing piece. So I mean, like the -- especially given what we've seen from your larger peers right now on the downstream side and issues with resins and pushouts. I know you guys are -- have a bunch of launches coming up. You're underappreciated there on the downstream side. Can you just talk about what the competitive dynamic looks like? Any early wins or increased interest on some of the newer portfolio you have on that side?

Yes. There are a number of fine players in the bioproduction space. The bioproduction space is a great space, right? It's a key enabling technology, especially moving more towards single-use for the pharmaceutical and biotech industry, and we play a key role. We've launched a number of innovative technologies, whether it's our DynaDrive single-use bioreactors, which is getting more and more standardized across the CDMO landscape. That's a super important indicator because it basically says that it drives efficient production of medicines, but it's also being adopted in the innovative pharmaceutical companies. But CDMOs that they make all their money, including our own, on how well you run your operations, DynaDrive is quickly becoming the favorite technology, and that bodes well for the follow-on consumable stream that comes from that as well.

So that's gone well. And our resin business is doing well, right? It's a smaller business. It's won a lot of new molecules over time, and we're doing well there. That's another area where technology has driven differentiation. And from a filtration perspective, kind of a different strategy. The legacy 3M business was always well respected as a very good technology business. But our commercial reach to this customer base and the relationships that we have has been allowing for a lot of trials of the technology. Effectively, customers want to see it. They're aware of it, but now they're interested because they -- our customers know us as a really reliable supplier, and we'll help them enable their success. So thank you for the question, Luke.

So let me wrap up the call. First, I'd like to thank everyone for participating today. We're pleased to deliver an outstanding quarter. We're on track to deliver a strong year as we continue to create value for our stakeholders and build an even brighter future for our company. We look forward to updating you as the year progresses. And as always, thank you for your support of Thermo Fisher Scientific. Have a good day, everyone.

This concludes today's call. Thank you for attending. You may now disconnect.

Welcome to Thermo Fisher Scientific's Investor Day Meeting. And now Vice President of Investor Relations,

Rafael Tejada.

Let me begin by covering the agenda for today's session. Mark Casper, our Chairman and Chief Executive Officer, will begin with a company overview. We will then transition to the company strategy section of the presentation led by Mark, Gianluca Pettiti, Mike Shafer and Jim Meyer. We will then take a short break towards the end of the company strategy section and then return to hear a few examples of our growth strategy in action led by Mike Schafer. After that, we will transition the presentation over to Jim Meyer and learn more about our exceptional financial outlook. After Jim's presentation, we will open up the session to Q&A from the audience and then conclude today's event. Before we begin, let me refer you to the safe harbor slide, which contains additional details about our safe harbor and non-GAAP disclosures. Please note that certain remarks made by the presenters today as well as some of the language in the presentation today may contain forward-looking statements as well as non-GAAP financial disclosures. So let's begin with a company highlighting Thermo Fisher Scientific, and then we'll turn over the presentation to Mark Casper.

Please welcome to the stage, Chairman and Chief Executive Officer, Mark Casper.

Good morning, everyone, and welcome to our Investor Day. It's great to be with you here in New York and with the many that are signed on virtually. What I would like to do is start by thanking the members of our Board of Directors that are here with us today as they have been in all the years past as well as the members of the management team for their tireless work to create value for all of our stakeholders. We're excited for the day. We're going to give you an update on the company, and then we look forward to the discussion at the end of the session. So in terms of where I want to start, really to give you an overview of the company, as Raf said, and then we'll turn to the strategy. With Thermo Fisher Scientific, everything starts with our mission. It's our purpose as an organization and that mission is profound. We enable our customers to make the world healthier, cleaner and safer. And that inspires all 125,000 colleagues to bring their best every day because of the importance of the work that our customers do. And when you click down a level into what that really means from each of those elements of enabling our customers to make the world a healthier, cleaner and safer place. From a healthier perspective, our pharmaceutical and biotech customers work closely with us because we're accelerating the time to bring life-saving therapies to the patients that so desperately need them. leveraging our bioproduction clinical research and clinical development and manufacturing capabilities.

From a cleaner perspective, our technologies ensure that the water supply and the food supply is clean. for us to be able to consume and our LCMS or liquid chromatography and mass spectrometry technologies are used ubiquitously in those applications. And from a safer perspective, you see here a picture of our TruNarc analyzer handheld spectroscopy instrument. And what it's used for is to determine illicit drugs on the street to help law enforcement in a safe way, stop crime and ultimately protect society. And these types of examples, there are tens of thousands of them every day of what we're working with our customers on, ultimately make a huge difference in society and creates a great responsibility as a company to be our very best.

Investor Day this year. As you know, you've heard me say in the past, we truly love this day. It's a day for us to talk about our objectives, our future and how we're shaping the company. The takeaways for today, there are 4 main takeaways. The first of which is we're an incredibly well-positioned industry leader. We have leading benefits that -- leading companies that -- leading businesses that benefit the company's scale and depth of combined capabilities. We serve attractive and improving end markets. powered by strong long-term fundamentals. We actively manage the company here to deliver outstanding financial performance and create a very compelling outlook. And we do that by 3 things: our proven growth strategy, that enables our customer success and ultimately allows us to deliver share gain by driving significant productivity and operational excellence through our PPI Business System, and through our tremendous value creation through our capital deployment approach.

And finally, we'll discuss AI at a fair level of depth today. right? And we'll do that and show how AI is going to benefit science. And ultimately, our industry that we're uniquely positioned to win because of AI and we're actively deploying AI within our company to strengthen our own execution. So a very important part of our agenda today. So our company overview. On 1 slide, we're the world leader in serving science. Our customers know us for our leading brands. They also know us for our industry-leading scale, $45 billion in revenue, 125,000 colleagues, $1.4 billion of R&D investment into our product businesses every year. And they see us for our leading innovative technologies, our deep deep applications expertise as well as the comprehensive biopharma services offering. How we are able to reach them to our commercial reach around the world, be their premier productivity partner, and then we're constantly adding new capabilities to strengthen how we work with our customers. And ultimately, they see us as their trusted partner, and we'll bring that to life this morning.

And then finally, it's all about outstanding execution. And our PPI business system really allows us to execute in every environment incredibly well. When you look at the revenue profile of the company, it's incredibly attractive. We have leadership in attractive end markets, and we'll spend some time on that today. Pharmaceutical and biotech represents 57% of our revenue. Our other 3 end markets evenly split the balance, industrial and applied, academic and government and diagnostics and health care. We have a very strong recurring revenue mix with 84% of our revenue derived from services and consumables. And we have an unparalleled commercial engine, allowing us to be a truly global company. and the largest domestic company in every major market around the world.

When you look at our business and you look at our segments, they are complementary to each other, and they are industry leaders in their own right. Life Science Solutions, a leading portfolio serving the bioproduction, life science research and clinical markets. Analytical Instruments, is leading technologies to enable scientific breakthroughs and solve the world's most difficult analytical challenges. Specialty Diagnostics, leadership and cost effectively improving patient care. And our largest segment, Laboratory Products and biopharma services, enabling the biotech and pharmaceutical industry with our leading laboratory products, clinical research, development and manufacturing services. This combination of products, services and expertise are highly valued by our customers and allowed us to deliver share gain.

When you look at those segments and the major businesses within each of them, in terms of Life Science Solutions, you know us for our leading bioscience reagents business as well as our leading bioproduction business, and you'll hear more about bioproduction today. In Analytical Instruments, chromatography and mass spectrometry, and we can't wait for the American Society of Mass Spectrometry Conference early next month to showcase our amazing technologies. Electro microscopy plays a critical role in powering the semiconductor industry. In Specialty Diagnostics, high-value diagnostic products to meet some of the most challenging diseases, very strong position in serving the transplant diagnostic market, autoimmune diseases within the immunodiagnostics as a couple of examples that we represent in this segment.

And then finally, in Laboratory Products and Biopharma Services a $24 billion segment. And here, we have our clinical research, our pharma services as well as our research and safety market channel businesses. When you look at those segments, and the complementary nature of them, they truly benefit from the total company's scale and depth of capabilities. And as you see the strategy unfold this morning, you'll see how our businesses benefit from our high-impact innovation, being the trusted partner to our customers, our unparalleled commercial engine around the world, further strengthened by our capital deployment strategy and underpinned by great execution because of PPI.

As a company, we're focused on creating value for all of our stakeholders. And when you look at our stakeholders from a customer perspective, we are their trusted partner to accelerate their innovation and advance their productivity. From a colleague perspective, this is a great place to have a mission-driven career. We have incredibly loyal colleagues around the world that do great work every day. From a community perspective, we're good stewards in our communities, right? And we're focused on enhancing them, giving back and improving the world for current and future generations.

And then finally, from a shareholder perspective, an outstanding financial track record and outlook for value creation. And when you look at that from a financial performance perspective, we have a proven track record of delivering excellent financial results. Over the past 10 years, we've delivered double-digit growth in revenue, adjusted earnings per share and free cash flow. And that is something that over the different periods of time, you would see that similar trend of just very strong historical growth in the company and delivering for our shareholders. When I think about our focus in terms of the financial areas, the 2 things that we're consistently focused on in terms of delivering exceptional performance is delivering 1 strong and consistent share gain. right? That drives organic growth. And whatever the environment is that we're living in, what we can control is the share gain that we deliver. We have an exceptional track record of doing that, and that will be our continued focus going forward.

And second, to deliver excellent adjusted EPS growth. And that's been a hallmark of our focus over the last 25 years. 2026 is the year of our anniversary, our 20th anniversary since the creation of Thermo Fisher Scientific. And I thought I would take a minute to reflect on the past and look to the future. And when you look at that perspective, I'll start with our proud history, right? Over the last 20 years, we've had a durable and compounding formula. in terms of serving attractive and resilient end markets, a proven growth strategy that delivers results. consistently strong execution and being outstanding deployers of capital. If you look at the chart at the bottom and you look at the growth in adjusted EPS from 2006 through 2019, you can see that steady progression of growth in our adjusted EPS irrespective of whatever the end market environment was, whatever the financial health of the world was, just a steady improvement of very strong growth.

During the pandemic, you saw a very large step-up in the earnings of the company and including in the unwind of the pandemic. We reinvested heavily during this period. and still delivered very strong earnings, allowing us to exit this period a much stronger industry leader than what we went into the period. And when you look at 2024 and beyond, you see that same upward march in terms of the growth in adjusted EPS. And I'm incredibly excited for the bright future that we have. We see it as a differentiated value creation opportunity. We are an incredibly well positioned industry leader with industry-leading businesses that enable our customer success. We serve attractive and improving end markets that are powered by strong long-term fundamentals. and we actively manage the company to accelerate value creation for all of our stakeholders. And those themes will be the ones that we cover in the rest of our Analyst Day. So it was a good moment to reflect on our 20th anniversary, we're excited for the decades ahead.

So the company strategy. I'm going to kick this session off and we're going to cover how we actively manage the company for creating value. And when you look at it, there are going to be 5 elements to what we discuss. We're going to discuss the leadership that we have in growing end markets that have strong long-term fundamentals. our proven growth strategy that enables customer success and deliver share gain, our PPI business system and how that drives significant productivity and enables outstanding execution. that our capital deployment strategy and how it creates tremendous value and then wrap up with our corporate social responsibility strategy and how it delivers competitive advantage. So this will be the road map for our company strategy this morning.

So starting with our end markets. We shape the end markets that we serve, right? We've worked to shape this -- what we serve and put ourselves in a position to have a great position in very attractive end markets. And when you look at the end markets we serve, it's a little over $250 billion end market. So we have roughly just under 20% market share in aggregate of the markets that we serve. And these markets are powered by attractive fundamentals and enduring long-term trends. And the fundamental driver in this industry, right, is demographics actually. Aging populations have unmet health care needs, they consume more health care, and they want to live longer, healthier lives. By 2020 -- by 2035, there will be 1.2 billion people around the world above the age of 65. And that is driving demand fundamentally for more health care, which then leads to demand in our industry.

A few years ago, you've heard me coin the term golden age of biology. Today, we have a greater understanding of biology than really at any time in our history. and it's being accelerated by artificial intelligence. It's an incredibly exciting era, and that is driving fundamental growth in our industry, and I'll delve into more on that in a moment. When I think about the need for expertise, the greater the scientific understanding, the more opportunities for the pharmaceutical and biotech industry to serve those unmet needs, and it's more complicated. And because of our scale and because of the role of our industry, we're able to serve that in a very fundamental way to unlock new cures for patients that are desperately waiting for them. And then in our advanced materials applications for this industry, a really an exciting time. There's about $1 trillion of announced investments in semiconductor capacity around the world. right, to fuel the AI demand for technology. It's really an incredible period and our industry plays an important role in supporting that growth. So the fundamentals here are very attractive.

Given the scale of pharmaceutical and biotech I not only want to talk about the long term, but also some of the shorter-term dynamics that we're seeing. So when you look at our largest end market as an industry, starting with pharmaceutical portion of it, what you see is a larger focus on biologics versus small molecules. Biologics are much more life science tools and pharma services intensive than small molecule. So that simple shift of what's in the pipelines, drives demand to our industry. And when you look at some of the facts, 2 very different ones, the scale of GLP ones is creating a reinvestment cycle in the industry that is really quite spectacular. It's expected that about $100 million of revenue for the GLP-1s in the very near future, right? And that really does put an R&D investment to effectively fill the pipelines for the future.

U.S. government policies has led to a significant expansion of investment in the United States. If you had asked me a couple of years ago, would have I expected $0.5 trillion of commitments to U.S. manufacturing. I would have taken the no on that. And the reality is it's incredibly exciting because when I think about the investment opportunities, it means for a company like ours, we serve that, not only in our clinical development and manufacturing capabilities, for our bioproduction equipment, we equip the labs, we supply the facilities. It really is an incredible opportunity. And towards the end of the discussion this morning, Mike is going to bring that to life for you in terms of that opportunity. Biotech, an incredibly important customer set. In 2025, especially early in the year, you heard me talk about improving sentiment. right? And I said there's a lot more optimism in the biotech customer set. Optimism doesn't spend any money, but it was good to see the optimism. And that translated into increase in spending as the second half of last year started to unfold. And when you look at what's happened from a dynamic perspective, M&A has really picked up. Licensing has picked up, VC investment has picked up. And if I look at how the company's growth has picked up, this year in biotech, you see a nice step-up in what's going on in the actual growth in serving that customer base. So it's really quite an exciting time for the short term and the fact that we live in an incredibly exciting world from a scientific advancement perspective, fuels a very good long-term prospect for the industry. So we're excited for the end markets we serve.

One of the questions that I get asked often is what does AI mean for our customers? And is AI a positive or not a positive for our demand longer term. So we wanted to share our perspective on that topic today. So when I think about AI and automation that is advancing very rapidly, it's going to be a tailwind for our industry. And when you think about what AI is doing, it's enabling a more predictable and higher return on investment for the research and development process of developing a new medicine. And what that does is it spurs a reinvestment in the pipelines of our pharmaceutical and biotech customers that will drive more demand for our industries. And when you look at the 2 main elements of our industry, the discovery phase and the clinical research phase, if you think about what's going on today in discovery, what our customers want is more embedded drug candidates. And what that results in the more that they understand the science, the more wet lab validation they will do to ensure that they're actually working on the right targets or in the right candidates, I should say.

We're also seeing new demand from what I would call a different type of work, which is purely populating biological-based model. So you're seeing a significant uptick in experimentation just to populate biological understanding to complement the advancement of the drug development pipelines. On the clinical research side, what you're seeing is a desire for faster clinical trials, better enrollment, the right sites, better protocol design. to be able to go after complex diseases and do that more quickly and more cost effectively. And where that results in for us is greater demand for CRO services because we're able to help them manage the complexity and leverage the fact that we have more data than really anybody in terms of understanding clinical research and can use AI to actually improve our competitive position. So it's an incredibly exciting time in terms of how AI will impact the fundamentals of our industry.

And as a company, we're exceptionally positioned to benefit from these AI-driven tailwinds. AI really does amplify our existing differentiators, unparalleled global scale, depth of capabilities and the trusted partnerships that we've earned as well as our execution. We're uniquely positioned to capture AI-driven growth through our presence across the full drug development value chain. We have a very different offering than anybody else, and the data really matters. We're benefiting from the differentiated investments that we've made in data that allows us to have unique insights. And then ultimately, we're partnering with the right collaborators, and they want to work with us because of our industry-leading scale and insights. So it's a really incredible ecosystem that we're very well positioned to benefit from.

So let me conclude the end market overview with the summary that our end markets are large. They have attractive fundamentals. Pharma & Biotech is really picking up and strengthening, and we're excited about the future in that end market. AI and automation is a significant driver, and we're uniquely positioned to win. and it's an exciting time in terms of our end markets. The second element of how we actively manage the company is through our proven growth strategy. And I'll kick off this section and then I'll turn it over to the members of the team.

So when you look at our program growth strategy, it has 3 elements: high-impact innovation, being the trusted partner with industry-leading products, services and expertise and our unparalleled commercial engine. Back in July of last year, you heard us talk about the outlook for growth, and our view remains as it was back in July. that we see the growth rates of 3% to 6% for the company over 2026 and 2027 and then returning to a 7% long-term revenue CAGR as we enter '28 and beyond. So we're very excited about the growth outlook for the company, and we'll bring that to life for you in the coming discussion. So what I wanted to end on is why our growth strategy matters to our customers. And when you think about it from an innovation perspective, our customers want cutting-edge technologies. They're doing incredibly important work. and they want the very best. And we have an incredible track record here of bringing out those breakthrough technologies. They are doing their lives work. They want to have a trusted partner by their side to enable their success.

And we have an unparalleled commercial engine able to reach every customer around the world in a cost-effective way through whatever channel to market a customer prefers. So it really is a unique strategy that has driven long-term success and positions us for an incredibly bright future. With that, I'm going to welcome Gianluca to the stage, who's going to kick off our discussion on high impact and innovation.

Mark, thank you, and good morning to you all. Good morning to the ones joining us virtually. Over the next 20 minutes, Mike and I will give you an update on the pillars of our proven growth strategy, starting with high-impact innovation. And I will start with an update on our innovation engine and then move to some very concrete example on now how our innovation is truly transforming the way our customers work every day. So that's exciting.

When you think about our innovation engine, we do innovate at scale. It has been a true differentiator for the company for many years. And we continue to invest aggressively with more than $1.4 billion in R&D investment every year. We do that through 7,000 exceptional colleagues that work within our R&D function. One of the key features of our innovation engine is the connectivity with our customers. The insights we get from them every day with thousands of touchpoints. Dosing sites are taken from world-leading scientists in each 1 of our businesses, and they're creating great solutions for our customers. That has resulted over many decades in a strong track record of best-in-class innovation that delivered very high return on innovation investments.

And now, as Mark highlighted, we're complementing data engine with artificial intelligence, and we're very excited about it. Now why that is incredibly important for our customers, it's because the end market we serve are thirsty for innovation. Just think of what is happening in biology. with the golden age of biology and our pharma and biotech customers in need of bringing to market more effectively advanced therapies and new modalities to support patients. We're the center of that and our differentiated innovation is supporting them. Or in Precision medicine, where we aging population, the need of more frequent, more personalized diagnostic is critical to advance health care and support patients or in the world of semiconductor and advanced materials, the demand we're seeing as a result of AI is unprecedented and will be sustained to robotics and physical AI. And our customers are under pressure to get better materials to market, to improve their manufacturing processes. And again, innovation is central to that.

So let me start with an example in the field of biology and specifically in discovery and translation with actually an update on 1 of the most exciting field of science, proteomics. Proteomics is, in fact, a fast-growing, multibillion-dollar segment and business for us. And the reason why it's so fundamental to the capability of our customers to innovate is because it's giving them a real-time view of what is happening in biological systems. If you think back at when Genomic came about, Genomic gave scientists the possibility of taking a still picture of life. Actually, Proteomic is giving scientists the capability to watch the movie of life. And that's why it's so exciting and so fundamental now that they can map proteins at scale near real time. And that will unlock not only a deeper understanding of disease biology and the underlying mechanism of disease and their progression, but also novel protein, drug targets, novel drug candidates and over time, all new class of diagnostics. So it is incredibly exciting.

And what we have done over the many years is to assemble an ecosystem that is highly differentiated and quite unique. -- starting from where our customers face the biggest challenge, the very complex processes of preparing sample for the analytic process in the sample prep, we innovated materially over the years, both from a hardware and reagent standpoint. On the detection technologies, we've been consistently providing the gold standard to our customers through our mass spectrometry to our hauling high affinity proteomics solutions with our cryo-electron microscope for structural biology, amongst other that you have represented on the slide, truly transformative to the capability of our customers to run science. And now we're complementing the ecosystem with an exquisite suite of software and solutions to allow our customers to analyze data at scale. And I can tell you, spending a lot of time with them, they are producing more data than ever.

And obviously, we're complementing that innovation with artificial intelligence, bringing more solution, more digital solutions to our customers. So what is the result? The result is that we're getting the preference of our customers. In fact, our technologies are, as I said, the gold standard in Proteomics with very wide adoption. But not only we're getting our customers' preference day in and day out in their lab. They're actually entrusting us with their most critical projects, large population study where they entrust our technology with hundreds of thousands of samples being tested on our platform. We shared in the past, as an example, the U.K. Biobank, selecting our Thermo Fisher rolling technology to do their proteomic testing. A more recent example is precise in Singapore 1 of the leading precision health programs globally. They did something unique. They actually decided to combine our mass spectrometry technology and our hauling technology providing them breadth and depth, understanding the protium of Singapore site, and they are on the verge of very exciting discovery as you think of the way that they're going to advance health care in Singapore.

So that's a great example of collaboration with customers at scale and I have to say, we're just getting started. So that's an update on Proteromics, it's a fast-growing, multibillion-dollar segment. We have a unique differentiated proteomics ecosystem and our customers love it. So now let me move from an exciting update to another equally exciting update. because I don't think you can talk about innovation these days without talking about AI. Actually, I don't think you can talk about anything today without talking about the eye. So let's begin what we are doing in that space. As Mark highlighted, our customers are focusing on accelerating the amount of data they are generating, the train AI model, -- and equally, they are focusing on streamlining their processes, improving their laboratories so that they can run science more efficiently. In that journey, we're focused on 3 things: enabling our customers with more speed to insights, helping them improving their R&D processes and ultimately trying to support them in what is going to be a transformation in their capability of getting drug to market, more success will mean more therapies to patients.

And we're actually uniquely positioned to do that as we serve our customers across the continuum of what they do. We start with helping them in designing their experiment, supporting them for all their needs in their laboratories, in the setup, including procurement of products as well as the testing phase, where they're using our technologies day in and day out and ultimately supporting them with software tools to analyze their data. That's quite unique as there's not another company serving customers with that level of breadth. But we were missing something. And therefore, we decided to strengthen our physical value proposition, the hardware, software reagents with great partnership with leaders in the digital NAI space.

Mark highlighted our partnership with OpenAI. I'm equally excited for our partnership, as an example, with NVIDIA. That partnership would result in the first version of fully autonomous instruments being deployed to our customers in the second half of the year. What does that mean? More speed to result, better quality and full integration of those platforms into their AI ecosystems. So we're very excited for what AI is bringing to our end markets, and we're equally excited for our progress in supporting our customers with more and better artificial intelligence solution.

Now let me pivot to another exciting example, Precision Medicine. As Mark highlighted, aging population is requiring more frequent, more personalized and precise testing. And the way that we have tackled that over the last decade, is to laser focus our next-generation sequencing business on that very challenge. And I'm incredibly excited to give you an update today on our NGS business and the contribution that it has done to medicine. In fact, more than 50% of all non-small cell lung cancer companion diagnostic tests today are done on a Thermo Fisher Scientific platform. with our Ion Torrent GenX DX integrated sequencer in combination with the Oncomine Dx express test. What does that mean in simple terms is that an oncologists can go from a sample to a therapy selection for patients and has leaded as 24 hours. And this is a fully walkaway system. So it's sample to answer, incredibly simple. and it's truly transform the way that doctors are identifying the right therapy for the right patients with the right timing because that's incredibly important for cancer patients.

So that's an exciting update on our next-generation sequencing business that has been a world leader in clinical-based NGS now for years. And finally, let me pivot to the word of semiconductor. In fact, AI is driving an unprecedented demand in the space of semiconductor and our customers are truly under pressure as they have to accelerate manufacturing, improve their processes, innovate in the way they develop new materials. In this example, the time to yield in high-volume semiconductor manufacturing is a critical area of focus for our customers. You're looking at very large fabs and month-long semiconductor manufacturing processes. What is the need is better quality and more importantly, full integration of automated system in line of manufacturing. And that's what you see in that picture. It's a bit dark because it's a quasi lights-out lab. You can see the track on the ceiling of the factory. That track is capturing samples, the manufacturing sites delivering it to our microscopes that are seamlessly analyzing those samples and just in time delivering results to manufacturing managers.

This technology has been so transformative that we retain a very high share in the semiconductor space, and it's been a very material contribution to the revenue for our Material Sciences business as well as for the company, more than 3% of the company revenue is now in that space. So it's incredibly exciting how we are truly transforming and advancing the capability of our manufacturing customers to advance their processes. And with that, I wrap the high-impact innovation. We started with the innovation engine. We look then a few examples on how we are consistently transforming our customers' work. And now I'd like to invite Mike to share with you how we became the trusted partner for our customers.

Okay. Thank you very much, Gianluca. That was excellent. So I'm going to spend some time talking about our trusted partner proven growth strategies. and how that enables customer success and equally important, enables us to drive tremendous share gain. And I want to give you also a sense for what Mark alluded to, why it matters to be a trusted partner from the customer perspective and how they think about it and how we're uniquely positioned to deliver on that. So what you're looking at here is basically our definition of our trusted partner status. And it's something where we uniquely occupy this position in the marketplace because we're the only company in our end markets with the scale and depth of capabilities to serve our customers' needs.

And so when we talk about scale, what that means is that, in many cases, we're the largest single supplier for the customer, which makes us incredibly relevant to them. And what depth of capabilities means it's a huge differentiator for us. Because if you just think about a typical customer, let's just say, a pharma and biotech customer or a pharma customer will take. If you're the head of R&D, you want to spend time with us because we provide your teams with the best tools and capabilities so that they can accelerate their scientific breakthroughs. That's super important to the head of R&D and his whole team -- and all of their person's teams. If you're the head of manufacturing, you need access to the best equipment, manufacturing equipment and supplies to ensure that your manufacturing facilities are operating efficiently and productively.

In addition, you probably are using parts of our CDMO capability to complement your internal manufacturing. So it's super important to spend time with Thermo Fisher if you're a head of manufacturing. excuse me. If you're the CFO, remember, we're usually the largest supplier, but we're also the source of support for driving productivity across their organization. So we're very important to supporting their agenda. And if you're the CEO, you want to -- the CEO is in a position where they want to try to accelerate innovation. That's their most important strategy and that is exactly what we are positioned to do and why they want to spend time with us. And so that scale and depth of capabilities are extremely relevant to our customers. But remember, we have to back this up with performance, and we have. We've done that over a long period of time and have an unprecedented track record of driving performance. And our customers have seen us deliver for them. They've seen how our customer-centric culture shows up in the daily engagements with their teams every day. They see us solving some of their most critical challenges on a regular basis, and they see us consistently performing in a wide variety of different market environments.

And from that, we've built this great track record of success and performance for them. And that is how we think about it. So the way we think about it is that we need to earn their business every day, which is exactly what gives us our access to customers because it becomes super logical for customers and their teams to spend time with us because we're making their jobs better. We're helping them be successful. And then what we do is we take the insights and experiences that we get from all of these engagements, and we continuously invest in new capabilities, both organically and through acquisitions. All of this creates a compounding effect that drives share gain for us. It's almost like a flywheel effect. The more we invest in solutions for our customers, the more they engage with us, the better we execute and the more business or share gain we end up getting. And so this is the case in all of our end markets that we serve, but it's particularly evident in our pharma and biotech end market.

And so when you think about the pharma and biotech market, one of the biggest challenges our customers face is that bringing a new therapy to market is incredibly complex, and it can take more than 10 years and $2 billion to get there. So our customers need a trusted partner that can help them drive faster scale of clinical trial programs and get them to commercial launch faster. They want a partner that they can access to provide scientific and regulatory expertise. to help them with the increasingly complex modalities and support them as the regulatory environment evolves over time. And they want a partner that is able to drive productivity for them so that they can reduce the costs involved with manufacturing and development. giving them the flexibility to redeploy their capital in the areas that create the highest value for them in their business.

And so when I think about what underpins all of this, when you look at the entire flow from discovery to clinical development and scaling up in commercial production, we are uniquely positioned with the scale and depth of capabilities to address their needs. We have a foundational set of products that are critical to the work the customer is doing every day. And when you look at our portfolio of services, they're essential to the clinical development and commercial scale-up and manufacturing capabilities. So the combination of these capabilities are what give us a unique position to address their needs. And so I want to give an example of what this might look like for a customer. And so in this example, this is a biotech customer, call it an early-stage biotech customer based in South Korea -- or no, I'm sorry, based in New England actually. It's a company we've met with many times over the years. The way we first approach them is through our commercial engines. So we got into this customer earlier in the process. Gianluca told you about the proteomics environment, what's going on there, this customer is actually developing new therapeutics based on proteomics. And so we were in a great position to address their needs relative to our mass spec portfolio and reagents for proteomics.

Then as you think about it, over time, as they start to grow and build out their lab capabilities, we became the rational partner to help them do that. We understood what they were working on. We were able to support them with our channel business and lab supply capabilities so that it could efficiently build up that lab. As they start to get closer to clinical trials, we're there as well. We know exactly where they're headed. We bring our clinical trial team earlier than we might have otherwise and we help them design that trial moving forward. And so in this customer case, we're actually in Phase II trial right now with them and starting to work on planning for the Phase III program. So our trusted partner status truly enables us to increase market share with these customers because we're with them during the entire journey of their work with us. And so -- on the clinical research side, I want to dive into a little bit more detail on how we're thinking about utilizing AI in this environment. So the reality is that the clinical trials are complex and they take a lot of time. from trial design and site selection to patient recruitment and execution and regulatory filings.

And so the AI impact is clear. Customers can get faster trials, better execution, stronger outcomes, which then importantly unlocks the pipeline so that customers can do even more successful trials. And this requires a partner that has the scale and depth of capabilities across the entire clinical workflow. And this is actually where we really are differentiated. We combine large-scale data sets global clinical execution and advanced AI capabilities, including the point that was mentioned earlier about Open AI and our collaboration with them to deliver these solutions in an integrated scalable way. And so the combination is why customers are selecting us. It's a key reason why we continue to win and how we extend our leadership in clinical research while helping our customers to bring therapies to patients faster.

And so when you connect our CRO and CDMO capabilities together, you have what you've heard from us before as our accelerator drug development program. which is an integrated model that connects every step of the drug development process from early development through clinical trials and commercialization. Effectively, what we're doing is making it faster, simpler and more efficient for our customers. And this unique offering is a key element of how we are a trusted partner for our customers. The recent acquisition of Cario 2 adds an important capability around digital endpoints that further differentiates our capability. And let me expand a little bit on why it matters and how this kind of plays out for the customer. And so when we look at what our customers are requiring here is, number one, we have to be able to support them across all major modalities and therapeutic areas. And then as they go through their journey, we're there to support them on every aspect of their pre-IND filing activities, their clinical trials and then eventually they're post approval and commercial scale up.

We do that across a global network with trials and supply capability operating around the world. And importantly, we connect it all. We bring our CDMO capabilities, our CRO services, our clinical endpoints and our trial supplies so that each step of development is integrated and not fragmented. That's a key point here. And so that integration matters because it enables our customers to make faster, better decisions and reduce the complexity of managing multiple vendors. And it removes the delay [Audio Gap] accelerator drug development means, and it's an integrated and entirely unique model. We are literally the only company in the world that are providing these capabilities for customers. And I want to give you a few examples here of what this looks like. And so this is the South Korea customer that I was thinking about originally.

So our commercial team met this company, after they were already down the road a little bit with some of their preparations for Phase 1, and the issue was that the people that we're working with, they really had some terrible delays in the program. And so our commercial team went in there and started understanding what their needs were, of course, and we ramped up our accelerator capabilities, integrating multiple solutions that eliminated several bottlenecks in the process. formulation issues, trial design issues and regulatory alignment requirements. And so the cool part about this is the customer age about 12 months in the whole process. We took something that was delayed to accelerating it by almost a year. And the cool part for Thermo Fisher is it's really a great example of how when we engage with biotechs or anywhere in the world for that matter, we can literally drive share gain with our accelerator drug development capabilities.

And so the second example, this is a larger biotech biopharma type of company. It's a U.S.-based company and it's a company that we have been working with for a while. We have a pretty well established trusted partnership with them. And in this particular program, it's a respiratory diseases that we're working on that address a large patient population need. It was -- and we were working with them in the whole program from the beginning. And so that we're coming into Phase III and they identified an issue. They identified a need to try to get to commercial launch much faster than they had originally planned. And the reason was there was a competitive market. There's some seasonality issues, and they said, "You know what, we need all of your guys to help to double down and get this out the door faster. And so fortunately, we had our CRO and CDMO capabilities already in embedded in the Phase I and II activities. And so our teams were able to identify, we have plenty of levers to pull because we kind of had to manage all under 1 roof. they identified a bunch of different areas that they could drive some cycle time reductions. Ultimately, what happened for the customer is that we were able to activate over 160 different sites in less than 8 weeks. It's huge. I mean there's something like 8,000 patients in this, and we reduced the enrollment time and the dosage time line by -- of more than 50%, really just blew away the targets that were originally set, and that trusted partnership became the key element for how we were able to support their needs. And so you'd get a little bit of a sense of why we're driving share gain across the clinical research and pharma services business.

And -- I would just -- let's see, I don't think I have another example. No, sorry, I would just give a little bit of a summary. So when you think about our trusted partner growth strategy and how that enables us to gain share, you can think about how we work with our customers across many different areas with our scale and depth of capabilities. You look at programs like accelerator drug development for our pharma and biotech customers. And you can see the reality of why this creates opportunities for us to help them accelerate their innovation, drive productivity and ensure that we're gaining share across all of the end markets here within our trusted partner status around the world and growth strategy around the world.

So thank you very much. Obviously, this is super exciting. It's real. We're actually winning a lot of share right now, doing all of this, and I'm super excited for the prospects moving forward. With that, I'll have Gianluca come back up and talk to us about paralleled commercial engine.

Mike, thank you, and let me pivot to another very important element and differentiation that we have at the company, our unparalleled commercial engine. And what differentiates us here is the combination of 3 elements: an exceptional commercial scale and access. We have, in fact, what is the largest commercial organization and presence in essentially all markets that we serve in our industry. Then that's combined with a decade-long journey or decades long journey to actually build what is a truly comprehensive infrastructure both from a supply chain standpoint and service standpoint that allow us to reach every customer every day, essentially across the globe.

And finally, an extensive set of data and insights that we gain from the interaction with our customers, both physically and digitally happening every day. So let me give you an update on each 1 of those, starting with the exception of commercial scale and access we have. We have thousands of interactions with our customers every day. This is happening as a result of our -- of the largest commercial team in our industry. And as I said, it gives us the benefit of powerful insights. We also interact with our customers at all levels from the front line to key decision makers all the way to the C-suite. In fact, there's not a week that goes by that as the senior executive team at the company, don't interact with many executives at our customers. And that's strengthening our trusted partner status. We're there for them when they need us the most.

The second element is a comprehensive set of infrastructure and services that have been assembled and scaled and which really continue to invest in those capabilities every year. Starting with our customers' enablement center. These are centers where our customers can go, demo our solution, test them, learn about innovation and ultimately is a big driver of adoption of our technology. We also have leading on-site services. It means thousands of Thermo Fisher Scientific colleagues spending time at our customer site every day. They're fully integrated in their operation. And finally, we complement that with scale capability and very specialized in supply chain and logistics. both in mature market and across the world in emerging markets and the regions.

So truly a comprehensive set of capabilities that gives us the opportunity to have access to a tremendous amount of data and customers in sight, whether dosing sites are coming from physical interaction and knowledge that our teams are developing being on site with customers or through the digital interactions where our leading e-commerce platform, thermofisher.com and fisherside.com are the most scaled e-business platform in the entire industry. where we have millions of touchpoints and transactions happening every year. And then obviously, we're taking full advantage of artificial intelligence to analyze those data scale and ultimately improve our capability to serve customers day in and day out.

Let me give you a concrete example on how this set of capabilities are coming together in a single integrated platform, our research and safety market channel business. Our research and safety market channels business. It's a highly differentiated and scaled channel to market. Just think that we have more than 6 million products, we aggregate 9,000 suppliers into 1 single channel for our customers that yields more than 4 million orders processed every year. We have more than 2,000 colleagues that are sitting at our customer site every day. And I tell you, I visit a lot of those customers, you can't differentiate whether someone is working for Thermo Fisher or is working for our customers. It's incredible, the level of trust and integration.

And then on the bottom of the slide, you can see the importance of our infrastructure with scaled and integrated supply chain and logistics and delivery. including logistics service directly to customers delivering product here in the U.S. and the global scale. And when you combine that with our digital presence, with fisherside.com, which is a premier website utilized from our customers to find choice and convenience. This creates a truly spectacular experience for our customers. And it has resulted over the many years in consistent share gain in the space. So we're very excited about our research and safety market channel is performing extremely well.

Another element of our unparalleled commercial engine is our presence and investment in emerging markets. And trust me, I had the opportunity to spend 3 years in South America, 5 years in China, this is incredibly important. Our customers in the region are incredibly thirsty not only for innovation, but for support, for help and they look up to Thermo Fisher Scientific as a partner of choice to advance their science. And these markets have been very good growth for us over many years, and they're incredibly attractive in terms of long-term growth prospects. driven by, obviously, favorable demographics and growing health care spend in most of these markets. We continue to invest at scale and employ commercial capabilities. And on the slide, we have a few examples, we're doing that in areas like India, Southeast Asia and Brazil, where over the last year, we have increased our presence, both from a manufacturing standpoint, commercial standpoint, customer enablement center standpoint. And we'll continue to do so over time, creating what should be an equally exceptional experience in the region compared to what our customers are getting here in the U.S. And we're getting that to many, many of our customers.

So with this, let me wrap up our proven growth strategy section. We started from high-impact innovation, a key differentiator for our customers in all the segments we serve. Mike explained how we gained trusted partner status and the central role of our services business to elevate the engagement and trust of our customers. And we closed with our unmatched and scaled commercial engine which is a practical but incredibly important aspect of our strategy, connecting us with our customers every day.

And with that, let me now call Jim to the stage to give you an update on our PPI business system. Jim.

Thank you, Gianluca, and good morning, everyone. One of the constants in my 17-plus years with the company is the PPI Business System. I vividly remember -- sorry. I vividly remember my initial PPI training upon joining the company that included a competitive simulation on most efficiently making toast. Picture it. I'm a new finance guy about 3 days into the company. I'm going to make shift kitchen in the mezzanine of our Rochester, New York factory on a team of value stream supervisors, trying to shave a few more seconds of our next piece of butter toast. It's an incredibly memorable and valuable learning experience for me. I'm reminded of it every time I'm in my kitchen at home, taking any unnecessary steps between covers and drawers and then annoying my kids, explaining the missed efficiency opportunity right in front of us.

The fundamentals are very simple. The concepts are very fundamental, but incredibly powerful when deployed at scale. The PPI Business System at Thermo Fisher is our discipline that enables outstanding execution. It's how our global teams know if they had a good shift, a good day, a good week, a good month, a good quarter and ultimately, a good year on repeat. It also allows us to know quickly and course correct when we're off track, and it does happen. PPI facilitates continuous improvement where all 125,000 colleagues can contribute to finding a better way every day, this creates robust pipelines of opportunities to reduce our costs, enhance our quality and make the customer experience better tomorrow than it was today.

We deployed PPI to help us effectively navigate complexity like integrating acquisitions, mitigating inflation with agility or executing large-scale transformation programs. In the current environment, we're focused on delivering excellent growth in adjusted earnings. And we're using PPI to deliver an accelerated level of productivity. We're aggressively leveraging our scale to grow the use of our global shared services and functional centers of excellence. We're expanding the use of product cost reduction capabilities through value engineering, and we're actively managing tariffs. We're also deploying PPI to drive working capital efficiency, additionally benefiting free cash flow generation. AI is allowing us to run the company even better within the framework of continuous improvement and PPI.

At the core of it is reimagining business processes to drive efficiency by deploying AI tools. This drives real cost reduction and a step change in scalability as we grow. As we look forward, we expect our headcount growth to be far less correlated to our volume growth as it's been in the past. AI is also unlocking tremendous value and insights from the vast proprietary data that we have across commercial, operations and supply chain. allowing us to work even smarter end to end, further strengthening our predictability and execution. The examples on the right show how we're more efficiently serving customers even better on a daily basis with real-time knowledge. We're deploying advanced software development capabilities to accelerate new product time lines and further stimulate innovation, and we're strengthening our operations through -- by deploying automation and predictive modeling to improve our throughput and reduce downtime.

The PPI Business System at Thermo Fisher is deeply ingrained in our culture. It lives within us as a persistent passion to always be better. It fuels consistent outstanding execution, and it drives durable margin expansion over long periods of time. We are excited about how AI can strengthen its impact moving forward.

With that, I'll turn it to Mark to talk about capital deployment.

Jim, the tow story really resonated with me. I have to admit Allison hates when I give her suggestions about how to run the household. So I stay in my lane. When I think about the fourth element of our company strategy and how we are actively managing the company, it's really about capital deployment. And our disciplined approach. Jim is going to walk through that in his presentation, but it hasn't changed. It's been a proven approach to unlock significant value for our shareholders. What I did want to talk about is our proven M&A strategy, which is an important element of our capital deployment strategy. And when you look at that strategy, it's been incredibly successful, right? It starts with a rigorous selection criteria for all acquisitions. A company must strengthen our customer offering. So that will be valued by our customers. It has to enhance our strategic position as a company. And when you listen to how Mike talked about the trusted partner status, you see how the businesses keep reinforcing 1 another and how we've curated those capabilities to have a stronger and stronger competitive position. And that ultimately, it has to create meaningful shareholder value. And we measure that through the ROICs, the internal rates of return as well as the EPS accretion that it adds over time.

The second aspect of that strategy is disciplined decision-making, right, because there'll be a number of companies that will fit that criteria. And the decision-making process is really to characterize risk and to understand the various scenarios of the businesses that we buy and how it will work out and our ability to deliver against the commitments we make to our shareholders. And our track record through that decision-making process has really been exceptional. We have a proven integration process for those businesses that we acquire. And the result of that combination of understanding the selection criteria, buying the right businesses, a proven way of integrating them is to be able to ultimately enhance the financial and operational performance of well-run businesses that we acquire, right? We don't buy broken businesses. We buy good businesses with strong competitive positions. We make them better.

Our ability to deliver synergies has been exceptional whether it is the aggressive cost revenue or tax synergies that we're able to target that really has created meaningful value. And ultimately, those businesses, you see them within our leading segments as having better strategic decision-making processes that drive their long-term success. We've been active deployers of capital. In terms of M&A, we've deployed $70 billion since 2012. And here are some of the major acquisitions that we've done over that period of time, and we've done a significant number of smaller ones as well. I thought in a moment, I would give you an update on a couple of the more recent large acquisitions that we've done. But first, I want to talk about capital deployment and M&A in the context of how we actively shape our business, right? When we think about it, we're adding to our capabilities. And if you look at the couple of recent acquisitions that we've done, both Claria as well as solvent filtration and purification business, they've actually expanded our capabilities in high-growth end markets.

And as part of our process of shaping our business, we actively look through our portfolio, think about are we the right owners of our businesses. And [Audio Gap] best businesses to free up capital and free up time. At the end of April, we announced the upcoming divestiture of our microbiology business as part of that portfolio management as well. So a quick update on our 2 most recent acquisitions. We closed the acquisition of Soventum's filtration business at the beginning of September of 2025. As a reminder, the rationale for the acquisition was it was adding leading capabilities in filtration and separation technologies in the production of biologics. A very complementary set of capabilities to our bioproduction portfolio. And ultimately, it's enabled us to serve an unmet need of our customers in the Filtration segment. And when you look at how it's going, while it's early days, it starts out with a $750 million set of capabilities that's been added to our company. We're on track for this business to become a mid- to high single-digit organic growth business as part of Thermo Fisher. And I think over time, you'll see us move higher in that range. We're on track to deliver the synergies. The team has done a really nice job on the early synergies and really setting up the plan and execution against that $125 million target. and we're on track to deliver the double-digit internal rates of return that we signed up for when we announced the transaction earlier in 2025.

So really an exciting addition that's going very, very well. We announced Claria, and we were able to close Clareo at the end of March. We announced at the end of 2025. And the rationale for Clareo was to really bring the industry-leading endpoint data solutions into our company, and this is a business that is has very differentiated technology, proprietary data assets. It's very much of an AI-enabled business with deep, deep scientific expertise. So it really is a very special addition. It positions our company in 1 of the fastest-growing segments of drug development and clinical research. It's a great fit with our laboratory capabilities in terms of 1 of the key areas that we bring in generating endpoints in clinical research. And ultimately, it's going to give us deeper clinical insights for our customers in the drug development process.

When you look at Clareo, this was a $9 billion acquisition for us. It is foundational in terms of its role in the drug development process. It has supported over 30,000 clinical trials around the world. 70% of the medicines approved by the FDA and EMA have been using these capabilities over the past decade, and we're actively working on 3,000 trials around the world, really an incredible set of capabilities. Financially, the business did $1.25 billion last year. This year, in the 9 months that we will own it. It will add about 20 basis points to our margins. $0.32 to adjusted EPS. And longer term, the expected impact here, as a reminder, is it will be accretive to our organic growth, our adjusted operating margins and to our adjusted EPS. We're on track to deliver the $175 million of adjusted operating income by year 5 and deliver double-digit internal rates of return. An incredible opportunity to create shareholder value from our capital deployment strategy.

We're excited about the pipeline of activities that we're looking at today, and we'll continue to be good stewards of your capital. The final element of how we're actively managing the company to create value is around our corporate social responsibility strategy, right? And ultimately, it delivers competitive advantage. And I wanted to spend a moment on that. right? I started this morning with our mission, right? And when you think about -- I talked about our colleagues, I talked about a great place to have a mission-driven career. And when you think about the company and our colleagues' passion, they want to work for a company that is a great steward of the planet, a great member of the community, making a difference to society. And that really creates a remarkable culture that allows all of us to bring our very best selves to work and work as a winning team.

Our commitment to environmental stewardship is important to the company. And when you think about some of the examples of our road to net 0, today, 63% of our electricity is sourced from renewable sources. We're well on track to deliver 80% of that by 2030. And in some of the markets where it doesn't exist yet in terms of renewables, as soon as it does, you'll see us continue to advance our target in terms of the use of renewable electricity. When I think about how we operate, it's incredibly important that we operate as an ethical company, a safe company, a high-quality company, and that is critical to our colleagues and critical to our customers as being a trusted partner. And then giving back to our communities, we're so passionate about science and STEM education that last year, 180,000 students around the world have benefited from how we give back to education and really a compelling view of the difference that we're making. And all of this focus on corporate social responsibility is about creating an environment where our customers want to work with us. Our colleagues are passionate about being here. We manage risks for the future, and we set ourselves up for a bright future.

So with that, we're going to take a break. I think you got a good sense of the company's strategy. We'll take a 15-minute break, we'll return, Mike will come up and talk about how we bring this to life in 1 of our businesses and 1 of the business opportunities and then we'll turn to our financial outlook. So see you shortly. Thank you.

[Break]

And now please to the stage, Mike Schaefer.

Welcome back, everybody. I hope you're well and high [Audio Gap] so what I want to do here is you've heard a lot about our company strategy, the proven growth strategies, PPI business systems, capital deployment. And what I want to do is provide a few examples. These are really cool, big examples, by the way, that we're uniquely positioned to go after. But talk a little bit about how we combine these capabilities in a way that enables us to drive share gain and win new business.

And so I'll start with our bioproduction business. This is an outstanding -- you guys, I think, have heard a lot about our bioproduction business over time. And it's really an outstanding business in its own right in a very fast-growing end market. We're the leading provider spanning the full cycle from cell culture media and single-use technologies to filtration, purification and production chemicals. And so we have a leadership position in core categories and the business has been and continues to be an exceptionally fast-growing business while -- growing extremely well with clear momentum as it fully leverages our total company capabilities. And so when you think of this -- what we're showing here are the components of our company strategy and growth strategies. And I'll start with our ability to invest in high-impact innovation. And so that ability enabled us to create new technologies that really address critical challenges for our customers. The 1 we're showing right now is our DynaDrive single-use bioreactor that really enables customers to accelerate process development and scale up to a much larger scale with single-use technology.

And so if I think about our trusted partner status, we're not just supplying products for our customers. We're working with them to help understand what's necessary to design and validate end-to-end bioprocessing workflows. And we do this through our commercial engine, where we're able to engage customers around the world, leveraging our scale of commercial efforts and bring the right subject matter expertise to the discussion either in their facilities or in 1 of our global located bioprocessing design centers. these design centers are good because it gives the customer a chance to come in and take a look at the equipment, understand how it's used, even run some non-GMP type of trials. And as you heard from Mark earlier, our ability to deploy capital to address critical categories of capabilities that enable the customer workflow solutions with the solvent filtration business. is a fantastic way by which we continue to strengthen our bioproduction business, leveraging our company growth strategies and driving growth and continuing to drive growth and share gain for the business.

And so the next 1 I want to bring your attention to is the U.S. reshoring theme that we're seeing across all of our big pharma customers. And so biopharma companies have announced. I think you guys have all heard over $0.5 trillion. Mark mentioned it earlier, $0.5 trillion in U.S. manufacturing investments. And they're really looking for partners who can help them move quickly. And what they're really trying to solve then are these time-based challenges around how do I move some of my programs into the U.S. now, and they're doing that with our U.S.-based CDMO capacity and then number 2, how do I accelerate the whole process of scaling up these new investments in the U.S.

And so again, company strategy, the components of it coming together in a way that enables this. I mentioned the DynaDrive here. Well, this is a part of an entire platform we're creating. So if you imagine, if you're going to build a new facility, you're going to want the great -- the best-in-class next-generation platform to fit out your new factory. And in this case, what we're showing you here is the entire platform. So from lab scale all the way up to commercial scale on the DynaDrive platform, this really becomes the next generation, and it's a great opportunity for us to capitalize on the new investments and building out manufacturing in the U.S. From a trusted partner status, so in the near term, what they want to do is get some of these programs into the U.S. right away. That's a huge priority for them. And so they're leveraging our CDMO capacity to do that, they know us already. We're working with all of these big pharma companies in our CDMO business across many others. So they know that we're in a great position to help them as a trusted partner, advance or accelerate this agenda.

And so that unparalleled commercial engine is based on the fact, as I mentioned in the trusted partners section, we're working with clients in -- at each level of their company. And so as a result, we're in there very early talking to them about their specific needs and what we can do with the subject matter expertise to help them design and build out the workflows and concepts that they need to drive. And then from a capital deployment perspective, you may know that from a sterile fill thinness perspective, there's huge demand for capacity. And so we used our ability to deploy capital to acquire no fees New Jersey sterile fill finish facility and create capacity for all of the programs that we want to start -- customers want to start transferring into the U.S. And so in summary, when you think about all of these components of our growth strategy, you really can get a sense for how we're generating share gain in demand and supporting these customers and the point I want to make on this last page, too, is that we're -- this is not some sort of way out in the future thing. We're actually already winning new business, significant new business for our CDMO because people are moving programs into our capacity right now, and we're getting great traction on supporting customers with their planning and development programs for the new builds that they're going to do.

And so what I want to do is give you an example of this. This is a real world. We're actually in the process of doing this right now with 1 of these top 10 pharma companies, where the way we're engaging with them right now, and of course, we've been working with them for many, many years, is we're working with them right now on enabling the validation of the workflow with this bioproduction platform that I mentioned. And so our teams are together running tests and so forth in our design centers so that you can get a good understanding of what it's going to take to do this at scale in their new facilities. And from a short-term perspective, we're already working with them on creating capacity -- giving them capacity for the new programs to transfer in so we can start to run those now and actually validate them in a GMP environment. And then the last piece is, so when they get the facility built, they want to ramp it up extremely quickly.

And so we will be in a great position to help them do that ramp quickly because they've done the tech transfer into us already, and we'll be able to help develop the tech transfers to them ramping up in the facility. on the same platform that we've been using. So it's really a phenomenal opportunity for us. It's kind of 1 of those once-in-a-lifetime opportunities, and we are so well positioned to win and gain share here. It's very impressive.

So in summary, company strategy, 2 big opportunities, how we deploy the components of that strategy and combine them in ways that really enable us to drive share gain in the industry. So with that, I hope you get a good sense of how that all works. I want to hand it over to Jim to talk about the exceptional financial outlook.

Thank you, Mike. Those are great examples of our strategy in action where we bring the power of Thermo Fisher to a particular business or across businesses to enable our customer success or capture an attractive market opportunity. You've heard much about our company and our customers' important work, and I'm excited to spend a few minutes now sharing our exceptional financial outlook. I'll be bridging what you've heard about our end markets, our differentiated growth strategy and our disciplined approach to capital deployment to what the expected financial outcomes will be as we execute in 2026 and beyond.

I'll start with a look backwards. and then dive into 2026. Then as I look forward, I'll talk specifically about our expectations and approach to managing the company over the midterm, which we've defined as the next couple of years. and then I'll turn to share our expectations for the longer term. Starting with a look backwards. Taking a 10-year historical view clearly demonstrates our proven track record of delivering exceptional financial results. Over the course of the past decade, we've delivered double-digit compound annual growth rates in revenue, adjusted earnings per share and free cash flow. This is a strong reflection on the attractiveness of our end markets, the impact of our proven growth strategy, the power of the PPI Business System in compounding capital deployment, generating excellent returns.

Turning now to 2026 and a summary of the guidance provided during our Q1 earnings call. The bottom line here is 8% to 10% growth in adjusted EPS. This reflects our commitment to delivering strong earnings growth as our end markets and top line continue to improve. clicking into some of the key assumptions embedded in our guidance. Our organic revenue growth range remains 3% to 4% with a midpoint slightly above 3%. We have very good visibility and continue to have very good visibility to the expected sequential growth progression across the year. Adjusted operating income margin expansion of 70 basis points includes an approximately 30 basis point headwind from the impacts of tariffs and related FX year-over-year, the majority of which we've already experienced in Q1.

Acquisitions will contribute $1.5 billion in revenue or 3% reported growth and $0.27 of adjusted EPS or 1% growth. In terms of free cash flow, we expect to deliver between $6.9 billion and $7.4 billion, and this includes an elevated level of capital expenditures as we ramp the capabilities of new acquisitions and invest to support our customers with their U.S. manufacturing initiatives. We are on track to deliver our financial commitments for the year.

Turning now to the midterm. As a reminder, in our July 2025 earnings call, we provided a financial framing that included roughly the next couple of years, including 2026 and 2027. This representative view of how we are actively managing the company in a more muted but improving set of market conditions to deliver outstanding earnings growth. We outlined an expectation for 3% to 6% organic revenue growth progressing through that range over the period. And then with that top line assumption, we would deliver 50 to 70 basis points of margin expansion and mid- to high single-digit growth in adjusted operating income. As we stand here today, we are on track to deliver the midterm financial framing provided. Organic revenue growth is on track with an improving trajectory. Our end markets are progressing as expected, and our customers remain focused on advancing their priorities. We are executing well on the accelerated level of productivity embedded while funding high-return strategic investments and delivering strong earnings growth. The accelerated level of productivity is proving durable and we are still in the early innings of unlocking efficiency from AI and automation.

Capital deployment continues to be a compounder of long-term returns. In Q1, we closed the acquisition of Clareo, which is immediately accretive to our margins and adjusted EPS. The business is on track and expected to grow high single digits under our ownership. and integration is progressing very well. In late April, we announced we had entered an agreement to divest our microbiology business for about $1.1 billion. The transaction is expected to close in the second half of the year. We'll provide any expected impact to our 2026 financials in our Q2 earnings call. When I layer in the impacts of known capital deployment to the previously provided organic elements, our expectation for growth in adjusted operating income improves. We still expect 3% to 6% organic growth progressing through that range over the period. We will deliver 50 to 70 basis points of margin expansion each year, and we now expect to deliver high single-digit growth in adjusted operating income for both years.

As usual, we'll provide specifics on our expectations for 2027 in January. Pivoting now to a longer horizon. As I think about the makeup of the company as we exit 2026, we are incredibly well positioned to deliver outstanding financial performance and create long-term value for all our stakeholders. Our actions have shaped our end market mix to 60% pharma and biotech with compelling growth fundamentals and where our trusted partner status strongly resonates with customers. Our business mix of greater than 85% services and consumables is highly durable and our new acquisitions are well on track to be accretive to organic growth as they anniversary their close dates. Capital deployment will continue to be a compounder of returns, and the PPI business system has never been stronger. We are incredibly well positioned to capitalize as our end markets continue to improve.

We thought it would be helpful to share what we view as the building blocks to our long-term expectations of a 7% organic revenue CAGR. It's helpful to start with 2025 as a grounding baseline where we grew 2% in the face of several specific end market headwinds that impacted the company's growth. Turning to the building blocks for 2026 and beyond. I've outlined the key drivers of steady end market improvement that we've begun to see or expect to see moving forward. This steady improvement is what progresses us through the range of 3% to 6% over the next couple of years and then to 7% organic revenue CAGR beyond that. This implies that end market growth progresses to normalized levels of about 4% to 5% in the out years. Starting with pharma and biotech. we saw improved biotech funding driving strong authorizations growth in our clinical research business last year that's translating to stronger revenue growth this year. As biotech continues to improve, funding will flow further to discovery and research, which we serve with industry-leading businesses across our products portfolio.

In Pharma Services, we've been investing in production capacity to support existing customers with their ramping up for commercialized medicines. We have well contracted capacity coming online over the next several quarters that give us great visibility into the business progressing to stronger and sustainable organic growth in the back half of this year and beyond. At the same time, we're actively supporting our customers with their U.S. pharma manufacturing investments. As Mike outlined, this will first be realized in our CDMO capabilities and then more broadly in bioproduction, analytical instruments and the Fisher Scientific channel. In addition to the shorter-term impacts of capacity builds, we expect our long-term outlook to improve as well because our technologies and capabilities are incredibly well positioned to have higher share in newly built production capacity.

Further out, as detailed earlier today, we expect R&D pipeline investment to accelerate as the benefits of AI improve the return and predictability of drug discovery. Our unmatched breadth and scale of capabilities, including our accelerator drug development offering position us incredibly well to win as AI helps bring more medicines to patients over time.

Turning to industrial and applied. Our electron microscopy business is a critical enabler to innovation in semiconductors. As investment in innovation accelerates and focuses on more efficient, higher density chip designs. Our cutting-edge instruments play a critical role, enabling our customer success as they scale capacity and transition new chips into production. In diagnostics and health care, we've seen reimbursement impacts globally, including in China, that we expect to moderate over the near term. As discussed earlier today, aging population demographics support our expectation for a steady uptick in testing volumes over the long term. In academic and government, we expect to see stabilization of funding in the U.S. and China over time. Specifically in the U.S., we've seen the approval of an NIH budget, we did a slight increase in funding, and it was positive to see the flow of funding improved at the end of Q1.

The cumulative impact of these market growth catalysts gives us great confidence in the organic revenue growth progression we are planning for over the long term.

Turning now to capital deployment. which will continue to be a strong contributor of value creation in the future. Our ability to generate strong free cash flows gives us substantial capacity for capital deployment in the short, mid and long term. Our disciplined approach drives outstanding returns, and those are additive to the returns generated on our organic investments. Mark outlined the tenets of our M&A strategy. and a highly fragmented nature of the industry gives us a robust pipeline of opportunities to execute against. M&A remains the primary focus of our capital deployment strategy. and you can expect share buybacks will remain the primary means of returning capital.

Over time, we expect to deploy capital roughly 2/3 to M&A and 1/3 for return to shareholders. That mix can vary in any given year depending on the opportunities available. Our formula for long-term financial success is very attractive and represents a compelling value creation opportunity. Taken all together, our long-term outlook includes a 7% organic revenue CAGR delivering 40 to 50 basis points of margin expansion annually, fueled by the PPI Business System, then layering in substantial capital deployment, delivering strong returns. This leads us to delivering low teens adjusted earnings per share and free cash flow growth consistently over the long term.

As I close the financial section, let me bring back together the key points that underpin our exceptional financial outlook and compelling value creation opportunity. We have a proven track record of delivering. Our markets are attractive and improving, which supports the steady organic growth improvement outlined. Our growth strategy is differentiated and delivers compounding share gains. When we deliver well for customers, we earn the right to do more. No 1 else can bring the depth or scale of capabilities that we can. The PPI Business System is the engine that drives great execution consistently and produces durable margin expansion over time. AI will only strengthen its impact. And we have substantial capacity for capital deployment and ample opportunities to deliver excellent returns.

Thank you for your time today. I'm 1 of over 125,000 colleagues who are incredibly excited about the bright future we're building together for our company. We appreciate your continued support of Thermo Fisher Scientific. I'll now turn it to Mark to open the Q&A and invite Gianluca and Mike to the stage.

Thank you. Jim. We're looking forward to your questions, I lean and Ralph have the mic. So if you raise your hands, they'll hand them out. So we'll start there.

Great. Thanks for the question. Mike Reston Bank of America. Mark, Jim, a number of times in your remarks, you kind of alluded to end markets continue to improve. You're seeing early signs of that improvement. you updated the LRP today again to, I think, 7% organic growth in the out years. You kind of refined it a little bit last year, too. But it's still a long ways away from where you are today and where the end markets are today. So that slide you had a couple of slides ago, Jim, the building blocks of the long-term growth of the bridge. That's really helpful. But just wondering if you could drill into that a little bit. How much of that is tangible? How much of that are you already seeing today versus maybe is a little bit more still hypothetical or theoretical, just what gives you confidence in that 18 months that you'll get there for 2028.

Mike, thanks for the question. So when I think about the end markets we serve, right? And we gave the midterm view in a period where I think the investor community in particular, about a year ago, very uncertain about what the markets were and actually us explaining how things would progress, was very reassuring to the investor base. And if you think about it, we've had the benefit of 3 quarters since then. and the markets have actually played out exactly as we've expected to, right? There's lots of things going on in the world. We have a war and all these other things. But actually, our end markets are incredibly predictable. And so where I sit today and I think about how much we're interacting with our customers across all 4 segments, they would articulate that the activities would actually support the progression that we're laying out. So we feel that the ability to see the growth in the 3% to 4% range this year. We're on track to do that. We had very strong orders in the first quarter. All of these dynamics that set it up. And if I think about what '27 looks like, it feels like a continued progression of that and as you exit that period, you get into that long-term dynamics. So hopefully, that's helpful.

And if I can ask a follow-up. You touched a lot on AI and how that's being implemented, how that's changing pharma R&D. I think the longer-term argument of improving ROI R&D and pharma reinvesting that. I think that makes sense. But there's still a question of where will those dollars go? Will those dollars get reinvested back into tools? Or are they going to reinvest it back into AI or maybe other processes. So I don't know if you had any specific examples you could point to. I mean there were some major headlines today about pharma deploying quad at a high level, sort of the early adopters of -- are they spending more with Thermal, where are they spending it? Are they shifting how that money is allocated between clinical preclinical? Just any details you can give on that would be helpful.

Sure. So Mike, when I think about -- I've had the benefit of being in this industry for 30 years, right? And in every technological advancement that we've seen, whether it was genomics or all of the different ones that have happened, the advancement of science has expanded the market. And AI is so exciting. So how does that -- what does it really mean where the spending is -- this customer base understands fundamentally how complicated biology is. And the higher the certainty you have or you actually invest in wet lab those experiments, right? And of course, there's going to be experiments that never get done, right? Because you know from, in a way, in silico that it's a waste of time. But there's so much desire to spend money and time on things that matter. The wet lab validation would be a great way of giving confidence on the earlier side of research that you do that. And then on the development, the higher the confidence you have in the molecule, the more indications effective you run, you kind of front load your spending.

So we're quite excited about it. And maybe the most tangible example I can give is some years ago in electron microscopy, alpha fold existed, right? And there was early read that the fact that you could have in silico predictions of microscope, what would happen. would there be less electro Micross could be done? And what actually happened, it was a huge accelerator because actually, once you have more insight, you actually want to have validated. So it's a real -- it's a very much applied in a way AI example to a technology area where you could have a hypothesis that it shrinks the market. The reality is it ultimately expanded the market. So hopefully, that's helpful.

Tycho Peterson from Jefferies. Maybe just a couple of follow-ups there. First, just on the adjustment to the LRP, is that just prudence going from 7% plus to 7? Or is there something that has changed in your outlook? And then I guess just thinking about AI, is there any way to quantify how much training LLM might actually raise R&D in the next couple of years? I mean, it seems like it could be a significant amount. And then are you investing in semi capacity as well? I think it's 3% of revenues today, -- you said a priority is that to build out capacity? And it sounds like you've got some autonomous instruments coming to. I'm just curious what you're alluding to there.

So Tyco, thanks for the questions. In terms of the outlook, and then I'll have Jean Luc talk about some of the AI aspects of in electron microscopy. So when we looked at the outlook, actually, it's the same in terms of what it is. What we thought about the longer term is what is the view on the market. And our view is that it's going to average 7%. There'll be years definitely above. They'll be the years of the plus, but for the analyst community, we want to actually be able to model because I don't know how you model a plus. So we put the 7% CAGR out there. And of course, there'll be years that will be higher than that in the years that will be around that. And so that's how we thought about it. And we're quite optimistic and quite confident in the progression of the market returning back to that more normalized growth. Gianluca?

Tycho, thanks for the question. And Topsathe best way to address it is share a couple of examples of engagement with our customer and how they are thinking about it. And I was recently with 1 of our large customers in the Boston area is a biotech company. They're very tech forward. They actually built their business on the premise that AI-driven drug discovery will enable them to accelerate drug to market and they had to create an enormous amount of Crimstructure in this, we supported them to actually begin to train model. I was recently [Audio Gap] company in the Boston area, we're sharing notes on -- and perhaps more importantly, which kind of data are available to truly train models. And I think the general consensus and what we're hearing from customers, everybody in the tech bio space is trying to generate more and more data. So we'll definitely see a pretty material acceleration over the next, I think, few years, including customers that will build data factory that will be specifically deployed to train AI models.

So it's definitely a quite clear trend hearing it from our customers, there's going to be substantial deployment capital and increasing their testing throughput over the next few years.

And maybe just 1 quick follow-up for Jim, on AI on margins. I understand some enhancement to PPI and I understand your long-term kind of guidance here on margins. But how do you think about AI contributing to maybe margin expansion above that?

Operating margins? Thanks, Tycho. When I think about the 40 to 50 basis points of margin long term in an environment growing 7% -- it's about $80 million to $100 million of more annual productivity than kind of the previous -- the historical long-term model. And we feel really good about our ability to deliver that, and AI will be a major contributor of that. We see endless opportunity to drive incremental cost efficiency, and we're still in the early phases of prioritizing and understanding the future costs of that deployment as well so that we can really get to a number. If it proves to be bigger than that, then we're well positioned to capitalize on it.

Want to follow up on the AI questions. I think 1 of the big themes of today is AI will benefit the industry over the long term. you didn't talk as much about is all of the data resources that Thermo Fisher has, including the recent Thermo-Clario acquisition. Can you talk about what you might be able to do in terms of new products that customers can improve their productivity with?

Sure. I'll start, and then I'll turn it over to Mike to add as well. So when I think about clinical research more broadly before we talk about Claro, One of the really unique assets that we have is we've just run an enormous number of trials, right, much more than any of the innovative pharmaceutical companies just given our scale, right? And the 2 large CROs are in that unique position in terms of the amount of data, everything from protocol design, everything from site selection, the regulatory filings, it benefits enormously from the experiences, right? So when you actually think about the trend that AI enables the development process, the stronger our data footprint is, the more capable you are, the better actually you have as a competitive position. So Clareo really adds to it in terms of the insights that it brings. But Mike, maybe you can talk about an example in terms of how we're applying -- what we're seeing?

Yes. The simple way that we think about it is -- when you're -- when we're involved in all aspects of the workflow, endpoint solutions, clinical supply and so forth, we kind of have -- we have a unique set of data all under 1 roof. And so when -- in the physical world, like with Accelerator right now, when we accelerate their trials, we get -- we win more business. They give us more molecules and they create more programs. And so from the data angle, a similar concept, we're in this kind of a unique position, where we're going to extract the data out of that in ways that nobody else can and figure out ways to model it. So we have this AI kind of suite of agents right now that we're applying it to clinical forecasting, trial execution and so forth. But the key to that is that we're underpinning that with this whole workflow data. And so what we're able to do is start to forecast where we're going to have opportunities to accelerate the trial with patient recruitment and so forth -- more effectively. And adding in the Clareo piece into that is really going to be super helpful in Clareo -- they have 40, 50 different agents already being deployed on the platform that they've got in their program too, and that's continues to grow.

And 1 follow-up. What are the KPIs that we should be tracking to kind of be able to judge for ourselves that this thesis that AI will be better for the industry is showing up and thinking things like an increase in the number of new companies that are being created or an acceleration in R&D spend because customers are making more money because they're bringing more things to market? What are you seeing in the business? Like what do you think would improve that out?

I always go back to what we hold ourselves accountable to, which is delivering the organic growth outlook that we've outlined in terms of how we're translating that. And when I think about our expectations, pharmaceutical and biotech we expect it to be a high single-digit growth market for the company. We'll be giving you examples throughout time in terms of what we're seeing in terms using for our customers and and bring it to life. But at the end of the day, it's all going to be how it translates into our top line performance. So that will be helpful.

Mark, Doug Schenkel here. Under your leadership, there are many examples of how Thermo plays offense when others are playing defense, especially in periods of slower growth. Claro and solvent, those deals in the Sanofi site acquisition, those are good examples of how you've done that recently. So with that in mind, really, I guess, kind of a 3-parter. One is there more to do this year in advance of the group, hopefully, moving into a more meaningful period of recovery. 2, are the partnerships you cited as part of your efforts to be seen and to be positioned as a trusted AI partner, things like NVIDIA, bench, et cetera. Are those kind of new components of your offensive playbook. And then third, collectively, are these actions fully reflected in the LRP?

Yes. So Doug, thanks for the questions. I agree with the sentiment, right, which is in periods that are not massive tailwinds, right? There are periods where you're living there, but most times or not, it's -- those are when you differentiate yourself as a company and you strengthen the industry leadership. The moves we made on the downside of the pandemic to strengthen the company really allowed us to exit a stronger position than anybody else. I love this environment from an M&A perspective. So we're very active. Does that mean anything gets done? We don't know, right? Because we're going to stick with our discipline about can we generate strong returns from it, but this is a good M&A environment because companies aren't loved as much as they once were, and we can be a solution for some of those companies. So I think that is positive. When you think about the AI partnerships and the trusted partner status from that lens, whether it's open AI or a video, they want to work with the industry leaders because they understand we actually have more data more insight, more commercial reach. So the more successful we are, the better off it's going to be in terms of the revenue that they generate, right? So the -- we've been able to curate a set of partners that allows us to be successful for the future and have flexibility as well so that as other companies evolve their technology and become very competitive, that we'll be able to bring those capabilities into our company as well. So hopefully, that helps. What was your third question?

On the tangible outside?

Yes. So when I think about it, right now, we want to deliver against this. We're not constraining ourselves to the 7% CAGR. And as we move through the midterm, we'll start to articulate how we see the end markets playing out, and we'll get some more data points on what is the academic government look like? What does China look like? And those could be obviously upside to what we're assuming right now.

Elizabeth Koslosky with Goldman Sachs. Given your LRP hinges on not only thermospecific growth initiatives, but also the underlying market improvement, can you walk through how much of the improvement in the growth rate depends on thermospecific execution versus broader end market changes? And then what are your expectations around the broader market growth baked into the 7%?

Yes, sure. So I'll start with the assumptions on the end markets within the long-range model of progressing to a 7% organic revenue CAGR. And the underlying end market assumption is that we progress to a normalized level of about 4% to 5% end market growth over that period of time. And that means we'll continue to drive share gains of about 2% to 3% over that period of time. And we've outlined the compelling growth strategy and give examples of real share gain opportunities, and we expect to be able to accelerate and deliver more throughout the period.

Great. And then you guys talked a bit about emerging markets and some of the investments you're making there. How much of a growth contribution from these markets is based into the 7%? And then how do you balance investments there relative to China where you've seen an increased investment from MNC pharma in the region?

EV, thanks for the question. So in terms of the emerging markets, -- there are clearly some incredibly exciting things going on in India, certainly in Brazil and a number of the markets that will continue to support the long-term growth that we've outlined. We have a large presence in China, it's about 7.5% of our revenue. When you look at what's going on in the end market, actually, pharma and biotech is growing nicely, right, despite the fact that the industrial health care sectors are under more pressure in China, for us, Pharma Biotech has been very strong, right? There's a lot of activity that's going on. The Chinese companies, they think about their Chinese competition. They know if they're going to license to a western company there is a real competitive advantage for the Chinese company to work with the right Western partners, right? And I was in China at the end of March, and I was thinking about the number of leaders of the Chinese biotech companies that I met with, they want differentiation relative to somebody else that's trying to get a license for a molecule, and they are opening up new opportunities for us.

Western companies are investing very heavily, not only in doing their own early research and early development in China, but also figuring out how to license as well, and that's creating more growth opportunities. So I actually think China is likely to -- [Audio Gap] and probably, if it plays we'd expect it actually could be actually an upside relative to what's assumed in our model.

Mark Dan Arias from Stifel. I wanted to ask you about biotech, if I could. Obviously, your scope across the industry is super broad, and my assumption is that your account level details are pretty good to you. Kind of feels like you're our best shot at asking this question, but -- have you been able to look at spending at the company level for biotechs that have raised money either in 2024 or during this wave here in 2026, and draw conclusions on what might happen. And the reason I ask is because I think we're all just sort of looking around and wondering whether this financing activity is going to translate to higher spending for these companies. And I'm wondering whether that's just like a wrong thesis to have at this point. So have you been able to look into the numbers and said, this company raised $200 million and you saw that 6 months or 12 months later?

Yes. So it's a great question. Don't lose the faith. So we hang out with these people all the time, right? I mean, if you think about what our biotech customers are doing, they are trying to make an enormous impact on human health, right? And the individuals are doing their lives work to make a difference in society and build great businesses. And if you think about the cycles, right, that go in here on the earlier-stage biotech companies, the ones that are pre-revenue, but could have been spending at a high level. The pattern is actually quite predictable, right, which is there's roughly a 6-month lag between the raising of money and activity starting to pick up. And it largely always shows up in the development pipelines first because as you progress through development, you are able to tap into more funding, right? So you see that -- we talked a lot about how authorizations in clinical development. Really, we're picking up in the second half quite meaningfully. That would then turn into spending thereafter. And you saw that in our growth rates pick up in the fourth quarter, first quarter in clinical development. The activity now has started to pick up in the research, which follows in the next phase.

So actually, that cycle is predictable, and we've lived through many cycles, right? This is not a new phenomenon on the pacing of it. So I feel very good. And you're seeing M&A activity pick up which then leads to more interest in VC in the industry. You're seeing that activity pick up in terms of funding of new companies and new rounds you're seeing licensing pickup. So actually, the environment feels very good and will set us up in the way that Jim articulated it over the next couple of years for a nice step-up in growth in the biotech area. So should be very positive, and we feel highly confident. You're also seeing what I'll call the -- not the emerging, but the midsized biotech companies, which have products on the market, those companies, we work with incredibly closely. -- and because they are actually meaningful customers, but they're still small enough, the 2 or 3 people at those customers make the decisions for the organization. Those are spectacular customers for us because we're able to sit down with the CEO, Head of Development, Head of Operations at the same time and just lay out a compelling way forward to be able to accelerate their time frame to market. So -- we're very, very excited about biotech.

Okay. That is helpful perspective. Then maybe just to go back to your comments on China, what is the underlying growth assumption beneath the 7% CAGR for China. When I think about PAUSE the old long-term growth rate that you talked about and a 7% number today. One of the big differences there is obviously just what that geography is capable of.

Yes, our assumptions embedded in the 7% would be below the company average. That's what's assumed there. The upside is pharma and biotech becomes a larger and larger proportion grows more quickly. So -- but for now, we're assuming it's a bit below the company average.

Mark, it's Dan Brennan from TD Cowen. I guess the first question would be, I just wanted to go a little further on Mike's question on the bridge. So you've got 3% to 4% growth this year. I think you're closer to 3 at the kind of midpoint and consensus, it's around 5% for next year, which seems reasonable in the context of the 36% framework. So I'm just wondering like the confidence level and seeing these levels of growth, and I'm just wondering if you can help bridge a little bit more on how we think about either customers or business segments improving to support the growth.

Yes. So Dan, thanks for the question. When I think about our confidence, you have an experienced management team that's interacting with our customers all the time. we have extraordinarily high confidence in the progression of our end markets and what the next couple of years and what longer term looks like. When I think about how do you support that, you ultimately support that with customers making decisions to spend their resources with us. And if I think about the pipeline of activity, the orders that we're winning, which is much faster actually than the organic growth that we're delivering right now, we're building that backlog, if you will, to support the progression. When we talk about things like pharma services capacity, Mike's team has sold it out. It's not we just need to actually bring those online, go through the regulatory process, produce the medicine. So what's embedded in the step-up is largely in our control, right? And so we feel very good about that in terms of what the next couple of years are, and we understand the drivers of our end markets that supports the longer-term growth as well.

Great. And then maybe as a follow-up just on an AI question and the benefits that you're expecting, particularly in the PPD business. I'm wondering if you could differentiate between how you think about the impact on the broader CRO industry. versus your ability to capitalize on AI since I think a lot of CRO peer stocks have faced more challenges given some concerns around what the impact could be?

Yes. So when I think about the entire CRO industry. Like every segment, there's always going to be a certain level of winners and losers, right? But for the industry as a whole, I actually think for the companies that have the deep data and capabilities has a real competitive advantage in serving the former biotech industry. So I'm quite bullish about our position in serving that. And it's actually from 2 different lenses, right? It's actually the capabilities we have today to support pharma and biotech and how we're applying AI to be able to really lead in the field and benefit, as Mike articulated, in the accelerated drug development, understanding all of the handoffs between the physical creation of a medicine alongside the development process is a huge advantage, actually in saving time and cost out of the process. So we feel we're uniquely positioned to win. Thank you, Dan. We'll take 1 last question.

Luke Sergott, Barclays. So all the questions on AI. I feel like there's like a different paradigm across drug discovery, regular research in the labs done until pharma manufacturing, where you almost have it like fully adopted on the manufacturing process on the semis business. And it feels like that we have different scale of automation that's needed across the different labs. And so can you talk about the investments that you guys are making from an innovation side where the research -- traditional wet lab work is needed to adopt all this innovation and automation. And like how close are we to getting to that semis automation example that you used.

Yes. So Jean Luca, why don't you talk about how some of the larger customers are thinking about the lab of the past versus the lab of today and how we're helping them modernize the approach to the early research.

It's interesting, the lab of the future became the love of today. We're starting to see a material traction in terms of demand for automation. We do have a business that is focused on automation and software. We combine those businesses a few years back, and we're seeing really good demand. I would say we're going to see more as some of the data factories are becoming more real. And as we said, the amount of data that needs to be created at scale is so material that will naturally see more and more demand for automation. One of the challenges that the industry had historically is that automation has always been incredibly bespoke. -- large engineering projects. And I think over time, we're going to see automation being productized more and company like ours will have a lot of benefit from it, considering the scale that we have in being able to bring product ties and more standardized automation to our customers.

Right. And then just last year, kind of follow-up on Ares' question on the biotech side. But Pharma has been backfilling a lot of their pipelines with M&A within China biotech. And I feel like China biotech was an upside driver for the tool sector in 1Q. And it feels like that that's a durable tailwind going forward. And I guess it's more of a question, does that kind of supplant the innovation that's needed and done on the Western biotech side that has -- that drove a lot of upside growth, let's say, pre-COVID? And is this just shifting around of the dollars? Or is this going to be something that can be incremental on top from what we're seeing from the funding side on the Western side?

It's a great question, Luke. When I think about what we're seeing, we're seeing really a nice pickup in funding in the West as well, right? So you're seeing that dynamic in China. And we're also seeing some of the Western biotech companies saying, we want to do some more of the early clinical research actually in China to get a quicker read on whether my molecule is safe and efficacious, right? So you're actually seeing global companies saying, "All right, Thermo Fisher, you have the reach into China, help us actually tap into that market as well. So whether we're in Cambridge or whether we're in Shanghai that we're able to take benefits of the regulatory landscape as well. So we see it as an upside and additive to our total business.

So let me conclude with the takeaways of the day. right? And I think you came away with the enthusiasm we have for the future in terms of how well we're positioned as the industry leader and how our businesses benefit from the scale and the depth of capabilities that we have. that we serve attractive end markets that have long-term compelling fundamentals. We're actively managing the company through our growth strategy, our PPI business system and our proven capital deployment approach. and that we're excited about AI and the acceleration of science, how we're uniquely positioned to win because of AI. And then ultimately, we're applying AI as well to how we're running the company to further strengthen our execution. So -- we're very excited for the years ahead. We look forward to updating you on our progress periodically starting next in the month of July with our earnings call. Thank you, everyone, and thanks for your attention today.

Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2026 First Quarter Conference Call. [Operator Instructions]

I would now like to introduce our moderator for the call, Mr. Rafael Tejada, Vice President of Investor Relations. Mr. Tejada, you may begin.

Good morning, and thank you for joining us. On the call with me today is Marc Casper, our Chairman and Chief Executive Officer; and Jim Meyer, Senior Vice President and 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 & Presentations until July 22, 2026. 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 within the meaning of applicable securities laws. 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 and subsequent quarterly reports on Form 10-Q under the heading, Risk Factors. These forward-looking statements are based on our current expectations and speak only as of the date they are made. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even in the event of new information, future developments or otherwise.

Also, during this call, we will be referring to certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the press release of our first quarter earnings and also in the Investors 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 a strong start to the year. Our end markets are progressing in line with our expectations. We continue to strengthen and add to our capabilities by executing our proven growth strategy and completing the acquisition of Clario. Our progress in the quarter further advances our leadership position as the trusted partner to our customers. And as you know, we're actively managing the company, leveraging our global scale and the strength of our PPI Business System to create value for our stakeholders and position our company for a very, very bright future.

To start, let me recap the first quarter financial results. Our revenue grew 6% to $11.01 billion. Adjusted operating income grew 6% to $2.4 billion. Q1 adjusted operating margin was 21.8%, and we grew adjusted EPS by 6% to $5.44 per share.

Turning to our end markets, performance played out as we expected. I'll briefly cover each end market, starting with pharma and biotech. We delivered mid-single-digit growth during the quarter. Performance was driven by strength in our bioproduction business, our clinical research business and our safety -- research and safety market channel. In academic and government, revenue declined low single digits driven by muted macro conditions in the U.S. and China. In industrial and applied, growth was flat during the quarter. Growth was led by our chromatography and mass spectrometry business as well as the research and safety market channel. Finally, in diagnostics and health care, revenue declined in the mid-single digits. We delivered another quarter of strong growth in our transplant diagnostics business.

As I look ahead, we see our end markets progressing as expected in our original guidance. When I think about the broader macroeconomic environment, there is added complexity, of course, given the conflict in the Middle East and we expect this to create some modest level of inflationary pressure. Our customers remain focused on advancing their priorities, and we expect our end markets to prove resilient. We are well positioned to navigate through this period, leveraging our experienced management team, global scale, and the strength of our PPI Business System.

Let me now provide some highlights from our growth strategy this quarter. As a reminder, our growth strategy consists of three pillars: high-impact innovation, our trusted partner status with customers, and our unparalleled commercial engine.

Starting with the first pillar of our growth strategy, high-impact innovation. We had an excellent start to the year. Our innovation enables customers to advance science and improve lives around the world. During the quarter, we launched a number of new technologies across our business that strengthen our industry leadership and help customers break new ground in their important work.

In our Analytical Instruments business, we introduced the Thermo Scientific Glacios 3 Cryo-TEM, a next-generation cryo-transmission electron microscope that features AI-enabled workflows. What's really exciting about this launch is that it further democratizes access to cryo-EM through the robustness of the instrument that allows us installation in a broader range of lab spaces, bringing high-end structural biology capabilities to more customers.

In mass spectrometry, we introduced the Thermo Scientific TSQ Certis, triple quad mass spectrometer. This advanced platform delivers faster, high-quality results helping customers enhance productivity and reliability in pharmaceutical and applied markets. We also launched the Thermo Scientific Niton, XL5e Handheld XRF Analyzer, which is a great addition to our handheld portfolio. This new instrument enables industrial and applied customers to identify materials in the field, helping them drive productivity and speed decision-making.

In Life Science Solutions, we launched the Gibco CTS Compleo Fill and Finish System. This automated system helps address manual fill and finish challenges in cell therapy manufacturing, enhancing productivity and reliability while enabling scalable manufacturing.

In Laboratory Products, we introduced the FluidEase Pro ClipTip electronic pipettes, which improves precision and efficiency in everyday lab work helping customers generate more reliable results.

Let me now cover the remaining pillars of our strategy. Our trusted partner status provides us with unique insights to guide our strategy and continually strengthen our capabilities for our customers. At the same time, our industry-leading commercial engine enables us to deliver those at scale. During the quarter, we continued to strengthen our leading position in both of these areas.

Earlier in the year, we announced a strategic collaboration with NVIDIA, combining our leadership and laboratory technologies with NVIDIA's advanced AI capabilities. The team is making great progress working together towards the commercialization of new workflow solutions that will enhance scientific instrumentation and help customers work faster, improve accuracy and get more value out of each experiment. To further strengthen our U.S. drug product manufacturing capabilities for our pharma and biotech customers we formed a strategic collaboration with SHL Medical, a leading provider of advanced drug delivery systems. We will be leveraging our recently acquired Ridgefield, New Jersey sterile fill-finish site to offer fully integrated sterile fill-finish and device assembly solutions for our customers.

Another great example of our trusted partner status is the continued adoption of our unique accelerated drug development offering, which combines our leading capabilities in pharma services and clinical research. This competitive differentiator is translating into strong performance and share gain in our clinical research business, which delivered strong revenue and authorizations growth once again in the quarter. We also continue to invest in our commercial engine to ensure we're meeting the current and future needs of our customers. Let me share an example.

We opened a new Cryo-EM Drug Discovery Center in San Francisco. It provides pharma and biotech customers with hands-on access to further accelerate adoption of our advanced cryo-EM technologies to advance drug development. So wrapping up on our growth strategy, we made great progress during the quarter, and we're continuing to advance our leadership position.

Let me now turn to capital deployment. We continue to successfully execute our disciplined approach to capital deployment, which is a combination of strategic M&A and returning capital to our shareholders. In late March, we completed the acquisition of Clario and had a terrific kickoff with our new colleagues. Clario is a market leader in digital endpoint data solutions. This technology business is an outstanding strategic fit and highly complementary to our clinical research capabilities. It enhances our ability to serve pharma and biotech customers by enabling deeper clinical insights and helping improve the productivity of the drug development process. This acquisition is a great example of the value that our proven M&A strategy creates for the company. Clario further strengthens Thermo Fisher's position as the trusted partner to pharma and biotech customers delivering important benefits to enable their success. And the acquisition has a very attractive return profile for our shareholders.

We're also very pleased with the progress we're making with our filtration and separation business, which we acquired from Solventum. I had the chance to visit the team in Germany recently. The business is performing very well. The integration is going smoothly and customer enthusiasm for these capabilities is very high.

Finally, in terms of return of capital during the quarter, we repurchased $3 billion of shares and increased our dividend by 10%.

Let me now give you a brief update on our PPI Business System because of its relevance to our success. PPI is deeply embedded in our culture and empowers colleagues across the company to operate with agility. The mindset of finding a better way every day is a core part of our culture and gives me great confidence in our ability to manage through the current environment. We have a proven track record of actively managing the company and consistently delivering strong operational performance. As a reminder, a few areas of focus for the PPI Business System in 2026 are: driving an accelerated level of cost productivity, deploying AI at scale to run the company better, and the continued mitigation of tariffs. Our teams are proactively working to mitigate any potential impacts from higher inflation given the current macro environment.

Now I'd like to review our 2026 guidance at a high level. We are raising our guidance for the full year on the top and bottom line, incorporating the positive impact of Clario and the strong first quarter earnings performance. We are raising revenue guidance from a range of $46.3 billion to $47.2 billion to a new range of $47.3 billion to $48.1 billion, which represents 6% to 8% reported revenue growth over 2025 and continues to assume 3% to 4% organic revenue growth for the year. And we expect adjusted earnings per share to be in the range of $24.64 to $25.12, which represents 8% to 10% growth over 2025, an increase from our original guidance of $24.22 to $24.80. Jim will take you through the details in his remarks.

So to summarize our key takeaways, we delivered a strong start to the year. We're raising our full year revenue and adjusted EPS guidance. Our end markets and our business are progressing in line with our expectations and we're on track to deliver a strong year. We've advanced our long-term competitive position in the quarter with high-impact innovation and important strategic collaborations. We're incredibly excited about the addition of Clario to our capabilities and we'll continue to leverage the strength of our PPI Business System to create value for our stakeholders while building an even brighter future for our company.

With that, I'll turn the call over to Jim.

Thank you, Marc, and good morning, everyone. I'll start by thanking Marc and Stephen for their support during my transition into the role. I've appreciated meeting many of you on the call over the past few months and look forward to continued engagement with the investor community. In my remarks today, I'll take you through an overview of our first quarter results for the total company and then provide color on our 4 business segments. And finally, I'll share details on our updated guidance for the year.

Before I get into the specifics of our financial performance, I'll provide a high-level view on how the first quarter played out versus our expectations at the time of our last earnings call. As you saw in our press release, we have a strong start to the year. We advanced our proven growth strategy, closed the acquisition of Clario and delivered strong earnings growth.

Let me begin with Clario, which was not included in our previous guidance. We were excited to complete the acquisition in late March and the business added $30 million of revenue and $0.01 of adjusted EPS to our first quarter results. The business is on track, and the integration is progressing well.

Turning back to the total company, both revenue and organic revenue growth were in line with our previous guidance for the quarter. On the bottom line, we delivered adjusted EPS in the quarter that was $0.14 ahead of our previous guidance. This included the $0.01 from Clario and $0.13 from strong operational performance, demonstrating our continued active management of the company and the power of the PPI Business System. So a strong quarter with excellent execution by the team, which enabled us to deliver Q1 financial performance ahead of what we'd assumed in our prior guidance.

I'll now provide you some additional details on our performance. Starting with earnings per share. In the quarter, adjusted EPS grew by 6% to $5.44. GAAP EPS in the quarter was $4.43, up 11% from Q1 last year. On the top line, Q1 reported revenue grew 6% year-over-year. The components of our reported revenue change included 1% organic growth, a 3% contribution from acquisitions, and a 2% tailwind from foreign exchange. As a reminder, in Q1, we had one less selling day than the prior year quarter. This impacted organic revenue growth by approximately 1 percentage point.

Turning to organic revenue performance by geography. In Q1, North America grew low single digits, Europe was flat and Asia Pacific was flat, with China declining low single digits.

With respect to our operational performance, we delivered $2.4 billion of adjusted operating income in the quarter, an increase of 6% year-over-year and adjusted operating margin was 21.8%, 10 basis points lower than Q1 last year. This includes approximately 80 basis points of headwind from tariffs and related FX versus the prior year. In the quarter, we delivered very strong productivity. This enabled us to fund strategic investments to further advance our industry leadership and largely offset the impact of unfavorable mix and the headwind from tariffs and related FX. Total company adjusted gross margin in the quarter was 40.8%. The drivers of adjusted gross margin are similar to those of adjusted operating margin.

Moving on to the details of the P&L. Adjusted SG&A in the quarter was 16% of revenue. Total R&D expense was $340 million in Q1, reflecting our ongoing investments in high-impact innovation. R&D as a percentage of our manufacturing revenue for the quarter was 6.9%. Looking at our results below the line, Q1 net interest expense was $120 million. The adjusted tax rate in Q1 was 10.5%, and average diluted shares were 373 million in Q1, 6 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 $1.2 billion and free cash flow was $830 million after investing $370 million of net capital expenditures. During the quarter, we completed the acquisition of Clario for approximately $9 billion plus potential future performance-based payments. The business is now part of our Laboratory Products and Biopharma Services segment.

In Q1, we also deployed $3.2 billion of capital to shareholders through $3 billion of share buybacks and approximately $160 million of dividends. We ended the quarter with $3.3 billion of cash and equivalents and $43.2 billion of total debt. Our leverage ratio at the end of the quarter was 3.8x gross debt to adjusted EBITDA, and 3.5x on a net debt basis. Concluding my comments on our total company performance, adjusted ROIC was 11%.

Now I'll provide some color on the performance of our 4 business segments. In Life Sciences Solutions, Q1 reported revenue increased 13% versus the prior year quarter and organic revenue growth was 1%. The growth in this segment was led by our bioproduction business, which had another quarter of excellent organic growth. Q1 adjusted operating income for Life Sciences Solutions increased 14% and adjusted operating margin was 36.2%, up 60 basis points versus the prior year quarter. During Q1, we delivered very strong productivity, which was partially offset by unfavorable mix and the expected impact from the acquisition of our filtration and separation business.

In the Analytical Instruments segment, Q1 reported revenue was flat, and organic revenue decreased 2% year-over-year. Performance reflects muted demand for instruments from academic and government customers in the U.S. and China. In this segment, Q1 adjusted operating income decreased 11% and adjusted operating margin was 20.7% down 250 basis points versus the year ago quarter. The majority of the margin change was driven by the expected impacts of tariffs and related FX. Beyond that, we delivered good productivity. It was more than offset by lower volume and unfavorable mix in the quarter.

Turning to Specialty Diagnostics. In Q1, reported revenue declined 1% year-over-year and organic revenue declined 3%. Performance in this segment reflects the impact of one less selling day in the quarter and a strong year-over-year comparable. In Q1, growth in this segment was led by our transplant diagnostics business. Q1 adjusted operating income for Specialty Diagnostics increased 3% and adjusted operating margin was 27.4%, 90 basis points higher than Q1 2025. During the quarter, strong productivity and favorable mix were partially offset by lower volume.

Finally, in the Laboratory Products and Biopharma Services segment, reported revenue increased 7% and organic growth was 4%. In Q1, growth in this segment was led by our clinical research business and our research and safety market channel. Q1 adjusted operating income in the segment increased 6% and adjusted operating margin was 12.9%, 10 basis points lower than the prior year quarter. In the quarter, we delivered very strong productivity, which was more than offset by unfavorable mix, strategic investments and expected headwinds from foreign exchange.

Turning to guidance. As Marc outlined, we're raising our 2026 full year guide to reflect the strong start to the year and the acquisition of Clario. We now expect revenue to be in the range of $47.3 billion to $48.1 billion, and adjusted EPS to be in the range of $24.64 to $25.12 representing 8% to 10% adjusted EPS growth. Our updated guidance for the year continues to assume 3% to 4% organic revenue growth. The midpoint of our organic growth guidance continues to be slightly above 3% and we continue to assume a $300 million tailwind to revenue from foreign exchange for the year.

At the midpoint, the guidance includes $900 million higher revenue, 20 basis points of additional margin expansion and $0.37 higher adjusted EPS compared to our previous guidance. This incorporates the acquisition of Clario, which increased our 2026 revenue guidance by $900 million and added $0.32 of adjusted EPS net of financing costs. At the midpoint, the increase in adjusted EPS reflects the contribution from Clario and the strong operational performance in Q1, partially offset by an assumption for higher inflation in future quarters that we are actively working to mitigate. In terms of adjusted operating margins, our guide has increased to 70 basis points of expansion for the year, including the addition of Clario and the strong performance we delivered in Q1. We are continuing to actively manage the company and drive excellent operational performance, enabling us to increase our guidance for the year while navigating a complex macro environment.

Let me provide you some of the modeling elements for the full year. We expect approximately $660 million of net interest expense, which now includes financing for the Clario acquisition. We continue to assume that the adjusted income tax rate will be 11.5%. We expect between $1.9 billion and $2.1 billion of net capital expenditures and free cash flow in the range of $6.9 billion to $7.4 billion for the year, both reflecting the addition of Clario.

In terms of capital deployment, we're assuming $3 billion of share buybacks, which were already completed in January and that we'll return approximately $700 million of capital to shareholders this year through dividends. We estimate the full year average diluted share count will be between 370 million and 375 million shares.

Now let me provide some color on phasing for Q2. Aligned with the quarterly progression in our original guidance, we are assuming organic revenue growth of about 3% for the second quarter. We expect Q2 adjusted EPS to be between $0.25 and $0.30 higher than Q1.

So to conclude, we had a strong quarter. We executed very well to deliver on our commitments. We are thrilled to have welcomed Clario to the company, and we are raising our adjusted EPS guidance for the year.

With that, I'll turn the call back over to Raf.

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

[Operator Instructions] Our first question comes from Michael Ryskin from Bank of America.

Great. Marc, let me start with sort of a high-level one. A lot of questions from investors, both this morning and just over the last couple of weeks has been -- the acceleration as you go through the year. Investors are increasingly worried about the ramp and given some of the end market concerns lingering macro pressures. You touched on a couple of those when you were talking about the first quarter.

So what would you say to sort of assuage some of those fears about the ramp needed to hit the full year guide. You talked about -- you did 1% in the first quarter, as Jim just called out, 3% for the second quarter. I think a lot of people are assuming sort of like 3% in the third quarter and then 5% in the fourth. You've got days impact in there. But beyond that, just sort of talk about the confidence of the improvement in performance as you go through the year.

Yes. So Mike, thanks for the question. When I step back and look at the quarter, I had the opportunity to see many customers during the quarter. And of course, the macro is challenging with the war in the Middle East and so forth. But it's actually -- not actually even in the customer's thinking in a good way. They're focused on their pipelines. They're focused on the scientific advances. I mean it's an incredibly exciting time about what's going on in our industry. The markets played out as we expected in the first quarter. We understand the ramp, but the ramp is not really assuming a change in the underlying market conditions. This happens to do with comparable days, things of that sort. So it's nice to have a good quarter behind us. And then we step up in a logical way from there.

But Jim, maybe you want to talk a little bit about the phasing?

Yes. When you think about the phasing from Q1 to Q2, you have the impact of the headwind from days in Q1 that doesn't exist in Q2, and you also have a significant comparable change in analytical instruments. So that's really the step-up -- is those two drivers, Q1 to Q2. And then if you think about the first half to the second half, you obviously have the impact of days, the headwind in Q1, the tailwind in Q4 and you have a meaningfully different revenue phasing profile in pharma services that impacts both to this year. in last year. So our pharma services business delivers much stronger growth in the second half of the year aligned with kind of how we modeled the year to start it.

Okay. And then a follow-up, if I could. I mean, it sounds like you had another good strong quarter in pharma and biotech. You called out bioproduction, you called out clinical research continue to do well. Is there anything in particular that kind of offset that? I think you touched on weaker U.S. A&G and in China, maybe a little bit softness in diagnostics. so is there just any moving pieces in terms of what came out worse than expected to offset some of the strength in Pharma and Biotech?

No. I mean as I think about the end markets and the growth that we delivered even by the various 4 end markets, they pretty much were what we expected to happen during the quarter. So we knew that Pharma and Biotech would be the strongest growth of that end market. That was our expectation, it was. The strength actually was broad-based in terms of the momentum there. So I don't think there was really anything that was materially different, I'd say, in the tiny categories, you had a weaker respiratory season, but it's really the irrelevance in terms of the scale of it. So that probably shows up in -- all positive to that, this shows up elsewhere in some minor numbers. But pretty much a very predictable quarter that our team did a nice job executing against.

Our next question comes from Tycho Peterson from Jefferies.

Marc, just maybe picking up on that biopharma thread, curious if you could talk on PPD. I think one of your peers had light bookings last night, obviously, you're coming off a very strong fourth quarter. So curious what you saw in the quarter on PPD. And then is the biotech funding, which has been okay here. Is that starting to translate into spending? And then just early feedback on Clario too from some customers and how we think about the combination there.

Yes, Tycho, thanks for the question. Clinical Research has had an excellent quarter. And whether you're starting to say sequentially, how is the business progressing nice step-up in organic growth. But then when you look at it year-over-year, really nice growth organically, both in revenue and authorizations, the customers really value our capabilities. So early read is we're continuing our share gain momentum. And the conditions are actually improving. It's not a surprise, but you're seeing biotech environment is improving from a funding perspective. That's a good thing from our perspective. And I'd say the sentiment continues to get stronger from that perspective. And there's lots of good opportunities that we've been able to close, but also a nice funnel of activities as well.

When I think about our accelerated drug development capabilities, where we simplify the process, we reduce complexity, take time out, that's highly valued by our customers. It's unique to us because we're able to leverage the insights of our development and manufacturing organization as well. So that's going very well. And we're embedding AI into our capabilities per that collaboration we had announced some time ago with OpenAI and customers value that, and that positions us very well. So business is quite healthy and our trusted partner status is really progressing. If I think about just the amount of dialogue, I've had with our biotech customers and our pharma customers recently, they're really excited about what we're doing together.

Clario is exciting, right? We just closed it. I think it was March 24, when I was there for day 1. And the early feedback from customers even from announcement to close is they're very excited about the technology that Clario has, and how we think about bringing the major endpoints together in an easier way for them to execute their clinical trials. So I actually am very excited about the acquisition and looking forward to the value unlock that is going to bring for the company and for our customers.

Great. And then maybe just a quick follow-up on Analytical Instruments. Obviously, everybody has kind of been dealing with the academic government headwinds. I guess as we kind of think about that business for the remainder of the year, how are you feeling about a recovery on the instruments side?

Yes. So when I think about the instruments business, as you said, the market conditions are kind of below the normalized level, it's really driven by the academic and government environment in the U.S. and China. Our innovation is super strong. So I actually feel very good about what's ahead. If you just think about how much time I spend in my script just on product innovation out of the instrument business, whether it's the next cryo-EM, whether it's our new mass spectrometer or new handheld, just a small sampling of what we launched. And ASMS is going to be awesome for us in June. So really, that's going to be exciting in terms of what's ahead.

The comparisons are a little odd this year. We know them. So there's nothing new, but the comparison for Analytical Instruments, as Jim said, is much easier in Q2 because it was affected by the implementation of tariffs. So you'll see the growth normalize in the first half, in a certain respect, in the business.

Our next question comes from Jack Meehan from Nephron Research.

Marc, I wanted to get your thoughts around AI as you -- this is obviously a huge topic for the market. As you look across the business segments, can you talk about how adoption might be influencing your customer spending behavior? And I'm not sure if you're planning an Analyst Day or not, but any color you can share on new offerings you might be able to highlight that leverage your data in Clario?

Yes. So Jack, thanks for the question. So I was going to have in my closing remarks that we're going to have our Analyst Day the morning of May 20. So we will do that, and we're quite excited to see our analysts in New York that day.

In terms of artificial intelligence, super exciting, actually. And when I think about the role that AI is playing with our customers, it's accelerating scientific discovery. It's deepening understanding and it's ultimately going to accelerate bringing new medicines to patients faster to address significant unmet medical needs. And when I think about what it means is, we believe that AI is going to improve the returns on investment for the drug development industry. That means that there'll be more products that will be coming through the pipeline and ultimately will create an enhancement of funding interest in the biotech community. So we actually think it's a meaningful positive.

And for our company, obviously, the good end market matters, and that will help us. But we see it as a significant positive for Thermo Fisher Scientific as we're exceptionally positioned to shape it and benefit from it, both in our clinical research business, we talked about that in the past with OpenAI. NVIDIA is really across our technology businesses, our Instrument businesses, parts of Life Science Solutions. And it's going to make our portfolio of capabilities stronger and really amplifies what differentiates us, our scale, our portfolio breadth, our trusted partner status and obviously, great execution. We believe that AI is going to accelerate and enhance our durable competitive advantage that we've had. So it's an exciting time, and we're looking forward to continue to drive the adoption that makes a huge difference for our customers.

Cool. Yes. I'm looking forward to May 20. Jim, one follow-up. You called out higher inflation a few times in the script. I was wondering if you could just elaborate like what areas you might be seeing that in and what the strategy is around offsets and productivity?

Yes, Jack, thanks. Given the daily variability in oil prices, we felt it appropriate to put a placeholder in the guide for future quarters. for the risk of inflation that we aren't fully able to mitigate within a year. The teams activated to offset it and mitigate it, and we expect to be able to do that, but just a wide range of outcomes that was prudent to put something in there.

The areas you see it first is in the shorter-term kind of supply chain logistics and transportation. And we started to see some of that and seems actively executing against that. But right now, it's just a placeholder, given the variability.

Our next question comes from Dan Arias from Stifel.

Marc, last quarter, the way that you and Stephen framed the year was to sort of say that you're looking to retire risk as you go along here. When you're answering Mike's question, you talked to some of the moving parts on the macro that have sort of cropped up as new, but I'm curious if you think there's anything that's sort of an offset there that maybe 90 days later, you're feeling a little bit better about and would sort of consider being retired at this point.

You know every year we have expectations of how things are going to play out based on our experience and our deep knowledge of working with our customers. When it goes exactly as we thought, which is what Q1 was, that retires risk, right, in terms of the world was as we thought it would be. Our operating discipline was even stronger than what we embedded in our guidance, which is allowing us to raise our earnings outlook. And customer sentiment is actually quite strong.

If I think about what pharma customers and the biotech customers are interacting with us on, they are excited about their pipelines, excited about the improving environment from their own end markets, the fact that they've reached agreements with the U.S. government, things are good in that industry and getting better, and that bodes well. So I feel from that perspective, retire risk.

In one of our normal conventions, if I think about the earnings side of the equation, normally, we would have beat by the $0.13 operationally. We largely just flow it through the P&L. The only reason we didn't do 100% of that is, there's volatility, as Jim said, in inflation. Nobody has a crystal ball exactly how it is. What I do know is our team is fully focused on offsetting it with all the levers. I believe that if it's relatively modest, we will offset it all, and that will all flow through the bottom line, what we held back. But if the world gets really challenging from an inflation perspective, then we've given ourselves a little bit of a cushion to deal with it. So I feel good as we sit here in late April about what the year is. We obviously raised our outlook and excited to deliver a great year.

Okay. Helpful. And then, Jim, for the quarter, you had the selling days issue that was mentioned, but I think that there might have been also some phasing in pharma services that was material. Is that a quantifiable amount? And I think you characterized the combination of those two as a couple of points. So it's a normalized number, for 1Q is more like 3%, and you're pointing to 3% or so for 2Q, is the general assumption that it's kind of status quo across the board when it comes to end market conditions? Or is it more puts and takes some improvement in one place, maybe a step back and other places? And so that's kind of where you net out. I guess I'm just kind of curious about how you see 1Q to 2Q in the context of where a more normalized 1Q number might be.

Yes, thanks. Your characterization is correct. So the 1% growth in Q1 was impacted by about 1 point from the impact of selling days, and about 1 point by the impact of the timing of revenue phasing in the pharma services business. In Q2, there's puts and takes, but in the aggregate, your summarization is correct.

Our next question comes from Matt Larew from William Blair.

Just wanted to follow up on Jack's question on AI, but also the instrument innovation highlights you shared. It seems like there's going to be an enhanced emphasis on scale, automation, connectivity and auditability or proof of work both for large-scale generation of biological data and in autonomous labs. I think the threat of your portfolio alone, might be an advantage, but as you think about the way your instrument exists today and what kind of enhancements or changes you might make in the future, how does -- how customers might shift the way they are using your instruments affect the way that you're thinking about developing them?

Yes. So Matt, excellent question. So if I think about one of the real interesting aspects, and I like the way you characterize it, of the adoption of AI in the research aspects of the lab work, you're seeing experimentation scale up and will scale up in areas that it would never have happened in the past, right, which is just large-scale generation of biologic information to effectively create biology models, right? So as opposed to what people normally do, which is they're looking at their particular area of interest, you're not seeing very wide-scale large volume labs that are just trying to build biology models, if you will.

And so when you think about what those customers need, they want the instruments to be more automated or more automated-ready, and they want it to be easy to effectively have the data be able to populate their own models, right? Those are a couple of the trends, it's not a -- it's a trend that we've been aware of for actually a number of years, long before generative AI, right, in terms of what customers would have in the past called it the lab of the future or lab-in-the-loop. That's not a new thing, but you're seeing very scaled facilities coming online and our technologies are being adopted. So as part of our R&D road maps about how do we create better connectivity, and we feel good about what we're doing there.

Okay. Great. And then on reshoring, I think that was probably a 2027 and beyond item. I think an industry conference this week heard that people are seeing RFPs. Would just be curious your level of confidence that, that will remain a tailwind? And what sort of the activity level has been like for Thermo?

Yes. So when I think about the reshoring activity, it's actually a nice tailwind, right, in the '27, '28 time frame what we've been able to already secure, start first with our CDMO business, right? A number of customers have decided that leveraging our capabilities is the best way to meet their production requirements in the U.S. So you've seen on the -- some announcements and some topics that we've talked about there.

And in fact, President Trump visited our drug product site in Cincinnati, Ohio as part of -- when he was talking about health care, which was really about reshoring in a way in terms of what we're doing, and that's a site that would benefit from those growth in jobs and so forth. So there's real momentum and contracts signed.

In bioproduction, we expect that the revenue is largely a '27 and '28 activity. We've won some business already in terms of in kind of industry parlance, brownfield facilities that are scaling up. So you see some of that. So that increases the confidence that you'll see even more revenue in '27 and '28. So really a nice positive. And then what I would say is our bioproduction business had a phenomenal quarter, but phenomenal in terms of just very strong growth from what we've seen, of what others have reported for in excess of that. So the team is doing a great job in terms of delivering on our customers' needs, and we feel very good about the prospects of our business. And view reshoring as an incremental tailwind that will develop over the next couple of years. So thank you for the question.

Our next question comes from Dan Brennan from TD Cowen.

Congrats on the quarter. Maybe just on pharma, Nice quarter again. I'm just wondering on the preclinical side market, it's hard for us to track, but I know it's a big part of the business, and I think maybe that's been an area that was not invested in as much with MFN and IRA. Can you just speak to a little bit what you're seeing in that part of the business? Has it been a bit of a drag on your business? And is that something that we could see get better this year?

Yes. So Dan, thanks for the question. So when I think about the business serving, I'll call it, the lab-based portions of pharma and biotech. And it's a little bit hard for us to -- we don't discern in our own data, whether it's going to a QA/QC lab or it's going to a research lab because customers don't manage that segregation so much, but I think it's a rough proxy. We're seeing good momentum in the channel business there in the, what I'll call the higher tech portfolio of the life science reagents, a little bit softer but still progressing in the right direction. So I would say that of the businesses, that's one that we're seeing the signs of a pickup. And I feel okay about how that's progressing going forward. So hopefully, that's helpful.

No, it is, Marc. And then just on U.S. academic and government, just wondering if you can elaborate a little bit on how that's been progressing. Obviously, I think there's hopes that things hopefully are bottoming out and starting in a little bit better. So I'm just wondering if you -- are you seeing any signs of that? Just remind us how you think about what you're assuming for the rest of the year in U.S. academic and government?

Yes. So Dan, in terms of the conditions in the U.S., when I think about the quarter played out as expected, muted conditions for sure. The passage of the budget in late January is good in terms of being a positive. We saw funding flows start to improve during the quarter. That's also a positive. Our assumption is that for the year, we would see greater stability in the U.S. end market improving modestly over time. But not back to normal is what we've assumed kind of in aggregate, similar to what we saw last year.

Our next question comes from Casey Woodring from JPMorgan.

Maybe if you can just walk through the Specialty Diagnostics performance in the quarter and the mid-single-digit decline there. I think you called out strength in transplant and minimal impact from respiratory but maybe just walk through where the softness occurred in the quarter. I think we've seen a couple of reports of a weaker microbiology market in China. So just wondering if that contributed there. And then any color on pacing in Specialty Diagnostics for the rest of the year? I think you have an easier comp coming up in 2Q and tougher comps in the back half. So just how do we think about the growth cadence there?

Yes. So Casey, probably stepping back on the business. Where we play in Specialty Diagnostics, a highly differentiated, profitable business, really focused on high-value clinical insights. And so the technology capabilities are very strong. And when you think about that, we cover the range from immunodiagnostics, transplant diagnostics, biomarkers, protein diagnostics for multiple myeloma. All of those things are incredibly important to the health care systems around the world.

When I think about the particulars of Q1 performance, this business is almost entirely consumable. So it has the more significant impact from the days. It also had a tougher comparison versus the prior year because of respiratory, which obviously doesn't repeat in the second quarter. So the phasing is that, that business improves as the year progresses. And so it's performing in line with what we would expect. So thank you.

Got it. That's helpful. And then maybe just a quick follow-up on China. Just curious to hear how performance in the region played out relative to your expectations across your different businesses. I think you called out a bit weaker academic in the region. So maybe just walk through the sort of portfolio, particularly the pharma end market in China. And then curious if you'd expect China to return to growth at any point this year?

Thanks. So as a reminder, China is about 7.5% of our revenue. We had low single-digit decline in the quarter. Conditions are muted in aggregate as you mentioned, academic and government weaker. Actually pharma and biotech performing well in the country and we're well positioned to capture opportunities as the conditions improve.

I was in China in March, I participated in the China Development Forum incredibly productive visit, right? And I had the opportunity to engage with a number of our customers, our team, with government stakeholders, I actually left China incrementally more positive coming out, particularly as what I did see is that China pharma and biotech customers, the innovators, see the value in doing more work with a company like us because when they're competing with another Chinese company, actually, our technology and capabilities is a differential advantage for them, and they're trying to license some of these technologies to the West.

And therefore, I actually think we're very well positioned to benefit from that trend. And so I think we're a little bit incrementally positive on China. We're not assuming any meaningful growth coming out of China this year. And when I think about upside over time, China will be an upside that we didn't embed even into our longer-term viewpoint that if that returns to stronger growth, and obviously, that will create an incremental tailwind.

Operator, we'll take one more question.

Our final question comes from Justin Bowers from Deutsche Bank.

So Marc, the research and safety market channel was a strong contributor to growth in 1Q. Can you help us understand how indicative of that is in a recovery in the end market versus ongoing market share gains? And likewise, the clinical business has also recovered nicely, PPD is taking share. Can you help us understand the appetite for customers to reinvest in early stage and for your upstream in R&D and what you're seeing there?

Justin, thanks for the questions. So on the first one, on our research and safety market channel, business is doing well. And it is actually a blend of both improving end market conditions as well as market share gains, there's both. And so I feel good about how that business has performed for quite some time and it continues to progress in a very nice direction. So that one is well positioned and is benefiting from a combination of market conditions and good execution.

In terms of clinical research, and we're seeing it in strong -- in terms of customer interest and reinvestment in those things. We had a strong quarter of authorizations growth, and we actually have a very strong pipeline as well, right? So authorizations of what you've signed up, pipeline is what's -- what you're working on that is not yet in the decision process. Both are -- have moved nicely in terms of how that business has been progressing. And actually, that business is progressing as we thought it would this year, right, in terms of stepping up in performance. And it was good to see that not only that those wins that we've been talking about for a few quarters have actually translated into good growth in terms of what we delivered as well. So good news on both fronts.

So let me wrap with a quick -- thank you so much, Justin. So let me wrap with a quick couple of comments. First, thank you to everyone for participating in our call. We're pleased to deliver a strong quarter, and we're on track to deliver a strong year, as we continue to create value for our stakeholders and build an even broader future for our company.

We look forward to updating you at our Investor Day, which we've scheduled for the morning of May 20, as well as the year progresses. As always, thank you for your support of Thermo Fisher Scientific. Have a good day, everyone.

Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.

It's time. So good morning, everyone. Thanks for joining us. I'm Andrew Cooper. Welcome to the Raymond James Institutional Investor Conference. I cover life science tools and diagnostics here for Raymond James and happy to have Thermo Fisher joining us this morning.

I think most of you probably know Thermo, a leader in a broad, broad chunk of the life science tools arena from reagents, analytical instruments, diagnostics, contract research and manufacturing, et cetera. I could keep going, but I'll stop.

Thrilled to be joined by CEO and Chairman, Marc Casper, for a discussion this morning. And maybe just to kick it off, the state of the union question, where are we today? And there's been a lot going on in the last -- at this point, half decade, it feels like but would just love a little bit of color on sort of how Thermo is positioned today and how you're thinking about that road ahead.

Yes. So Andrew, thanks for having us. I'm joined by Eileen Pattinson from Investor Relations. So when I think about the state of the union, we had a good 2025. I think it's always about what we actually do. When I think about the company, not only did we have strong financial performance and strong earnings growth, but we actually exited the year with a lot of momentum, right, and entered '26 in a strong point. The second thing is, that our industry is evolving in the positive direction, right? There's been a period of volatility post COVID. And last year was a much more predictable year.

Even with all of the macro things that we read about and caused lots of angst, I would say, in the investor community, the reality was the year played out pretty smoothly. And so we entered this year in a position of strength as a clear industry leader, deep relationships with our customers and have been consistently gaining market share. So it's a really super exciting time for the company as we enter 2026.

Great. And then we're going to dive into a bunch of the moving parts there as we think about entering '26. But first, you talked about momentum exiting '25. I think one thing is 4Q earnings have wrapped up for the space broadly. We've seen a lot of companies in the tool space guide how the Street is thinking might be conservatively, I think especially in 1Q, and there's a little bit of a question of, is there some sort of pause in this end market recovery? Is this just conservatism or sort of what the setup for the year is. So maybe the question here is, how do you think about philosophically the way you approach guidance how we should interpret the way you laid out the '26 outlook? And help us understand sort of the balance of what's prudent to what's a pause if there is one and some of the moving parts around '26.

Yes. So I think there's a core philosophy that we've executed over a long period of time, right, which is set goals that are ambitious and worthy but goals that you're going to achieve and try to be in a consistent long-term mode of being able to slightly beat the numbers that you put out, not where you have so much room that the numbers become irrelevant, but that you're in a mode of just a series of positive news. And having been in my role for 17 years. I sort of have lived under different models, where I say what period works best, it's that.

Coming out of an industry where you have lots and lots of little companies, right, with several hundred million dollars of market cap versus a couple of companies with post greater than $100 billion market cap, it can be a very noisy industry in terms of guidance. And what we did both in July is set out a couple of year framework. And then when we gave our guidance in January is we're super clear that actually the market is playing out as we expected, it's recovering. We delivered a little bit over 2% organic growth last year. We're expecting 3% to 4% growth this year on the way to ultimately longer term in the 5%, 6% range and then eventually, we think 7% plus. I mean that's sort of the progression that we've articulated.

And we believe that the 3% to 4%, just given where we finished last year, is a very logical place to start. And the way we've always managed the company is you retire risk each quarter. And as long as you're performing well, you're going to raise your outlook, and that's how we're approaching the year. This is one of the first years as I've read through pretty much every earnings report or the report that everybody else has in the industry. Most companies seem to follow that approach. I don't know that factually, but just kind of reading the view we always go first or second in the cycle. And it seems like the industry took that and no good deed goes unpunished. I think the take was well, then the outlook must be bad for the industry because of that. But I actually think it's really setting the industry up for less volatility, which will be a good thing.

So safe to say, not suggesting to us that there's a major pause or anything.

No, actually, I think the industry continues to strengthen. I look at the signs of activity with biotech, what's going on with pharma, the fact that we got a budget pass on NIH. These are all good factors in our industry that would say that the market should continue to strengthen.

Perfect. And I want to jump into exactly that end market pharma and biotech. As the recovery continues, how has customer behavior, excuse me, evolved in terms of prioritization and what they're thinking about today across the drug development life cycle and where are you seeing the most momentum there?

Yes. So when you look at pharma and biotech, it's our largest end market, about 60% of our revenue. Last year, we grew mid-single digits in serving that end market. We ended the year in the fourth quarter with high single-digit growth. So we've had strong momentum. Our business is clearly gaining market share. A lot of what we talk about as we describe the company is that we're the trusted partner to pharma and biotech. And what does that really mean? We have such a unique set of capabilities that we're working with the management teams of our pharmaceutical and biotech customers almost on a daily basis in some fashion.

And that allows us to understand evolving trends understand how we're performing and ultimately opens up new opportunities. So our business has great momentum in certain pharma and biotech, and I'm certainly excited about it. One of the things that we've done is effectively been building out our capabilities, right? And over the last roughly 10 years, we built out a meaningful service business, right, in serving pharma and biotech beyond our product businesses that serve it. And having both clinical research and in clinical development, meaning that we design the clinical trials, we execute them to determine the efficacy and safety of medicines. We develop the physical medicines all the way up through scaling up the commercial production and we're the largest company that does that set of activities.

When I look at what has happened is when a customer selects us, we're actually able to do it faster than anybody else, right? There's just insights on all of the handoffs that happen in the development of a medicine that has allowed us to ultimately win significant new business, and that positions us really well for the future.

Great. And one kind of big topic of the last, call it, handful of months at this point, has been reshoring and the potential impact there. I think you called out on the fourth quarter call some new contracts in terms of U.S. manufacturing needs. Can you step back and share how you see that trend evolving from here? And where are customers in the process today of trying to reshore? And how do you think it plays out in the next, call it, few years?

Yes. So the larger biopharmaceutical companies have made significant commitments to reshore manufacturing to the U.S. And in exchange for that, they've been able to negotiate exemptions from tariffs as well as pricing mechanisms for the medicine. So there's a direction of travel in our industry of a lot more activity. And when you look at that, we also -- because we're a contract developer of medicines have made a $2 billion commitment to the U.S. government in terms of additional capacity to produce medicines here. And we've won a meaningful number of new contracts to fill that capacity. And effectively for many customers, it's more economical to rent the capacity from us than building a whole new facility.

So we've seen that. That revenue will show up faster than the greenfield revenues that would show up in our pharma and biotech customers. And when you think about it, we would expect '27, '28, even into '29, you should see a nice step-up in growth above the trend line, if you will, from that activity. The way a new facility works, and there will be a significant number of them built in the U.S. is we play a role in equipping the facilities, we stock the labs. Our position in bioproduction of enabling technologies to produce medicines is much stronger today than it was when the old plants were built 15, 20 years ago. So we're likely to have a much higher market share of the activity as well. So it's really -- it's quite a positive trend for Thermo Fisher and for the industry more broadly.

Great. Now touching on something you mentioned a little bit in the prior question. You launched Accelerator, I think, at the end of 2024, which integrates that contract research side with the contract manufacturing side to, like you said, streamline some of the timing there, reduce costs, et cetera. So as that solution sort of picks up traction, how should we think about that offering driving growth across your pharma services and clinical research business? And is it changing the nature of the relationships and the nature of the engagements with the customers you're working with?

Yes. So if you think about what we're doing, right? You have -- in developing a medicine, you're going through the clinical trial process, which is around safety and efficacy, and then you actually have to be able to manufacture the medicine, right? And we play a meaningful scale role in both. If you're a biotech company, right, and you have neither the capabilities of executing the trial or the capabilities to manufacture the medicines, it's incredibly compelling actually in the case studies that we've developed, the studies that were put out by Tufts University about how much time this process is saved through using the combination of the capabilities, and we're able to implement it that works for our customers.

And the reason that the adoption has been so strong and you see it in the authorizations and contract wins that we've gotten over the last 6 quarters since we've offered it is effectively the value creation in the biotech and pharmaceutical industry is how long is the period of exclusivity and who's first to market for a new medicine. And we're able to impact both, right? The faster you can go, effectively, the longer your economic benefit is as a client as well as derisking that your second or third class of medicine.

So it's really been incredible in terms of the momentum. And you've seen our clinical research business, which is roughly an $8 billion business, has really been gaining very meaningful share, and you see that through the numbers as we publish them.

Maybe when you just maybe think of it logically makes so much sense. Why have we not seen more players follow suit and try to more tightly align a CRO business and a CDMO business to make it easier and to be able to, frankly, keep up with what you're able to offer?

You have to do it at scale. It has to be done at scale because of the complexity, right? So that really limits who the opportunity set is available to. And like everything, it takes a while for the industry to understand the changes. And ultimately, we have a huge first-mover advantage. So that's really been the reason that we had the concept, we didn't overpromise to our customers, and ultimately, they've been super pleased, and that positions us well for the future.

And now the topic that no one can escape. Let's jump into the AI question. I think there's a lot of excitement about what AI can do for drug development. A lot of the market has looked at that as scary for life science tools. So especially the CRO landscape, can you help us think about how you view AI as changing or maybe not changing the long-term profile for that -- this industry and where you think Thermo Fisher is sort of positioned to play in a world where AI is a bigger part of what we're doing?

So Andrew, it's a great question. Thank you for asking it. So let me start with the 30-year view, right, and having seen many evolutions of technologies and many evolutions of change, right, which is in our industry and the customer base we serve, the better the technology that advances scientific discovery, the better the capabilities to bring medicines out more effectively has always led to a reinvestment cycle in the industry, right? So inefficiency that comes out effectively leads to more money coming in to go after the big opportunity because human health and the challenges globally is so enormous that, that has been the ecosystem that as we've seen it. I think the capabilities around AI are incredibly profound, right?

And when I think about how we use AI in just running the company, it's making us meaningfully more efficient, right? It's creating a better customer experience. That's not going to differentiate any company, but it becomes a sort of -- it's here, it's -- we're living it. We're driving it. But in clinical development, which is one of the areas that is the most cost intensive for our customers, developing a medicine, the ability to shave time out, the ability to generate reports more quickly, more effectively, to select the right sites and the right patients it creates meaningful value, right? And the only way you do that is by who owns the data, right? And we have -- and 1 or 2 of the other large CROs have the most data, if you will, on how to ultimately do the development better.

So you can think about it as an enabling technology to leverage our insight to do a better job. What is it going to mean over time? A couple of things. You're going to have molecules that are more likely to be successful going into clinical development. That's great because it means waste comes out. And two, you're going to be able to do it more quickly, right? And when I think about our own economics and all of the modeling of that we win, right, through that process, right? While we make some money on things that fail, ultimately, the reality is we make most of our money actually in the things that are successful, right? And therefore, we're energized about it.

The things that have made the company successful, scale, a unique portfolio, a trusted partner status and outstanding execution every day, quarter in and quarter out, year in, year out. AI plays to the strength of that, right? It actually is an accelerator and a multiplier. So this is the most exciting time, right, in terms of leading the company in terms of going through a change evolution, revolution on certain things, evolution on other things, it's awesome, right? And I'm excited about how well positioned we are to win and it's our job to execute well and help our clients be successful.

Perfect. And shifting a little bit to the bioproduction space. We get a lot of questions about it. I think you do as well. Maybe first, just help us understand how Thermo fits into that because I think a lot of people use the word in a lot of different ways.

Bioproduction in our vernacular which is generally the industry vernacular is the enabling technologies to produce biologic medicines and there are major categories of technologies, right? There are the cell culture media, the supplements, effectively the things you would add to grow a medicine. There other single-use technologies, the capabilities you need to be able to produce it in a sterile fashion. You have the purification capabilities that you need and then ultimately the filtration. Those are the 4 major categories in bioproduction. We're the industry leader in 2 of those categories, in cell culture media and in single-use technologies. We have a rapidly growing purification business. And while we're not the industry leader there, we're winning a very large share of new molecules.

So business with a lot of long-term tailwind. And we acquired from Solventum their filtration business to give us a foothold in that category. And we're excited about how that integration is going. We're in our first year of ownership. So it's a business that's growing the fastest in the company. It's been growing the fastest in the company for the last 15, 20 years. We're well respected by our customer base and things like the reshoring efforts that you asked about earlier are real positives for this business. So we're well positioned here.

And just thinking about that, you have delivered really strong performance there. I think it's been -- there's been periods of noise for various pockets of the end market at times. What have been the key differentiators for Thermo to deliver that strong performance even in some of these more kind of challenged times?

Yes. So I think we talk about trusted partner. And if you get down to the practical aspect of it, right, we're a large developer of medicines. We also are a large supplier to the competitors of those developers of medicines. Coming out of the pandemic, our largest competitor in the field called me and said, "You are our best supplier for the enabling technologies throughout the pandemic. You put the care to our success, unlike any other player in the industry". And that's why we're the trusted partner because I'm sure there are people at that particular company that feared and said, well, if there's a limit of supply, then Thermo Fisher is going to prefer their own internal capability. But the reality is those customers have put their life to work with us, right?

And if we do great work for them, they will be loyal forever. And that's been the differentiator. We have great technologies but we have a mindset that if we help our customers successful, they'll open up new opportunities. And if I just think about the first 6 months or so with Solventum in the filtration business, we're getting very meaningful trial of the capability, meaning that customers know we spend $4 billion. They know that that's a big commitment of capital. and they want to know why, right? They want to test out the product and they're going to ultimately adopt it. So it's a great time for the company.

Great. Shifting gears a little. Analytical instruments, excuse me, were ahead of expectations in the fourth quarter and delivered a solid kind of overall year. And innovation was a really big part of that. I think you had Astral Zoom and mass spec. You had some big launches in electron microscopy over the last couple of years. As you look ahead, how do you think about the growth trajectory in I want to say AI, but I probably shouldn't do that to confuse anybody, but in analytical instruments in '26 and more broadly sort of the pace of innovation and what's needed and what it contributes to that segment longer term?

Yes. So when you think about Thermo Fisher Scientific, we have 4 values that have been deeply ingrained in the company. The first of those values is integrity. The second is innovation. Our customers expect the best products and services. They just do, right? You're trying to develop a medicine, you're trying to diagnose a sick child. You want the best technology. We spend $1.4 billion on R&D in our product businesses. And our instrument business is known as the innovation leader in the industry. So whether it's the new mass spectrometers that we launched, the Astral Zoom, whether it's the suite of electron microscopes that we launched around both in the life sciences setting, the Krios 5 or the automated technologies in semiconductor yield ramp that use our electron microscopes.

We've been just launching a suite of incredible products, and we're driving good adoption, gaining market share. And that's a business that was most pressured even though our results were decent. You had pressures from China, pressures from academic funding, the area of tariffs, a lot of what could go wrong and actually the business did reasonably well and enters this year with incredible momentum. So it's an exciting time for the business, and we'll have a really good set of launches coming up as the year progresses.

Maybe now is a good time to touch on academic and government markets a little bit, ones that have been certainly noisy over the last couple of years as well. I think the general sense is things are more getting better than anything else, but we just love sort of the lay of the land today, knowing what we know about NIH budgets, knowing what we know about sort of the way folks are thinking, what you're seeing in the field.

Yes. So you have a period of 2025, lots of anxiety amongst the customer base in the U.S. with whether it was [ DoD ], whether it was what was going to be funded on NIH. And yet our view was that NIH was going to be okay in terms of what the budget was and it ultimately was in terms of slight growth that was passed. And customers are still a bit cautious, but that will improve over time. You don't have the shock anymore. Now there's more stability and customers are getting back into the cycle of reinvesting and upgrading fleets of instruments and so forth. So I would expect that market gradually improves and get to a better spot. Europe has been good, interestingly enough, actually in terms of the academic markets. There's been a good commitment to spurring innovation across the continent. So there's been a bit of an offset.

Great. And now maybe touching on capital deployment. You're in sort of the mid-2s from a leverage perspective. You already did $3 billion of buybacks this quarter. You've got a $9 billion or so acquisition pending. So as that kind of slides leverage higher in the near term, how should we think about capital deployment both sort of near term and then what you're seeing in the M&A market as you sit today?

Yes. So when I think about our capital deployment strategy, we are an industry consolidator. We have a very clear approach that's been consistently deployed, which is we do a balance of M&A and return of capital with M&A being the priority. And over long periods of time, about 2/3 of our capital goes to M&A and about 1/3 of return of capital. We are very clear on acquisition, what the strategy is. It has to make the company stronger. It has to be highly valued by our customers of transaction and ultimately has to deliver strong returns as measured by returns on invested capital, internal rates of return, so that we clearly are generating shareholder value through those activities.

Last year was a good year, right, in terms of the targets that were available to us, and we were more active because they were good fits. We announced the acquisition of Clario which we are expecting to close in the second quarter. And that's a $9 billion transaction. It's a business that is the leader in endpoint solution generation. What that means in English is when you're doing clinical research, you need to know the safety profile, so the cardiac profile on a patient that's taken a medicine you need to know what's going on in terms of the body from the physiology of the medicine. You need to know what the patient is saying to the doctor. It's called the clinical outcome assessment.

Clario has the best set of technologies for those capabilities. The fourth thing that you need to know is what's going on physically in the body from the blood or whatever biological sample. We're already the #2 player in that. We will integrate that into a unified endpoint for our clients, and they can do those trials themselves. They can do that through our CRO or anybody else, but we believe we'll have the best solution. It's going to be a high-growth business. And so we're focused on closing that doing a great job with it. That's our priority for 2026. We're actively looking at things. We have a strong management team. We've got balance sheet flexibility. And if the right transaction is available to us, we certainly would consider it. But I always like to focus on what we actually are in the middle of doing and this is a really exciting time for the company.

Great. And the next one I want to ask is admittedly more of a philosophical question probably than anything else. But whether it's trade policy, tariffs, general sort of policy impacts on life science tools, it's never been, I'd say, more -- there's never been more going on, and it's never been changing as quickly as it has been. So just philosophically, how do you think about navigating that, knowing that what's here today may not be what's here tomorrow and thinking about the here and now, but also the long term and the decisions you have to make for that time period as well.

I think one of the things that there's headline and then there's reality. And this has been by far the noisiest headline period. Actually, the amount of change actually has been more modest, actually, than what might appear, right? If I think about the health of the industry, it's actually quite strong in terms of the end markets, what's going on in pharma and biotech, how some of the larger players in serving those customers are positioned. It's actually a good time. And we're in the room, right? We have access to the governments around the world. We are the largest domestic producer of these capabilities in every major market around the world.

So whether we're in Germany or whether we're in the U.K. or the United States or Finland or China, we are the largest player and that allows us to be able to educate, inform and ultimately advance human health in a way. So I actually think this is a really interesting period of time where -- you're seeing some things that have been challenges for the industry in terms of some of the concerns around pricing that seems to have worked well in terms of how pharma has navigated it. So I'm actually quite bullish on what the prospects are for our industry.

Great. And with just a minute or 2 left, maybe the classic closing question of what would you most want investors to take away about Thermo Fisher? What do you think the markets are most underappreciating about the story today and how you see the trajectory longer term?

Yes. So when I think about the company and how I perceive our investors understanding, I think actually, our investors understand the strength that we have, right, as an industry leader understand the consistent growth strategy, the good stewards of our shareholders' capital. So the fundamental who Thermo Fisher is, I think, is largely pretty well understood and our discipline about driving earnings growth and gaining market share. Those are the things that are well understood. I think where investors have struggled broadly in the industry is actually the question you asked about sort of the environment.

What I would say is that we have a really good handle on the environment, and we try to articulate to the investment community how we see the world playing out. And our track record has been pretty good about that. Right now, I think there are 2 different factors that investors are trying to get their heads around. The guidance question, less about us and sort of what is the outlook for the industry. I think the outlook for the industry is actually quite good, right? It's actually progressing in a stable way and improving. So I think that one will just shake out over time as results come out across the industry and our results as we continue to deliver strong performance.

And then the second is you see the volatility around AI in sectors that we would all say, why would AI affect transportation or something else, right? There is a bit of -- you take a headline, you extrapolate doomsday. The reality is we're incredibly well positioned as the industry leader to adopt AI and strengthen the moat around our business. And that's what we're doing. And it's an incredibly exciting time to lead the company and to ensure we're doing a fabulous job for our customers. So I think ultimately, it's the performance that matters, and we're well positioned to deliver a great 2026.

Fantastic. I appreciate the time and looking forward to the breakout downstairs. Thank you.

Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2025 Fourth Quarter Conference Call. [Operator Instructions]

I would now 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, our Chairman, President and Chief Executive Officer; and Stephen Williamson, Senior Vice President and 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 April 22, 2026. A copy of the press release of our fourth quarter and full year 2025 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 within the meaning of applicable securities laws. 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 and subsequent quarterly reports on Form 10-Q under the heading Risk Factors. These forward-looking statements are based on our current expectations and speak only as of the date they are made. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even in the event of new information, future developments or otherwise.

Also, during this call, we will be referring to certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the press release of our fourth quarter and full year 2025 earnings and also in the Investors 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 fourth quarter call. As you saw in our press release, we delivered a strong year, capped off by an excellent fourth quarter. Our results reflect outstanding execution from the team, the strength of our proven growth strategy and excellent operational performance enabled by our PPI business system.

Looking to the year ahead, we entered 2026 from a position of strength as the market leader serving attractive end markets. Our growth strategy is resonating with customers, and our PPI business system will enable us to continue to deliver excellent operational performance. To recap our 2025 financial performance, starting with the quarter. Revenue grew 7% year-over-year to $12.21 billion. Adjusted operating income grew 6% to $2.88 billion. Adjusted operating margin was 23.6%, and adjusted EPS grew 8% to $6.57 per share.

Now turning to our full year results. Revenue grew 4% to $44.56 billion. Adjusted operating income grew 4% to $10.11 billion. Adjusted operating margin was 22.7%, and adjusted EPS grew 5% to $22.87 per share. As I reflect on the year, first, the environment evolved differently than everyone had envisioned entering 2025. We actively manage the company and our team responded with agility, effectively managing tariffs and the U.S. policy dynamics to deliver a very strong year. As a trusted partner, we work closely with our customers, helping them navigate the landscape and enabling their success.

Let me now turn to our performance by end market and provide some context on how the quarter and full year played out. Starting with pharma and biotech. We delivered high single-digit growth in Q4 and and mid-single digits for the full year. Performance in the quarter was led by continued strong growth in our bioproduction business as well as our research and safety market channel. As expected, our clinical research business continues to strengthen, delivering mid-single digit growth in the quarter. For the full year, revenue growth was broad-based, and was highlighted by strong performance in bioproduction, research and safety market channel, analytical instruments and pharma services businesses.

In academic and government, throughout the year, performances and market was impacted by the macro conditions in the U.S. and China. We declined in the low single digits during the quarter and for the full year. In industrial and applied, we declined in the low single digits during the quarter, and grew in the low single digits for the full year. Growth during the year was highlighted by strong performance in our research and safety market channel as well as our electron microscopy business.

Finally, in diagnostics and health care, we delivered low single-digit growth in Q4, reflecting good performance across our specialty diagnostics businesses. For the full year, growth in this end market was flat with strong contributions from our transplant diagnostics and immunodiagnostics businesses. Thanks to our proven growth strategy and our team's excellent execution, we delivered a strong finish to the year across our end markets and continue to drive meaningful share gain.

Let me now turn to our growth strategy. As a reminder, our growth strategy consists of three pillars: high-impact innovation, our trusted partner status with customers and our unparalleled commercial engine. In 2025, we meaningfully advanced the position of the company becoming even more relevant for our customers and enhancing our competitive position.

Let me call out some key highlights for the year, starting with innovation. 2025 was another outstanding year of innovation as we launched a number of high-impact products across our businesses that strengthen our industry leadership and enable our customers to accelerate breakthroughs and enhance their productivity. In chromatography and mass spectrometry, we launched the Thermo Scientific Orbitrap Ashfall Zoom. Building on the success of the Astro mass spectrometer, Astral Zoom delivers even greater sensitivity, speed and depth of coverage enabling researchers to uncover new biological insights and advanced precision medicine. Customer adoption and feedback have been extremely strong as the platform represents a significant lead flow forward in mass spectrometry, enabling researchers around the world to accelerate discovery and advance the pace of scientific breakthroughs.

In bioproduction, we expanded our single-use portfolio with the launch of the Thermo Scientific 5-liter DynaDrive single-use bioreactor, offering pharma and biotech customers increased workflow efficiencies and the ability to seamlessly scale up manufacturing of new therapies. In electromycoscopy, we delivered a series of high-impact innovations across Life Sciences and Advanced Materials. This included the Thermo Scientific Krios cryo-EM, which is advancing structural biology by enabling faster, higher resolution insights to support drug discovery and development. In the fourth quarter, we launched the Thermo Scientific Helios MX1, plasma-focused IMB, SEM, a fully automated semiconductor analysis system designed to accelerate time to data for yield ramp and fab process control.

In clinical next-gen sequencing, it's great to see the growing application of our Ion Torrent Oncomine Dx target test as a companion diagnostic. During the quarter, this technology received another FDA approval this time is a companion diagnostic for buyers, new therapy targeted for certain patients with non-small cell lung cancer.

In clinical diagnostics, we also achieved U.S. 510(k) clearance for the EXENT system, a first-of-a-kind automated platform that enables earlier and more confident diagnosis for patients with multiple myeloma and related disorders.

So another spectacular year of innovation, and we also have an exciting pipeline of launches in 2026 that positions us well for the future. Let me turn to our trusted partner status and industry-leading commercial engine, which can continue to strengthen in 2025. Our trusted partner status with customers has built -- has been built over many years by anticipating, understanding and meeting their needs. Increasingly, customers are relying on us, not just for technologies and services but for our expertise and deep understanding of how to apply them to enable their success. We help our customers accelerate innovation and improve their productivity.

You've heard me talk about our accelerated drug development solutions throughout the year. It's a terrific example of one of our unique capabilities. As a reminder, Accelerator is our integrated CDMO and CRO offering that brings together the strengths of our pharma services and clinical research businesses to help customers reduce development time lines, improve decision-making and enhance returns on their R&D investment. In 2025, we secured meaningful wins for our clinical research and pharma services businesses and continue to see outstanding customer adoption. During the year, we also expanded and deepened strategic partnerships that create value for our customers and our company. This included a technology alliance with the Chan Zuckerberg Institute for Advanced Biological imaging to develop new technologies to better visualize human cells. We also announced a strategic collaboration with OpenAI, aimed at increasing our use of artificial intelligence at the company. This will improve productivity across our operations and also allow us to embed AI capabilities in our products and services to accelerate scientific breakthroughs and advance the drug development process. In addition, we continue to expand our global footprint to better support customers. During the fourth quarter, this included the expansion of our bioprocess design centers in Asia with the opening of a new site in India. So as you can see, it was another excellent year of advancing our growth strategy.

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 shareholders. 2025 was a very active year, as we advanced our strategy and added exciting new capabilities that further strengthen our long-term competitive position and create value for all of our stakeholders. During the year, we deployed approximately $16.5 billion, including committing $13 billion to M&A and returning $3.6 billion to shareholders through stock buybacks and dividends. In terms of M&A, we completed the acquisition of our filtration and separation business from Solventa. The addition of filtration is a natural extension of our bioproduction capabilities, where we have leadership in cell culture media and single-use technologies, along with a rapidly growing purification business. Our pharma and biotech customers see real value in Thermo Fisher offering these filtration capabilities for their manufacturing processes. The integration is going smoothly, and our new colleagues are thrilled to be part of Thermo Fisher Scientific.

This year, we also expanded our U.S. drug product manufacturing footprint through the acquisition of Sanofi's state-of-the-art sterile fill-finish site in New Jersey. Both of these acquisitions enhance our ability to support our customers' growing production needs.

During the fourth quarter, we also announced a definitive agreement to acquire Clario. The company is a market leader in digital endpoint data solutions 1 of the fastest-growing areas and an essential capability in drug development and clinical research. In 2025, the business generated approximately $1.25 billion in revenue. Its differentiated technology and deep medical expertise together enable unique capabilities in generating and delivering digital endpoint data for clinical trials. The business is an outstanding strategic fit highly valued by our customers and complementary to our clinical research capabilities. By adding Clario's high-growth; capabilities over time, we will be able to deliver even deeper clinical insight to our customers and further accelerate the digital transformation of clinical research. This is an incredibly exciting opportunity to help our pharma and biotech customers improve the return on investment of the drug development process.

Financially, the transaction has an attractive double-digit return profile is expected to be accretive to organic revenue growth and to adjusted operating margin. We expect it to be accretive to adjusted EPS by approximately $0.45 in the first 12 months of ownership, and we expect to close the transaction by the middle of 2026. So overall, an active and high-impact year of capital deployment.

Let me now turn to our PPI Business System. In 2025, PPI continue to be a critical enabler of our performance. Throughout the year, we leveraged PPI to actively manage our cost base drive operational excellence and deliver strong earnings growth while continuing to invest to strengthen our long-term competitive position. PPI enabled us to operate with agility and discipline as we navigated the environment and delivered excellent results for our customers and shareholders. PPI is deeply embedded in our culture and empowers colleagues across the company to find a better way every day. That's why we're also increasing increasingly using artificial intelligence into PPI, which will further enhance its impact across the organization. The combination is helping us improve how we serve customers, streamline internal processes and operate the company more effectively, strengthening execution today and positioning us well for the future.

Before I wrap up on 2025, I want to briefly touch on the progress we made with our corporate social responsibility priorities. Part of our mission-driven culture is a focus on making a positive impact on society by supporting our communities and being a good steward of our planet. You can read more about this on our website, but I'll share a couple of highlights. In terms of the environmental stewardship, we increased the use of renewable energy across our global operations and expanded the number of sites achieving zero [indiscernible] certification, keeping us on track with our long-term sustainability commitments. We also continue to launch more sustainable products to help our customers achieve their own sustainability goals. In our communities, we remain focused on expanding access to STEM education and advancing global health equity. In addition, our engaged colleagues and community action councils had a huge impact around the world through their volunteer activities throughout the year. As I reflect on 2025, I'm very proud of what our team accomplished and deeply grateful to our colleagues for their unwavering passion for our mission which fuels our success.

So let me now turn to guidance. Steve will outline the assumptions that factor into the guidance for the upcoming year, so let me quickly cover the highlights. In 2026, we will continue to actively manage the company, leveraging the PPI Business System to enable excellent operational performance and very strong earnings growth. We are also well positioned to continue our share gain momentum. We are initiating a 2026 revenue guidance range of $46.3 billion to $47.2 billion, which represents 4% to 6% reported revenue growth over 2025 and assumes 3% to 4% organic growth for the year. We are initiating our earnings guidance with an adjusted EPS range of $24.22 to $24.80 per share, which represents 6% to 8% growth in adjusted earnings per share.

So to summarize our key takeaways, we delivered a strong 2025 capped off by an excellent fourth quarter. We delivered another year of excellent operational performance and share gain, reflecting the active management of the company, the strength of our proven growth strategy and the power of our PPI Business System. We advanced our long-term competitive position throughout the year with high-impact innovation, strategic partnerships and disciplined capital deployment. And we entered 2026 with strong momentum. Our growth strategy is resonating with customers and positions us for a very bright future.

With that, I'll turn the call over to our CFO, Stephen Williamson. Stephen?

Thanks, Mark, and good morning, everyone. As you saw in our press release, we had a great Q4 to cap off the year. Throughout the year, the team effectively navigated the external environment and remain focused on delivering for all of our stakeholders. I'll take you through an overview of our fourth quarter and full year results for the total company, then provide color on our four business segments, and I'll conclude by providing our 2026 guidance.

Before I get into the details of our financial performance, let me provide you with a high-level view of how the fourth quarter played out versus our expectations at the time of our last earnings call. In Q4, we delivered 3% organic growth and 8% growth in adjusted EPS. It was another quarter of excellent execution. These results are significantly ahead of the assumptions at the midpoint of our prior guidance on both the top and bottom line. Q4 revenue was approximately $250 million ahead, driven by 1% stronger organic revenue growth and a stronger-than-expected tailwind from FX. Adjusted EPS in Q4 was $0.14 ahead. This is comprised of $0.25 from very strong operational performance, partially offset by $0.11 of higher FX headwind on the bottom line. The FX impact was driven by continued volatility in rates during the quarter due to trade tensions and represented an incremental 65 basis points of headwind to margins relative to our prior guidance. So as I said, a great Q4 with a strong beat to cap off the year.

Let me now provide you with some additional details on our Q4 and full year 2025 performance. Starting with earnings per share. In the quarter, adjusted EPS grew by 8% to $6.57. For the full year, we delivered adjusted EPS of $22.87, up 5% compared to last year. GAAP EPS in the quarter was $5.21, and for the full year, it was $17.74.

On the top line, Q4 reported revenue grew 7% year-over-year. The components of our reported revenue change included 3% organic growth, a 2% contribution from acquisitions and a 2% tailwind from foreign exchange.

For the full year 2025, reported revenue growth increased 4%. Organic growth was 2%, and both acquisitions and FX were a 1% tailwind.

Turn to our organic revenue performance by geography. In Q4, North America grew low single digits, Europe grew mid-single digits and Asia Pacific grew low single digits, with China declining low single digits. For the full year, North America grew low single digits, Europe grew mid-single digits and Asia Pacific grew low single digits, with China declining mid-single digits.

With respect to our operational performance, we delivered $2.88 billion of adjusted operating income in the quarter, an increase of 6% year-over-year and adjusted operating margin was 23.6%, 30 basis points lower than Q4 last year, which includes over 100 basis points of headwind from tariffs and related FX. For the full year, we delivered $10.11 billion of adjusted operating income, a year-over-year increase of 4% versus 2024, and adjusted operating margin was 22.7%, 10 basis points higher than the prior year, which also includes a headwind from tariffs and related FX of over 100 basis points. Throughout the year, our active management of the business and the power of our PPI Business System enabled us to effectively manage the unexpected macro headwinds and continue to grow our adjusted operating income and expand our margins. I'm proud of how the team stepped up this year to enable these results. Total company adjusted gross margin in the quarter was 41.8%. And for the full year, it was 41.7%. The drivers of gross margin are similar to those of adjusted operating margin.

Moving on to the details of the P&L. Adjusted SG&A in the quarter was 15.3% of revenue, down 80 basis points. For the full year, it was 15.9% of revenue, down 40 basis points. Total R&D expense was $357 million in Q4 and $1.4 billion for the full year, up 1% year-over-year, reflecting our ongoing investments in high-impact innovation. R&D as a percent of our manufacturing revenue for the year was 7%. Looking at results below the line, our Q4 net interest expense was $107 million. Net interest expense for the full year was $426 million. The adjusted tax rate in Q4 was 10.5% and 10.4% for the full year. And average diluted shares were $377 million in Q4, $6 million lower year-over-year, driven by share repurchases net of option dilution.

Turning to free cash flow and the balance sheet. Full year cash flow from operations was $7.82 billion, and free cash flow was $6.34 billion after investing $1.48 billion of net capital expenditures. Cash flow was slightly lower than we'd assumed in the prior guide, largely driven by temporary impacts in working capital and the timing of cash taxes. During 2025, we continue to successfully execute our capital deployment strategy, deploying approximately $16.5 billion in 2025. This includes $4 billion for the acquisitions of our filtration and separation business from Solventum and the Stellar fill-finish site from Sanofi earlier in the year. That in Q4, we announced a definitive agreement to acquire Clario for approximately $9 billion in cash plus potential future performance-based payments. We expect to complete the transaction by the middle of 2026, at which point the business will become part of our laboratory products and Biopharma Services segment. In 2025, we also deployed $3.6 billion through the return of capital to shareholders. $3 billion of share buybacks and approximately $600 million of dividends. We ended the year with $10.1 billion in cash and short-term investments and $39.4 billion of total debt. Our leverage ratio at the end of the year was 3.5x gross debt to adjusted EBITDA and 2.6x on a net debt basis.

In concluding my comments on our total company performance, adjusted ROIC was 11.3%, reflecting the strong returns on investment that we're generating across the company.

Now I provide some color on the performance of our four business segments. In Life Science Solutions, Q4 reported revenue in this segment increased 13% versus the prior year quarter and organic revenue growth was 4%. Growth in this segment was led by our bioproduction business, which had another quarter of excellent growth. For the full year, reported revenue increased 8% and organic revenue growth was 3%. Q4 adjusted operating income for Life Science Solutions increased 10% and adjusted operating margin was 35.5%, down 110 basis points versus the prior year quarter. During Q4, we delivered very strong productivity and good volume leverage, which is more than offset by unfavorable mix strategic investments and the expected impact from the acquisition of our filtration and separation business. For the full year, adjusted operating income increased 8% and adjusted operating margin was 36.3%, down 10 basis points versus 2024. In the Analytical Instruments segment, for both Q4 and the full year, reported revenue increased 1% and organic revenue growth was flat. Growth in the quarter was led by our chromatography and mass spectrometry business. In this segment, Q4 adjusted operating income decreased 12% and adjusted operating margin was 26.3%, down 420 basis points versus the year ago quarter. The majority of the year-over-year margin change was driven by the impact of tariffs and related FX and Outside of that impact, strong productivity was partially offset by strategic investments and unfavorable mix. For the full year, adjusted operating income decreased 11% and and adjusted operating margin was 23%, 320 basis points lower than 2024. Specialty Diagnostics in Q4 reported revenue grew 5% year-over-year and organic revenue growth was 3%. In Q4, growth in this segment was led by our clinical diagnostics, transplant diagnostics and immunodiagnostics businesses. For the full year, reported revenue increased 4% and organic revenue growth was 2%. And Q4 adjusted operating income for Specialty Diagnostics increased 19%, and adjusted operating margin was 26.6%, 300 basis points higher than Q4 2024.

During the quarter, to deliver good productivity and volume leverage and had favorable mix, which is partially offset by headwinds from foreign exchange. For the full year, adjusted operating income was 8% higher than 2024, and adjusted operating margin was 26.9%, an increase of 120 basis points versus the prior year.

And finally, in the [indiscernible] Products & Biopharma Services segment, reported revenue increased 7% and organic revenue growth was 5%, with broad-based strength across our research and safety market channel and our pharma services and clinical research businesses. For the full year, reported revenue grew 4% and organic revenue was 3% higher year-over-year. Q4 adjusted operating income in the segment increased 12% and adjusted operating margin was 14.5%, 50 basis points higher than Q4 2024. In the quarter, we delivered very strong productivity and good volume leverage, was partially offset by unfavorable mix, strategic investments and headwinds from foreign exchange. For the full year, adjusted operating income increased 8% and adjusted operating margin was 14%, 70 basis points higher than 2024.

Turning now to guidance. As Marc outlined, we're initiating a 2026 revenue guidance range of $46.3 billion to $47.2 billion, and an adjusted EPS guidance range of $24.22 to $24.80, representing 6% to 8% growth. The guidance assumes 3% to 4% organic revenue growth. A $300 million revenue tailwind from foreign exchange and 50 basis points of adjusted operating margin expansion. All of this will enable a really strong 6% to 8% growth in adjusted EPS. We -- this guidance is consistent with the financial framing for '26 and '27 that we shared with you back in our Q2 earnings call. It reflects a continued improvement in our organic growth in 2016, coupled with very strong earnings growth. The strength of our guidance reflects our industry-leading position, our proven growth strategy and the power of our PPI Business System.

Let me now provide some detailed context behind the guide. The midpoint of our guidance assumes organic revenue growth of slightly above 3%. This is a step-up from 2025. We think this is appropriate to start at 3% at the beginning of the year. As we execute through 2026, we can retire risk as we go and progress higher in the range. Asset on normal practice, we've not included any future acquisitions or divestitures within our guidance. The guide therefore does not include the benefit of the pending acquisition of Careo. As a reminder, we expect this deal to close by the middle of 2026. Should that be the case, we would expect $0.20 to $0.25 of incremental adjusted EPS for this year, reflecting the strongly accretive nature of the acquisition. That would represent roughly 1 additional point of adjusted EPS growth for 2020 and taking the total company growth into the range of 7% to 9%.

In terms of the macro environment, our guidance is based on the tariffs that are in place as of today. It doesn't contemplate any future changes in tariffs not the potential impact on FX rates. Should additional tariffs be levied, as we did last year, we will act with speed and scale to minimize them and provide a usual level of transparency as to their impact. The guidance includes $600 million of inorganic revenue from the acquisitions closed in 2025. In that inorganic period, these acquisitions are expected to contribute $60 million of adjusted operating income. The math of which adds a 20 basis point headwind to adjusted operating margins in 2026. After factoring in the financing costs, they represented $0.07 of adjusted EPS dilution for 2026. These acquisitions are progressing well versus our deal model expectations. We're in the integration and investment phase in 2026, which is setting us up to deliver strong accretion and very attractive returns going forward. To help you with your modeling, here are a few additional assumptions behind the guide.

We expect approximately $500 million of net interest expense in 2026. We assume that the adjusted income tax rate will be 11.5% in 2026, largely driven by the increased earnings. We're expecting between $1.8 billion and $2 billion of net capital expenditures in 2026. The increase over 25% is driven by our investments in U.S. manufacturing. In terms of free cash flow, we're expecting that to be in the range of $6.8 billion to $7.3 billion for the year. In terms of capital deployment, we're assuming $3 billion of share buybacks, which were already completed in January. We estimate that full year average diluted share count will be between 370 million and 375 million shares. I'm assuming we'll return approximately $700 million of capital to shareholders this year through dividends.

Then finally, I want to touch on phasing for Q1. Embedded in the guidance is the assumption that Q1 organic revenue growth will be a couple of points lower than the full year -- this is likely driven by selling days and the expected phasing of our revenue in our Pharma Services business over the course of 2026. And we're expecting low single-digit adjusted EPS growth in Q1. So in conclusion, Q4 capped off a very successful 2025. The team is focused on continuing to maximize share gain, delivering very strong earnings growth and generating great returns from our capital deployment also enable an excellent 2026 and advance our strategy for an even brighter future.

With that, I'll turn the call back over to Marc.

Thanks, Stephen. So before we turn to Q&A, I just want to say a few words. As you know, Stephen will retire at the end of March. Let me start with thank you to Stephen, for all of your contributions to the success of Thermo Fisher and the deep friendship we have developed over the past 25 years. And let me say a heartfelt congratulations on the spectacular career at Thermo Fisher, including being our CFO for the past 10 years. We have played such an active leadership role in our growth and success, and we're all very grateful. What is both so cool and so important is your consistent passion for developing people and also in building a world-class finance function. I'm thrilled to have the opportunity to work with Jim Meyer, who will be taking the reins as CFO in March, having spent 17 years at the company. Stephen, on behalf of all of your colleagues and stakeholders of Thermo Fisher, thank you, and congratulations. We wish you a wonderful retirement. And Jim, congratulations on your promotion.

Thanks, lot, for those incredibly kind words. It's been an honor to be part of that's an amazing company. I'm really excited about my next chapter, and I'm also excited about the continued success of [ Semtech ] with Jim as the CFO. Let me turn it back to wrap to start the Q&A.

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

[Operator Instructions] Our first question comes from Michael Ryskin from Bank of America.

Great. And first off, on your remarks comments, congrats, Stephen. It's been a great run. It's been a pleasure working with you and wish you all the best going forward. Maybe I'll start with a high-level 1 on the guide. As you laid out, you guys had a framework previously that you talked to and the guy follows in that range. Just -- but still, you're talking about the acceleration from 2% you did in 2025 organic to 3% to 4%, just can you talk a little bit more about what's underpinning that? What gives you confidence that reacceleration any particular end markets or customer groups that where you're seeing the most improvement in activity as you look ahead? And I have a quick follow-up.

Sure. So Mike, thanks for the question. When I think about the way we are opening up our guidance for the year, we're actually assuming market conditions are going to be pretty similar to 2025. As a reminder, we had just under 1 point of pandemic runoff in our 2025 results. So adjusted for that, we roughly had 3% growth last year, and we're assuming that we're going to be in the 3% to 4% range. And as Stephen said, start with the assumptions around 3. What we expect over time in this 2-year time frame is that just the absence of the negatives will start to allow for conditions to improve and build within that range. But we don't want to make any major changes into the markets to start the year. There's lots of things I'm optimistic about actually just based on how January is in terms of customer meetings and so forth. But we just want to set ourselves up in the industry for success this year.

Okay. And then maybe as a quick follow-up. Again, Stephen, you referred to that prior framework you gave on the 2Q guide last year at the time. I think you talked about 3% to 6% over the course of 2026 and 2027 combined. I just want to make sure that entire framework is still intact, especially how we think about next year about 2027, nothing has really changed in your forward outlook there.

Yes. I think when we gave the back of the time when we gave that framework, and where we are now, yes, we see it consistent in terms of about the future, and we're executing towards that. So yes.

And what I would add is that one of the key focuses back in April is that irrespective of market conditions, we were just going to deliver great earnings growth, right? And we did a great job of navigating 2025. There was a lot of headwinds around tariffs and so forth that we just worked our way through in delivering 5% EPS growth for the year. I feel very good about in our opening position with effectively around 3% growth. We're assuming 6% to 8% of EPS growth without any of the capital deployment embedded into that. So that's what we can control. That's what we're going to deliver. And I'm optimistic about the progression of the industry as well, but we wanted to keep ourselves focused on controlling our destiny, which is a great earnings growth, drive share gain, and that's going to serve us well. Thanks, Mike.

Our next question comes from Dan Arias from Stifel.

Mark, I wanted to ask about biopharma here. One of the idea seems to be that sentiment on spending at a high level has improved just because these companies are seemingly breathing a little easier now that you have some of these MFN deals in place. I'm just curious, are you finding that that's actually translating the spending plans or '26 pharma budgets actually looking better to the extent that you can tell with these meetings that you're having so far?

Yes, Dan, so it's a great question. So we have a really unique set of capabilities to serve pharma and biotech, right? When I think about the year last year, mid-single-digit growth. Obviously, we had some headwinds around the final roll-off of the pandemic embedded in that. to finish the quarter, the last quarter at high single digit. Our team is doing a great job. And our customers really value a trusted partner, and I'll come back to that in a moment. So when I think about the tone of what we heard in the health care conference and certainly in my meetings in Europe in January, so quite a number of customers. Pharma consistent with what we've been hearing for a while, which is good confidence around the ability to navigate governments and feel good about the things that have been agreed to and excitement around their pipeline. So the tone feels good in pharma. And I think that ultimately we'll see that in activity. And then from a biotech, you're seeing the data to show that funding is starting to improve, but the tone was incredibly positive. Now there, of course, is a lag between when funding flows and when money is spent. But I would say January in terms of what the sentiment is in our customer base was quite positive. Trusted partner is the other aspect of it, right? The one is what is the industry and two is what is our role in all of this. When I think about trust department, I've talked about it for a number of years. And so what does it really mean? And I thought maybe two anecdotes might be helpful to just bring it to reality, right? Because we see lots of customers in all of our industry peers do. So I was at a health care conference. I was meeting with the CEO of one of our larger customers and discussing objectives for the year, where we can be helpful with the challenges. The discussion was so positive that he literally said, can we go and find my head of development and -- which we did. And let's talk about the specifics, right? Literally, just kind of real time, we track is peer down or is colleague down, and we got into the details and the right follow-ups happen from that. And if I think about spending a half day with the management team of one of our larger biotech customers and just working through systematically about what are their priorities, how we can help them. And then the long list of follow-ups about what the new opportunities are, and why that's so relevant to their success. I hope that brings that a little bit more to life, and it's across our whole management team were having these dialogue, right? And that's the supercold thing about our role in pharma biotech, and why we're so well positioned there.

Yes. Okay. Helpful perspective. Maybe just to sort of summarize the point that you kind of touched on there, mid-single-digit growth in 2025 in pharma in a year with some obvious headwinds. Is mid-singles plus the right way to think about things or something different?

Yes, I think this is the right way to frame it. There's obviously different ways we can get to the 3% to 4%, but that's a way to find the year as it stand here now.

Our next question comes from Jack Meehan from Nephron Research.

I wanted to build off of where Dan left off, but focusing on the LPBS segment. So in Pharma Services, Marc, how are you feeling about industry supply demand dynamics entering 2026, and any color you can churn what's reflected in the guide for that business?

Yes. So when I think about our Pharma Services business, really executing very well. As a reminder, we have the leading positions in the drug product Stellar fill-finish and in our clinical trials logistics packaging business. And we have a smaller position, but meaningful in biologic drug substance as well. So when I think about industry demand capacity, really Stellar fill-finish has been the area where there is heightened demand relative to industry capacity as part of the reason that we acquired the Sanofi site in New Jersey. It's really in a way a capital project to expand our capacity. We're winning contracts to meet our pharmaceutical customers' needs for reshoring to the U.S. So the demand profile is good, and our businesses had a strong year, and we'll continue to step up in growth over the next couple of years. So well positioned there. And I would believe that, that will continue to be a nice contributor to our long-term growth in this business.

Excellent. Okay. And then next, I wanted to talk about the channel. So if you do some relatively simple benchmarking. It seems like you're doing pretty well there competitively. I was wondering if you can just talk about what's resonating in terms of investments you've made there? And do you see this advantage as stable or expanding weakening entering this year? Just any color on that business would be great.

Yes, Jack, thanks for the question on our channel business. So think about how we serve the research and safety market. It's a business that performed well for us for a long time. We have an excellent portfolio of supplier partners that has what our customers need. And you see the strength of the performance broad-based. We've done well in pharma and biotech in terms of winning business. We have done well in serving industrial customers. We call that out. And while academic and government is certainly more pressured as the end market is, actually, our share position has been quite stable there. So I think competitive dynamics remain pretty consistent. We've been a methodical share gain over many years, and that trend continues. And we'll continue to do a great job serving our customers and helping them meet their innovation and productivity needs.

Our next question comes from Matt Larew from William Blair.

Since you launched Accelerator in late 2024, a number of pretty big changes in the drug development and manufacturing ecosystem in terms of manufacturing regionalization, rising use of AI and drug discovery. Marc, you referenced outstanding customer adoption of that solution. Just curious how some of these ecosystem changes are affecting customer preferences for outsourcing in general, and I guess more specifically in the accelerator offering?

Matt, great question. So when I think about -- let me start with this clinical research more broadly, and then I'll delve into change and a little bit about Accelerator. So the clinical research business for Thermo Fisher is performing very well. And the year played out really exactly as we thought it would play out. And with a steady progression of revenue building sequentially quarter-over-quarter and then returning to growth in Q3 and mid-single-digit growth in Q4 organically and and authorizations have been far ahead of our revenue throughout the year and is showing the strong momentum in our competitive position. So when I think about accelerated drug development, which was something that we worked on creating for almost three years. We launched it in the fourth quarter of 2024. What it really is about is how do you shave a week off here, a month out there? How do you get waste out of the system and ultimately meaningfully bring the drugs to market more quickly or have insights or the drug is not performing well, and therefore, end of clinical trial more quickly, both of which add value to our customers. And it's really resulting in very meaningful authorizations wins for both our clinical research business and new total contracts for our Pharma Services business. So it is a differentiated capabilities. It's one that we've really worked hard to understand where the best opportunity is and then apply it to customers. When I think about how we are collaborating with OpenAI really focused on the clinical research side of the thing, the equation is how do you further save time and cost out of the process? And have even more insights. And that's going to be a journey because it's a highly regulated industry, and we'll go on that journey with our customers and look for new opportunities to drive an even more efficient drug development process. And our experience is the higher the returns our sponsors get on their investment, the more indications they want to go after in terms of the scale of the clinical trials, and they actually in a way, pursue their pipeline more aggressively. So we're really excited about what the future holds in terms of drug development more broadly, both in the manufacturing of the medicines as well as executing the clinical research.

Okay. So encouraged about drug development activities. But thinking about the drug discovery side, I think still some debate about whether AI as a headwind or tailwind to the amount of lab work moving forward. Just would be curious what your experience is better with the customers, be it AI first biotechs and the larger pharma companies that were perhaps more aggressively using AI, and what you've seen about their wet lab activity, their demand for instruments, et cetera.

So what we're seeing is a recovery in the early research part of our business in terms of demand for the bioscience reagents the basic R&D labs and pharma from the channel. So you're seeing that methodically strengthen. Some of that will come with biotech funding as well as that improves. What I would say is on the application of AI, we're doing a lot of work with customers on the wet lab, dry lab combination, meaning that we're actually working with our customers to better link what goes on in their wet labs with their data management and insights from AI. Our experience to date and certainly our experience historically is the more confidence you have in the research, you wind up doing actually more wet lab experimentation. You're probably going to work on less things that are just going to fail. So there is some waste that comes out of the system. But customers want to have total confidence in the work they're doing, and that's been our experience. And so we're actually quite optimistic about the intersection between AI and the demand for wet lab research. Thanks, Matt, for the questions.

Our next question comes from Casey Woodring from JPMorgan.

And first, I just want to reiterate the comments. Congratulations, Stephen on retirement and Jim, looking forward to working with you moving forward. Wanted to touch on Analytical Instruments performance in 4Q. Curious on how the performance played out relative to your expectations in the quarter. Obviously, a tough comp, but curious to hear what you're seeing in that business across the different regions and end markets and whether you saw a budget flush in the quarter or any sort of stimulus in China?

Casey, thanks for the question. So the analytical instruments team did a really good job in the fourth quarter. As you said, we had a more challenging comparison and we were flat growth in the quarter, and we grew modestly in the full year. So -- and when I think about that dynamic. That's in a dynamic where you have pressures on academic and government funding. You also have pressures in China more broadly throughout the year. So two of the important sectors of that part of the business faced the headwinds, we did very well with our pharma and biotech customers. So I feel good about that. And I feel good about the performance in aggregate. For us, a lot of what drives it is the quality of our innovation and the impact, right? We have an incredible year, right? And if you think about where I allocated time even in my remarks today, I spent more time on innovation than anything because customers want those breakthrough solutions that matter, right? And whether it was what we're doing in mass spectrometry, the next generation of our cryo electron microscope or tomography and structural biology for all of those insights that we're bringing, that's what drives demand there. So the business is well positioned we're applying AI to the capabilities as well and announced an interesting collaboration with [ Navidea ] at the beginning of the year. And so we'll continue to strengthen that business, and it's an important part of our company.

That's helpful. And then relatedly, as we think about your analytical instrument end markets, the U.S. academic market, specifically there, Marc, at our conference a few weeks ago, you had talked about the expectation for U.S. academic and government customers to really remain cautious until a finalized NIH budget this passed and then for spending to increase thereafter. I guess what's assumed for U.S. academic and government growth in 2026? And really how quickly would you expect spending to pick up after that budget is finalized. Last year, we saw a bit of discrepancies between fund appropriations and ultimate spending with tools. So just any further color on the expectations for U.S. academic and government in 2026.

Yes. So Casey, when I think when we -- first globally, our assumption for academic and government embedded in our guidance is similar conditions to last year in aggregate, right? And when I think about the U.S. environment, our assumption here is that there will be a level of customer caution, that will probably abate as the year goes down. But I would still assume in our guidance, it will be a more cautious environment as customers are navigating the landscape. It seems likely that we'll get a flat to slightly up NIH budget. That's going to be a good point in time exactly when that happens, TBD. So that should create tailwinds. So when I think about over the next couple of years, I would expect that, that will be one of the drivers of us higher in the range. But for now, our assumption is that relatively cautious for 2026. So thank you, Casey.

Operator, we have time for one more question.

Our last question comes from Dan Brennan from TD Cowen.

Stephen, obviously, congrats, nice working with you. Maybe just one housekeeping, and then I'll follow up with more of a deeper question. Just on the housekeeping. So Stephen and Marc, you want investors to put like 3% -- started 3% for 2026 and around 1% in the first quarter for organic. Is that right?

That's what I indicated in my script that how I think about year? And then we -- yes.

Terrific, okay. And then Marc, I just wanted to ask maybe 1 more follow-up just on biopharma, given it's your largest end market, obviously and really strong growth to finish out the year. I know you've mentioned a couple of times the guide doesn't assume any change in end market conditions. And I know Dan asked this, but I think most of us are hoping or assuming that with all these deals in place and the level of, obviously, cautious is we think, has persisted that there will be some increase in spending. So I'm just wondering, you obviously you mentioned the commentary that you had with that one customer that was pretty favorable. So is that just conservatism or maybe you are outpunching the market in 2025, so that for you, really, its not going to be any change even if the environment gets better. Just wondering if you can kind of maybe speak to that a little bit.

Truly appreciate the question. So when I think about -- we've been consistently gaining share. So I love creating difficult comparisons. That's our job. So that's a good thing. And we'll continue to build our momentum in pharma biotech. I think the way we're viewing the year is, we're starting out with market conditions are roughly the same as last year in aggregate. And we don't have the repeat of the -- another repeat of the roll off of the effect of the pandemic last of the revenue, right? So that's the starting assumption. And as Stephen said, our goal is to retire risk as the year goes on and work our way up in the range. And when I think about what would be the factors that would drive that is largely going to be, as you said, pharma and biotech, biotech in particular, as funding flow. There is a lag between when funding close and when money is spent, usually in roughly 6 months on average, but that bodes for a strengthening environment. And one can envision that it continues to strengthen into the following year as well. But I think just we all learned a lot over the last couple of years, I think starting out with prudent set of assumptions to start the year is helpful. We're going to just deliver great earnings growth, right? I mean we're not looking at what the market is going to be. We have a plan to deliver 6% to 8% growth plus the benefits of capital deployment, and we're excited about Clario. So we're setting ourselves up for the right way to start the year and ultimately, '26 will be another year of excellent performance with Thermo Fisher Scientific.

So Dan, thank you for the questions. And let me from here, I'll just wrap up with -- thanks, everyone, for participating in the call today, and I think you got a sense from our enthusiasm. We entered this year in a great position to deliver an excellent 2026. Of course, thank you for your support of Thermo Fisher Scientific, and we look forward to updating you as the year progresses. Thanks, everyone.

Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.

All right. Great. Welcome to the JPMorgan Healthcare Conference, Everybody. My name is Casey Woodring from the Life Science Tools & Diagnostics team. Pleased to be joined by Thermo Fisher's CEO, Marc Casper. Marc is going to run through the corporate presentation, and then we'll leave room for Q&A afterwards. Marc, all yours.

Casey, thank you. Nice to see everybody here this morning in San Francisco. Great to be back at the JPMorgan Healthcare Conference. I'm Marc Casper, Thermo Fisher's CEO. And what I thought I would do is, first, reorient you very briefly to the company, talk about our progress in 2025 against the goals that we articulated here a year ago and then finish with an outline for our goals for 2026. We'll cover our financials and performance from that perspective at the end of the month when we report our results and give our guidance for the upcoming year.

So as a reminder of the Safe Harbor statement and the use of non-GAAP measures, you can find the reconciliations on our website in the Investor Relations section. So the key takeaways from my remarks this morning really break down into the -- looking backwards and then looking forward. So when I think about 2025, it was a year of excellent performance. Operationally, the company really stepped up and navigated the environment incredibly effectively. You saw the consistent and active management throughout the year. At the same time, we significantly advanced our growth strategy. And that has allowed us to create value and strengthen our short- and long-term competitive position. And then ultimately, it was an active year of capital deployment where we're able to create long-term value through those actions as well. So a very successful year in 2025.

When I look ahead to the year that we're in, it's always helpful to remember that we serve attractive end markets with demand trends that are improving, which supports the improvement in organic growth from the current levels that we're operating in. So I'm quite excited about the next couple of years in terms of how the end markets will progress. And at the same point in time, we're incredibly well positioned to achieve strong adjusted EPS growth in the environment that we're navigating.

So to reorient it to the company, we continue to evolve, to change and to strengthen our competitive position. We are the world leader in serving science, right? We serve science. We serve our customers. We have leading brands that are well respected by our clients. And I always enjoy the JPMorgan Conference because so many of our clients are here, and it's a wonderful opportunity to connect and refine our plans for the upcoming year.

We are the industry leader in terms of scale, $44 billion in revenue, 120,000 colleagues in our product-related businesses, we invest about $1.4 billion in R&D every year. We have incredible relevance to our customer success, right? I mean that's really the thing that matters, right? We make a huge difference in enabling their success with our innovative technologies, our deep applications expertise and the comprehensive service offering that we have.

When you think about how our customers look at us, they think of us as their trusted partner to enable the important work that they're doing. Our company is passionate about finding a better way every day, right? We feel accountable to make today better than it was yesterday, and that's powered by a deeply ingrained business system called PPI, our Practical Process Improvement that allows us to deliver outstanding execution over many years.

Our mission. With 120,000 colleagues, they're fired up to come to work every day, right? It's because of our mission. We enable our customers to make the world healthier, cleaner and safer. And enable is the key word, right? Our customers get the headlines, and we're proud to play that role behind the scenes to bring those new medicines to market, the new diagnostics to make progress on a cleaner and safer world. And these are all things that our technologies and expertise plays a meaningful role across the globe.

And when we think about our end markets, we have a rich set of opportunities to enable our customer success. We serve 4 end markets. Pharma and biotech is our largest, about 56% of our revenue. The other 3 markets are roughly the same size, diagnostics and health care, where we enable cost-effective diagnostics ultimately to lead to better patient care and powering precision medicine. In academic and government, we enable the advancement of new science, if you will, and the insights that it unlocks. And in industrial and applied, we serve a number of markets very focused on advancing -- advanced materials as well as in the clean energy area.

Our market is large, $270 billion is underpinned by attractive fundamentals. We have about 20% market share in aggregate when you think about our competitive position. And what drives our market is we're all getting older, right? Increasing demand for health care. And if you look at the demographics of the world, you see an aging population that will drive an increased need for affordable health care, and we play a large role in supporting those efforts. There are amazing advances in life sciences and precision medicine that are creating new options on how to treat people.

Many of you have heard me talk about the golden age of biology. It is an incredible time in terms of understanding and applying knowledge in a new way to make a difference for society, and that ultimately drives meaningful growth in our industry. Our largest customer base, biopharma, is increasing the need for expert partners right? When they think about their goals of increasing or shortening the time to market and reducing the cost of developing a medicine, they're really looking for expertise in that journey and given the complexities of pipelines, that creates real demand for our industry and opportunities that can improve the returns on investment in the drug development process also will drive expertise and demand from the life science tools and diagnostics industry.

And then ultimately, in the material science area, the breakthroughs that are happening also, whether it's in semiconductor, whether it's in AI, spurs interest in our industry and ultimately demand. So we serve a good market that have long-term durable trends. And when I think about all of that in the context, we're able to execute at a very high level because of the PPI Business System. It was introduced in the company in 2002. It's who we are and how we work. And most importantly, it's the culture and the mindset of every colleague of finding a better way every day. And it improves our productivity, our quality, our customer leads.

And ultimately, the results that it delivers is competitive advantage, successful acquisitions and differentiated financial performance. It really is the secret sauce behind Thermo Fisher Scientific. When you take that combination of attractive end markets, a unique trusted partner status with our customers, a disciplined business system, we have a track record of delivering exceptional financial results. If you look back over the last decade, we've averaged a 10% growth in the top line and have been able to convert that into low double-digit growth in both adjusted earnings per share and free cash flow growth as well over the decade.

So a year ago, we were together, I actually think in this same room and many of the same faces. So it is truly great to see you. And what we talked about was these goals. From a revenue perspective, execute on our growth strategy, which is a proven strategy to drive share gain, right? And that was a combination of advancing our trusted partner status as well as launching incredibly relevant high-impact innovation. Operational excellence, deliver differentiated performance through our PPI Business System, effectively execute our capital deployment strategy and progress our corporate social responsibility initiatives, right?

And ultimately, our goal for the year was to deliver excellent performance in 2025 and enhance our long-term competitive position. So I always like to give the report card, right? And I always view ourselves as tough graders, and I'm very proud of what the team accomplished last year. I think in any assessment, I actually think the market environment is incredibly important to understand what the world looked like. At this conference a year ago, the optimism was very high, right, across really a very positive sort of first week in January, second week of January. And ultimately, the industry, our customers, in particular, had to adjust to a series of new policies that created uncertainty, right?

So if you think about February through April, there was a lot of change that occurred. And what I would say is that our customers navigated that environment incredibly well, right? I'm not surprised by that, but they rolled up their sleeves and really figured out how do they thrive in the environment. And we, as a key enabler, actively manage our company, so we'd be the right partner for them in the environment and for all of our stakeholders, including our shareholders. And when I think about it, the environment was different than what we thought, but it was one that we were built to thrive in and we did. And I'm very proud of those efforts.

So on the top line, an incredible year of new product launches, right? And this is just a small snapshot. And on every earnings call, I try to highlight a few. And it really is important because our customers are doing incredibly important things. They want the right tools to enable their work, right? And in terms of the golden age of biology, great new Mass Spectrometer launched, sold a record number of Astral Zooms, a great complement to the work that we're doing with our Olink Technology as well in terms of proteomic analysis. And research and discovery, very meaningful launch of our next-generation Cryo-electron microscope to really provide insights down at the molecular level, what's going on at the molecule level.

From a drug development perspective, a very strong set of launches in our Bioproduction business to enable fully scalable bioreactors. What's incredibly important about that is you go from the bench shop in the early stage all the way up through the largest single-use bioreactors at 5,000 liters with the exact same technology and performance characteristics. That has really become the expectation of the customer base and it really is driving great growth for our business. In precision medicine, in terms of cancer and oncology and the diagnostics that we were able to get FDA approval and FDA clearance on, a very, very meaningful year in terms of patient care, right, in terms of our next-gen sequencer getting FDA approval as a companion diagnostic.

And with our EXENT Solution for multiple myeloma diagnostics, really another area where we've had great progress in terms of the FDA. And then from a materials perspective, we launched the Thermo Scientific Vulcan Lab. So the Vulcan Lab is an automated system to allow semiconductor customers to understand what is exactly going on in the fab. And it's their way of identifying quality control. And you cannot quite visualize with any slide. You have to actually walk through an enormous building and all you see is Thermo Scientific electron microscopes and effectively a lights-out operation. All of the samples come in automated, all of the analysis done, and you see a couple of technicians just making sure that everything is running smoothly with an incredible fleet.

And that's really what the deep understanding of how we know our customers work to ultimately deploy innovation to make a huge difference for our customers. From a trusted partner status, another key element of our growth strategy, it was a very strong year, right? In an environment that was changing, we stepped up and helped our customers navigate that environment. Through the first 9 months of the year in pharma and biotech, we delivered mid-single-digit organic growth in terms of our performance to that customer base, and that was well ahead of where the industry was. And the interactions with our customers have been very positive, and it really is creating new opportunities for us to drive market share gains and lots of examples of different collaborations that we're always talking about as case studies in the year that I'm very proud of how we progressed those relationships with our customers.

So the top line was very strong. The second element of a good year was how the PPI Business System helped us navigate the world. And as soon as we started to face tariffs and some changing environment, the team stepped up, right, and really delivered meaningful additional cost actions to appropriately navigate the environment. We increased our cost reduction target by about $300 million back in April, and we were able to exceed that performance during the course of the year. And that's beyond the normal level of reductions and increases in productivity that we have. We just felt it was the right thing to do, and the team did a very good job of delivering strong bottom line performance.

So top and bottom line, very strong. When I think about capital deployment, it was an active year. I always think about putting it in context, right? And when you think about our capital deployment strategy, it's focused on strengthening the company and creating long-term shareholder value, right? And from an M&A perspective, we completed the acquisition of Solventum's Purification and Filtration business. We closed that in September. We also acquired a manufacturing site from Sanofi to expand our drug product capabilities in our clinical development and manufacturing organization. We announced a $9 billion acquisition of Clario, which we expect to close before the middle of the year.

We were active in investing in our business. In addition to the R&D investments that I highlighted earlier, we invested over $1.4 billion in capital into our business, and that all fuels long-term high ROI investments. And as always, we were active returners of capital, $3.6 billion between buybacks and dividends. And when you think about it in the context of the last decade, we've distributed $4 billion in dividends, growing our dividend every year. We've repurchased $20 billion worth of our shares, and we've deployed $50 billion in terms of M&A. So very active and consistent with our long-term targets that we've had.

When you click a bit deeper, Solventum is a great complement to our Purification and Filtration business is a great complement to our Bioproduction business. We have leadership in cell culture media, leadership in single-use technologies. This is our entry into filtration, and it's a good platform that we can grow over time. Last year, the business was expected to generate about $750 million on a full year basis, both pre-acquisition and post close. And as we integrated into our company, we expect it to be a mid- to high single-digit organic growth business and delivering meaningful synergies by year 5. So it's a really important business in terms of serving our customers' unmet needs.

We also did a smaller acquisition, but very relevant and topical because of the U.S.'s focus on reshoring pharmaceuticals to the United States. And we are the market leader in serving sterile fill finish, which is the final form of biologic medicines and injectables. And we bought Sanofi site in Richfield, New Jersey to expand our U.S. capacity, and that will allow us to reaccelerate those reshoring efforts for other clients. And it's a really nice acquisition and highlights the nature of the partnership that we have with Sanofi. So an exciting addition to our portfolio.

And then finally, we announced the acquisition of Clario, a meaningful acquisition, a technology leader in endpoint data solutions, has differentiated technology, advanced AI capabilities, proprietary data assets and incredibly deep scientific expertise. And the business is expected to generate last year about $1.5 billion of revenue. It is a business that is high growth. It will be accretive to our organic growth as a company. It has high margins and it will be accretive to our margins, and we expect it to have double-digit return profile as well. So a really exciting acquisition. It will be meaningfully accretive from an EPS perspective and further strengthens our position as the trusted partner to the pharmaceutical and biotech industry.

Customer feedback has been incredibly positive, right? When I think about the dialogue, our customers can't wait for the transaction to close. And that's exciting, and we look forward to that milestone that's coming up this year.

And then finally, in terms of the recap on the year, corporate social responsibility. It's important to our customers. It's important to our colleagues, and we're committed to it. And when I think about the year, we're active in our communities in terms of facilitating education of children around the world, a passion around health equity and using our technologies to bring health care and access to health care to those that can less afford it. And from an environmental stewardship, another year of great progress.

Today, over 56% of our global electricity is sourced from renewable energy. We're on track to hit our target of 80% by 2030. 33 of our sites have now achieved zero waste status. So really a very strong year in terms of environmental stewardship, and we advanced our corporate social responsibility initiatives last year. So a successful year and my gratitude to the colleagues at Thermo Fisher Scientific for delivering against those goals.

So let's look to the future, 2026. One of the things if you go back and look at the company, you have a consistency of strategy, a consistency of focus and an ambition to be meaningfully better in the current year than the year before, right? And when you think about the goals, we're going to focus on executing our growth strategy, right? And we're going to gain market share. When I think about that is a blend of advancing our trusted partner status as well as another year of just awesome innovation, right? We're excited about the product launches that are on slate for the year, and we can't wait for them to get out to the hands of our customers.

From an operational excellence perspective, of course, we're going to actively manage the company and leverage the PPI Business System to have outstanding execution. But we're also going to be very active in deploying advanced AI capabilities to drive additional cost productivity as well as further differentiate our products and services. We've announced a number of collaborations, one with OpenAI, one with NVIDIA, all to continue to position the company for long-term success.

We're going to effectively execute our capital deployment strategy. We'll deliver the strategic and financial benefits of the 2025 acquisitions and the ones that we'll close this year, and we'll continue to execute against that strategy. And of course, we'll progress our corporate social responsibility initiatives. Our goal is to deliver an excellent 2026, enhance our long-term competitive position and create meaningful value for all of our stakeholders and our shareholders. And when I think about the year, incredible excitement about what's ahead. And having had the opportunity to be with our extended leadership team last week, we're already up and running and ready to go for a great 2026.

So with that, look forward to Casey, the dialer.

All right. Great. Thanks, Marc. That was a great overview. I guess during the presentation, you described how Thermo Fisher progressed its strategy through 2025. So Marc, let's spend a little time here just to start. Let's talk about 2026, how the company is positioned into this year? Why investors should be excited about investing in Thermo Fisher?

Yes. So when I think about '26, I think we start with the market context, right? Just how do we think about the industry, right? There's great excitement in our customer base. Biotech funding is improving. You're seeing some announcements that, that generates an investment cycle. The pharmaceutical industry feels very confident about how they're working with the U.S. administration and there's confidence in investing in their pipeline. So the large customer base is excited. The understanding of biology has never been better. That creates new opportunities in the pipeline.

So I actually see an improving set of end markets. It will be methodical, but moving in the right direction. And our company has never been stronger. We entered this year with incredible momentum. We delivered a very strong 2025. Our team is very confident about the strategy, the expectations of what excellence is, and we're just getting going in terms of what's ahead of us. And this is a great year for the company. And we have a proven growth strategy, and we supplement that with smart capital deployment that creates additional value. So 2026 will be a special year.

Let's turn to your largest end market here, pharma and biotech. Marc, can you remind us how Thermo Fisher serves pharma and biotech customers across the value chain? And give us a sense of how that part of the business has performed year-to-date in '25? And as a follow-up, how have customer conversations evolved following MFN? And what are some of the -- what you're seeing near term and long term in terms of reshoring opportunities?

Yes. So if I think about how we serve pharmaceutical and biotech, we equip the labs, we resupply the labs. We provide deep technology and applications insight into the biology for our customers. We help our customers design their clinical trials. We execute those clinical trials. We help our customers develop the physical medicine. We scale it from a concept all the way through commercial manufacturing, whether we do that in our own facilities or we do that through our enabling bioproduction technologies. And we've put together a set of capabilities that nobody else has in terms of the unique position that we have in the market.

So a very comprehensive set of relationships across our biotech and pharmaceutical customers. When I think about the tone and what customers, how they feel, I think as we said earlier last year, customers were confident that they would be able to navigate the environment successfully. That's different than actually navigating the environment successfully. So I had high confidence, they had high confidence, but they actually have navigated it very successfully. And that's the important thing, right, which is the agreements that have reached out provides clarity and certainty and an excitement about investing in pipelines, and you're seeing the spillover effect into biotech.

And so I actually think the environment is very strong. And then ultimately, in some of those commitments, as you know, there's a very big focus on reshoring more production and activity in the U.S. And that is going to be a tailwind in '27 and '28 for this industry, right? And the way that we participate there, Casey, is in 2 very different ways. Our Pharmaceutical Services business, which is our contract development and manufacturing business, has won a number of contracts to help customers move production from Europe or Asia to the U.S., right?

And the fastest way for a client to do that is actually to use existing capacity. And so we're winning new business. And part of the reason we acquired the Sanofi site was really a capital expansion, if you will, to be able to help customers do that. But in the midterm, meaning in the '27, '28, as new facilities are built, our technologies will be spec-ed in bioproduction, our instruments will equip the labs. And so it will be a meaningful tailwind over time in our industry, and we're excited to support our customers' efforts in that.

That's a good segue into talking about a few of your businesses, maybe starting with Pharma Services, your CDMO business. Marc, can you update us on how Pharma Services has performed year-to-date through '25 and the level of visibility that you have as we look ahead to 2026? And as a follow-up to that, given the administration's focus on domestic manufacturing, the backfilling of legacy COVID programs, your planned capacity expansion through Sanofi that you just mentioned, how should we think about the opportunity set for Pharma Services going forward?

Yes. So if I think about the long-term growth characteristics of our Pharma Services business, it's a high single-digit growth business is the way I think about it. There'll be times that might be a little bit above that. There'll be times that will be a little bit below that. But it's an incredibly strong business. We have leading capabilities in drug product on the sterile side. We have leading capabilities in all of the clinical trials, logistics, packaging, comparator sourcing, all of the things to run a clinical trial as well as important offerings in drug substance as well.

So when I think about that business, it has benefited, as I said earlier, about the reshoring efforts. But it's also benefited from just really strong consistent execution, right, in terms of just doing a good job for our customers and doing that in a way that reduces the capital intensity required within the innovators. And so it's been a really strong business. Obviously, it took time to work through the repurposing of some capacity from COVID vaccines to other capacity, but that's behind us. So if I actually think about over time, the growth prospects here really pick up, and we're well positioned within that business.

Let's turn to bioproduction. Growth here has been strong and consistently above many other industry participants. So can you just talk about what's driving that performance? And then maybe touch on how the addition of the legacy Solventum Filtration business is really expected to enhance your bioproduction portfolio moving forward?

Yes. So when I think about bioproduction, so I break down that industry, if you will, it's an attractive industry into 4 segments: the media and serum and the supplements that go around that. We're the market leader. The single-use technologies that are used in the production of medicines, and we are the market leader. When you look at the purification in the resins business, we are a niche player with a rapidly growing business. So we win a large proportion of new molecules, but we're not the industry leader today, but we have a business that's growing well with an incredibly bright future.

And in filtration, we had not been a market participant. One of the lessons of the pandemic was, as a company, we are incredibly focused on customer success. And you have to think about how do you price and what message are you sending to your customers, especially when they're dependent on you. And we took a very much customer-focused methodology through the pandemic.

Some of the players in the Filtration segment took a huge opportunity to raise pricing in a meaningful way. It was noted by the customer base. And when we had the opportunity to buy Solventum's business, customers are excited. I mean, they're really excited about specking us in, and it's going to be a business that does incredibly well. So it's a business that's performed well. We've gained share over many years. It's growing last year and at least through the first 9 months in the mid-teens organically, and I'm very proud of the team's performance.

Let's shift to your Clinical Research business, the CRO. From an organic revenue growth perspective, the year has been playing out pretty much in line with how you framed it last year at this time at our conference. So what really stands out though is the strength in bookings really across the business. So Marc, can you help us understand what's driving this momentum? And then looking ahead, how should we think about the sustainability of that demand and the implications for growth and visibility as we move through 2026 and beyond?

Yes. So Casey, when I think about clinical research, in a way, it's a business where you have a tremendous amount of visibility, right? You get an authorization, it takes you many months to get any revenue from that and a couple of years until you're really at run rate. So you can see the pattern of how the business is going to perform. And when I look back at last year through the first 9 months, it performed exactly as we expected. It was a business that we expected authorizations to be very strong, meaning new wins, and we expected revenue growth to progress each quarter, and it did. So the business returned to growth and authorizations were well ahead of revenue and very well positioned.

So why are we gaining share? Because accelerated drug development capabilities, the insights that we have for how the physical medicine is made and ultimately how you do the clinical research and how do you shave time out of the process, it's real, right? Customers understand that. We've won an enormous amount of business because customers believe that they will get to market faster because they work with us. And the momentum there is very strong, and there are a number of fine peers in the industry, and we've carved out our role and approach, and it's working well, and that business has a lot of tailwind as we enter 2026.

Maybe turning to your Analytical Instruments business. Year-to-date organic growth has been running at a positive low single-digit rate with mid-single-digit growth there in 3Q. Marc, can you talk about what's driving performance in both Mass Spec and Electron Microscopy? And then separately, how are you seeing customer demand trend here? And how should we think about performance going forward?

Yes, it's all about innovation, right? If you think about who are the customers, right, for our instruments, it's really the leading researchers in the world, whether they're in academia, whether they're in the pharmaceutical or biotech industry. If you're doing research and your goal is to publish or you're doing research and your goal is to develop and -- discover and develop a new medicine or a new diagnostic, you have to have the best tools where effectively your odds of success are meaningfully lower.

And when you think about the products that we launched and the relevance that it brings, whether the funding environment is strong or whether the funding environment is weak, the best researchers around the world get funding for the tools that they need to do their cutting-edge research, and that has served us incredibly well. The Astral Zoom, the Cryo, the Krios 5, these are great products that unlock insights that drive demand. The funding environment is actually quite muted, right? You have hesitancy in the U.S. academic environment. You have China going through its own economic recovery. So the end market isn't strong, but the team has done a nice job in terms of being able to grow the business.

You touched on academic and government customers there. So let's turn to that end market. Marc, can you comment on the latest -- your latest view on customer activity really across your key regions? And then as a follow-up, you were one of the first to really flag that the fiscal 2026 NIH budget might come in about flat. While we don't have an official budget yet, what's your latest thinking there?

Yes. So academic and government is about 15% of our revenue. About half of that is in the U.S. And so when I think about the environment, last year, really the U.S. was the focus for certainly investors and certainly for us in terms of the changing environment. What I would say is I think there's a reasonably high level of confidence that we will have a flattish NIH budget. That will be perceived quite positively by the customer base.

I still think we're seeing a level of customer caution. The government shutdown was the longest in our history. We have a relatively short-term continuing resolution. So if I say the one end market that we will be cautious in our expectations for this year will be that one. It's not a large part of our total revenue, about 8%. But I would expect until we get the budget passed, customers will be a little bit cautious, and then you'll see spending increase once we get the budget finalized.

Okay. That's helpful. Maybe let's talk capital deployment here. So Marc, it's been a very active year on the M&A front. You acquired the Solventum assets, the Sanofi site, now the announced acquisition of Clario. Can you just maybe walk us through why Clario was the right strategic fit for Thermo? And looking ahead, how should we think about your appetite for further M&A or potential divestitures?

Yes. So when I think about our M&A strategy and the priorities, right? It's a very simple strategy. It's been consistently applied, which is an acquisition has to strengthen the company strategically, meaning it has to have a very logical and clear fit. It has to be appreciated by our customers so that when they read it, they don't need our explanation of why we did it, right? They get it intuitively on why it's a good fit and that our shareholders are excited by the acquisition because it's going to generate strong returns in terms of the expected IRRs and ROICs that we're going to generate from those acquisitions.

And at the same point in time, we always characterize risk of acquisitions, and we don't do transactions that we think have binary risk, right? We buy businesses with -- where we can clearly understand what the risks are associated with them so that we can deliver against our commitments to our stakeholders. And Clario is an awesome business, right? It is a business that is incredibly well-respected technology provider to moving clinical development forward, providing the endpoints you need to determine the safety and efficacy of the medicine. And we know this business incredibly well. As a large CRO, we use all of the providers of endpoint solutions, right?

So we understand fundamentally who the players are and Clario is phenomenal. And it is a nice complement to our Labs business, which is the fourth of the endpoint that are used in clinical research. And that will allow us ultimately to have a tech stack for our customers that will provide an even better approach for them to be able to advance their clinical research. So we're very excited about it. We expect it to be $0.45 accretive in the first year of ownership and be accretive to growth and margins for the company.

Maybe we can close on the financial framing you laid out in mid-2025. You outlined expectations for 3% to 6% organic revenue growth in '26 and '27, followed by 7% plus growth in 2028 and beyond. So Marc, why is 3% to 6% the right range for the next 2 years? And what gives you confidence in achieving that 7% plus longer-term growth rate? And then just quickly on margins as well, what are the key drivers of expansion over the next 2 years as you commit to a level of above your prior algorithm?

Yes. So in the middle of the year, coming out of some of the changes in the market, there was a wide range of views of what the environment was. And given our experience and given our customer relationships, we felt that it would be helpful to our investors to outline how we would see the environment play out. And as we looked at the different factors, we saw the progression of improvement in the end markets. And what we assumed is that it would be methodical, right? And it doesn't mean it won't be faster than that. We said over the next couple of years, meaning this year and next year, we would expect the range of growth to be 3% to 6% in terms of the top line for us.

And embedded in that is our continued focus on meaningful share gains. So meaning that you have kind of low single-digit market growth is what we were assuming, but improving as the quarters progressed. And we felt that, that was a reasonable floor on what the outlook was. And then as we exit that period, we believe that the long-term fundamentals in the industry are such that for us to be able to return to 7% plus organic growth is -- we're extremely confident in our ability to do that.

And in that mid-single-digit growth environment, we wanted our investors to know that we're focused on driving great operational income growth or operating income growth and really manage the company actively. And with the 50 to 70 basis points of margin expansion each year and the mid- to high single-digit EBITA growth, complement that with additional capital deployment, it allows for a very attractive EPS growth environment in this period.

We don't have a perfect crystal ball, right? And we hold ourselves accountable every quarter to delivering outstanding performance. So if we're conservative, then you'll see us raise our expectations. But our confidence to be able to operate within that range is extraordinarily high. And I think that's very helpful to our shareholders to kind of know what the base case is, if you will, going forward. So we're excited about it. The PPI Business System will drive and our colleagues will drive that margin expansion and earnings growth, and we're very excited for the year ahead.

Great. Well, we have less than a minute here. Just quickly, Marc, what are you most excited for, for 2026 for Thermo Fisher?

Getting going, right? And it's -- we have an awesome opportunity and an incredible team, and this is our year. So thank you, Casey.

Great. Well, thank you, Marc. Thank you, Thermo Fisher. Thank you, everybody, for joining us today. Enjoy the rest of the conference.

Good morning, ladies and gentlemen, and welcome to the Thermo Fisher Scientific 2025 Third Quarter Conference Call. My name is Claire and I will be coordinating your call today. [Operator Instructions]

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, our Chairman, President and Chief Executive Officer; and Stephen Williamson, Senior Vice President and 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 February 1, 2026. A copy of the press release of our third 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 within the meaning of applicable securities laws. 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 reports on Form 10-K and Form 10-Q under the heading Risk Factors. These forward-looking statements are based on our current expectations and speak only as of the date they are made. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even in the event of new information, future developments or otherwise.

Also, during this call, we will be referring to certain financial measures not prepared in accordance with Generally Accepted Accounting Principles or GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the press release of our third quarter 2025 earnings and also in the Investors 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 third quarter call. As you saw in our press release, we delivered an outstanding quarter that included excellent operational performance, reflecting our active management of the company. Strong execution from our team with ongoing focus meaningfully advanced a number of our customer relationships. And we made significant progress advancing our proven growth strategy, which continues to strengthen our foundation and build an even brighter future for our company.

So first, let me recap the financials. Our revenue grew 5% in the quarter to $11.12 billion. Our adjusted operating income grew 9% to $2.59 billion. Adjusted operating margin expanded by 100 basis points to 23.3% and we grew adjusted EPS by 10% to $5.79 per share. Our performance in the third quarter enables us to raise our full year guidance.

Now turning to our end markets. In Pharma and Biotech, we delivered another order of mid-single-digit growth. Performance in the quarter was led by our Bioproduction and Analytical Instruments businesses as well as our research and safety market channel.

Turning to academic and government. Revenue declined in the low single digits, representing a modest improvement versus last quarter. To provide some additional context, conditions in the U.S. in this end market were similar to Q2. In Industrial and Applied, revenue grew in the mid-single-digit store in the quarter, representing a nice sequential step up. Performance in the quarter was led by our Electron Microscopy business as well as our research and safety market channel.

Finally, in Diagnostics and Healthcare, revenue growth improved over Q2, though it remained down low single digits for the quarter, largely due to conditions in China. Highlights in this quarter included strong growth in our Transplant Diagnostics and Immunodiagnostics businesses.

Wrapping up my comments on end markets, our team executed very well to capture the opportunities during the quarter.

Let me turn to our growth strategy, which consists of 3 pillars: high impact innovation, our trusted partner status with customers and our unparalleled commercial engine. Starting with innovation. It was another excellent quarter for our company. Our new offerings demonstrate our continued leadership and further enable our customers to unlock scientific breakthroughs, advanced precision medicine and enhance productivity in their labs. In clinical next-gen sequencing, we continue to expand our offerings strengthening our ability to help clinicians and researchers advance targeted care for patients. The Oncomine Dx Express Test on our Ion Torrent Genexus Dx Integrated Sequencer received FDA approval as a companion diagnostic for a targeted therapy used to treat non-small cell lung cancer and for broader tumor profiling applications.

We also introduced the Oncomine Comprehensive Assay+ on the Genexus System providing clinical research labs with an all-in-one comprehensive genomic profiling solution that delivers next-day results. This capability provides clinical researchers with faster, more actionable insights to advance precision medicine.

For proteomics, we launched the Olink Target 48 Neurodegeneration panel to advance research into conditions such as Alzheimer's, Parkinson's and Multiple Sclerosis. The new panel helps address the need for reliable detection and measurement of biomarkers that can unlock insights into these and other complex neurological diseases, while also enabling researchers to monitor disease progression and therapeutic responses.

In Analytical Instruments, we unveiled 2 new electron microscopes at the recent Microscopy and Microanalysis Conference. These include the Thermo Scientific Talos 12 transmission electron microscope. This powerful new platform built on our popular Talos line and delivers exceptional image quality and ease of use for structural and cellular analysis and biological research, pathology and drug development. We also introduced the Thermo Scientific Scios 3, focused ion beam scanning electron microscope, engineered with advanced automation, precision and ease of use, this instrument accelerates material science research and supports the development of new materials used across clean energy, aerospace, and digital devices.

In Chromatography and Mass Spectrometry, we launched Chromeleon 7.4, the first enterprise-ready compliance-focused software platform that unifies chromatography and mass spectrometry workflows. This system offers centralized secure data management and remote access across labs empowering regulated biopharma, clinical and environmental labs to streamline workflows, improve their productivity and accelerate scientific decision-making. This launch is a great enabler for both our mass spec and chromatography instruments.

Let me give you a quick update on our trusted partner status and our unparalleled commercial engine. We have a unique relationship with our customers. One that has been earned over many years through a relentless focus on anticipating, understanding and meeting their needs. Our trusted partner status provides us with unique insights to guide our strategy and continually strengthen our capabilities. At the same time, our entry leading commercial engine enables us to deliver those capabilities at scale. I'll share a few highlights of the actions we've taken recently to deliver even greater value to our customers and position our company for the future.

One example is our strategic collaboration with OpenAI. The collaboration is focused on 2 broad areas. The first opportunity is to embed these capabilities into our products and services to make an even bigger impact for our customers. And the second opportunity is to make Thermo Fisher even more productive. As part of this collaboration, we are embedding OpenAI advanced technology into critical areas of our business, including product development, service delivery, customer engagement and operations. Our initial focus is on clinical research to help improve the speed and success of drug development, ultimately enabling customers to get medicines to patients faster and more cost effectively. We are deploying these capabilities to improve the cycle time of clinical trials. We'll also look to leverage OpenAI's capabilities to unlock value in our deep repository of data and experience to enable customers to focus on the most promising opportunities in their drug development pipelines.

To enable the second focus area, we've launched ChatGPT Enterprise internally across the company to drive productivity, innovation and ultimately, smarter customer engagement. I'm really excited about the ways Thermo Fisher and OpenAI, 2 innovation leaders will work together to make a real difference in advancing science and bringing new medicines to patients.

Another good example of our trusted partner status this quarter was the recently announced strategic partnership with AstraZeneca Bioventure hub in Gothenburg, Sweden. This partnership will leverage the combined expertise of Thermo Fisher in AstraZeneca to drive innovation and strengthen the life sciences ecosystem. A dedicated team from Thermo Fisher will co-locate with AstraZeneca scientists to work on collaborative R&D projects with an initial focus on chromatography, molecular genomics and proteomics. And it was also great to celebrate the grand opening of our Manufacturing Center of Excellence in Mebane, North Carolina this quarter. A high-volume, low-cost facility, this site was developed with support from the U.S. government and is capable of producing at least 40 million laboratory pipette tips per week to support Life Science Research and Diagnostic Laboratories and adds to the U.S. national supply chain resilience.

So wrapping up our growth strategy. This was an excellent quarter, where our actions strengthened our industry leadership today and positions our company for an even brighter future.

Moving on now to capital deployment. We also had a very active quarter successfully executing our proven capital deployment strategy, which, as you know, is a combination of strategic M&A and returning capital to our shareholders. In September, we completed our acquisition of our Filtration and Separation business from Solventum, which is now part of our Life Sciences Solutions segment. As you know, this business expands our bioprocessing offering for Pharma and Biotech as well as industrial filtration capabilities. The integration is progressing smoothly and the early feedback from our customers has been incredibly positive.

We also closed our acquisition of the Ridgefield, New Jersey sterile fill-finish site from Sanofi, expanding our U.S. drug product manufacturing. This is an excellent addition to our industry-leading sterile fill-finish network within our Pharma Services business. At this site, we'll continue to manufacture a portfolio of Sanofi's therapies, and we'll invest in additional production lines to meet the growing demand for U.S. manufacturing from our Pharma and Biotech customers as they re-shore more activity to the U.S.

Also in the quarter, we repurchased $1 billion of our shares. This brings our total repurchases to $3 billion for the year. So overall, a very active quarter for capital deployment. We have a company culture based on continuous improvement through our PPI business system, which once again was a key enabler of outstanding execution. We made great progress in the quarter, leveraging PPI to manage our cost base and deliver very strong earnings growth. The PPI Business System continues to drive great impact, and with the OpenAI collaboration, it will have even more impact going forward. The practical application of AI will enhance our colleagues' ability to find a better way, increasing our productivity and improving the customer experience.

As I reflect on the quarter, I'm proud of what our team has accomplished and grateful for their contributions to our success.

Let me now turn to our guidance. Given our strong performance in the quarter, we're raising both our revenue and earnings guidance for 2025. Stephen will take you through the details in his remarks and I'll cover the highlights. We're raising our revenue guidance to a new range of $44.1 billion to $44.5 billion and raising our adjusted EPS guidance to a range of $22.60 to $22.86 per share.

So to summarize our key takeaways from Q3. This was a terrific quarter. We delivered excellent operational execution, reflecting consistent and active management of the company and the power of the PPI business system, which resulted in outstanding earnings growth. We continue to advance our growth and capital deployment strategies. And we're raising our full year guidance and remain confident in our midterm and long-term outlook and the proven strength of our strategy to create meaningful value for our shareholders and continued success for our company.

With that, I'll now hand the call over to our CFO, Stephen Williamson. Stephen?

Thanks, Marc, and good morning, everyone. I'll take you through an overview of our third quarter results for the total company then provide color on our 4 business segments and I'll conclude by providing our updated 2025 guidance.

Before I get into the details of our financial performance, let me provide you with a high-level view of how the third quarter played-out versus our expectations at the time of our last earnings call. In Q3, our team executed really well and delivered results significantly ahead of what we'd assumed at the midpoint of our prior guidance on both the top and bottom line. Q3 reported revenue was approximately $300 million ahead of what we'd included in the midpoint of the prior guide, driven by stronger FX tailwinds, a benefit from our recent acquisitions and a slight beat on organic revenue. The beat on the bottom line was even more significant. We delivered $0.30 of adjusted EPS ahead of what was included in the midpoint of our prior guide for Q3. $0.11 of that beat was from a lower impact of tariffs and related FX than had been assumed in the prior guide. $0.20 of the beat was from very strong operational performance, and this was partially offset by a $0.01 of dilution from the recent acquisitions.

So to summarize, in Q3, we once again delivered excellent operational performance. Let me now provide you with some additional details on Q3. Starting with earnings per share. In the quarter, adjusted EPS grew 10% to $5.79. GAAP EPS in the quarter was $4.27, in line with the prior year quarter. On the top line, Q3 reported revenue grew 5% year-over-year, that included 3% organic revenue growth, a 1% contribution from acquisitions and a 1% tailwind from foreign exchange.

Turning to our organic revenue performance by geography. In Q3, North America grew low single digits. Europe and Asia Pacific both grew mid-single digits with China declining mid-single digits. With respect to our operational performance, we delivered $2.59 billion of adjusted operating income in the quarter, an increase of 9% year-over-year, and adjusted operating margin was 23.3%, 100 basis points higher than Q3 last year. The very strong earnings results reflect our active management of the business and the power of our PPI Business System. Total company adjusted gross margin in the quarter was 41.9%, 10 basis points higher than Q3 last year. We delivered very strong productivity, which enabled us to fund strategic investments to further advance our industry leadership and offset the impact of tariffs and related FX and unfavorable mix.

Moving on to the details of the P&L. Adjusted SG&A in the quarter was 15.5% of revenue. R&D expense was $346 million in Q3, reflect our ongoing investments in high-impact innovation. R&D as a percent of our manufacturing revenue was 6.9% in the quarter. Looking at our results below line. Our Q3 net interest expense was $113 million, as expected, the adjusted tax rate in Q3 was 11% and average diluted shares were $378 million, approximately $5 million lower year-over-year, driven by share repurchases, net of option dilution.

Turning to free cash flow and the balance sheet. Year-to-date cash flow from operations was $4.4 billion and free cash flow was $3.3 billion after investing $1 billion of net capital expenditure. Q3 was a very active quarter of capital deployment. We deployed approximately $4 billion of capital through the acquisition from our Filtration and Separation business from Solventum and the sterile fill-finish site from Sanofi. In addition, we repurchased $1 billion of shares during the quarter and returned $160 million of capital through dividends. We ended the quarter with $3.5 billion in cash and short-term investments and $35.7 billion of total debt. Our leverage ratio at the end of the quarter was 3.2x gross debt to adjusted EBITDA and 2.9x on a net debt basis.

Concluding my comments in our total company performance. Adjusted ROIC was 11.3% reflecting the strong returns on investment that we're generating across the company. I'll provide some color on our performance of our 4 business segments.

In Life Sciences solutions, Q3 reported revenue in this segment increased 8% versus the prior year quarter and organic revenue growth was 5%. Growth in this segment was led by our Bioproduction business, which had another quarter of excellent growth. Q3 adjusted operating income for Life Sciences Solutions increased 15% and adjusted operating margin was 37.4%, up 200 basis points versus the prior year quarter. During Q3, we delivered very strong productivity and volume leverage, which was partially offset by unfavorable mix, strategic investments and the impact of the acquisition of our Filtration and Separation business, which is included within this segment.

In the Analytical Instruments segment, reported revenue increased 5% and organic revenue growth was 4%. Growth in the quarter was led by electron microscopy and chromatography and mass spectrometry businesses. In this segment, Q3 adjusted operating income decreased 5% and adjusted operating margin was 22.6%, down 230 basis points versus the year ago quarter, but this was a sequential improvement from Q2 2025. The majority of the year-over-year margin change was driven by the impact of tariffs and related FX. Outside of that impact, strong productivity was partially offset by strategic investments and unfavorable mix.

Turning to Specialty Diagnostics in Q3 reported revenue grew 4% year-over-year and organic revenue growth was 2%. In Q3, growth in this segment was led by Transplant Diagnostics and Immunodiagnostics businesses. Q3 adjusted operating income for Specialty Diagnostics increased 10% and adjusted operating margin was 27.4%, 150 basis points higher than Q3 2024. During the quarter, we delivered strong productivity and volume leverage.

Finally, in the Laboratory Products and Biopharma Services segment reported revenue increased 4% and organic revenue growth was 3%. Growth in the segment was led by our Research and Safety market channel. The runoff of pandemic-related revenue had a 1% impact on the revenue growth in segment in the quarter. Q3 adjusted operating income in the segment increased 12% and adjusted operating margin was 14.5%, 100 basis points higher than Q3 2024. In the quarter, we delivered very strong productivity which is partially offset by unfavorable mix and strategic investments.

To change to guidance, as Marc outlined, we're raising our 2025 full year guide on both the top and bottom line, reflecting our continued active management of the company. Let me provide you with the details. We're raising our revenue guidance to an expected range of $44.1 billion to $44.5 billion. Organic revenue growth at the midpoint of the guide continues to be 2% for the full year, and as a reminder, that includes a 1 point of headwind from the run-up of pandemic-related revenue. We're increasing our outlook for adjusted operating margin in 2025 to a new range of 22.7% to 22.8%. And we're raising our adjusted EPS guidance to a new range of $22.60 to $22.86. The increase at the midpoint of the guidance range reflects $420 million higher revenue than the prior guide, driven by the benefit of our recent acquisitions and an increase in the tailwind from FX.

From an earnings standpoint, the increase in the midpoint of the guide reflects 20 basis points of improved adjusted operating margin expansion and $0.20 of higher adjusted EPS. This change includes $0.05 of dilution from the recent acquisitions. We'll continue to actively manage the company and drive excellent operational performance, once again, enabling us to increase our guidance for the year.

I'll now move on to an update of some of the modeling elements for the full year. Our guidance now includes the impact of the recently closed acquisitions. These deals added $260 million to revenue to our prior full year guide, $20 million adjusted operating income, and as I mentioned earlier, $0.05 of adjusted EPS dilution. In terms of tariffs, our guidance reflects the tariffs that are currently in place as of today. This includes the increase in tariff rates between the U.S. and Europe that occurred since the time of our last guidance. The changes in tariffs and trade policy once again caused intra-quarter volatility in FX rates in Q3. As a result, FX in Q3 was $220 million revenue tailwind to our prior guide and a $0.10 adjusted EPS headwind. So for the full year, we now expect FX to be a year-over-year tailwind to revenue of $230 million and a headwind to adjusted operating income and adjusted EPS of $110 million and $0.37, respectively.

Below the line, we now expect net interest expense to be approximately $440 million in 2025, and we continue to expect an adjusted tax rate of 10.5% for the full year. We expect between $1.4 billion and $1.7 billion of net capital expenditures and around $7 billion of free cash flow for the year. Then in terms of capital deployment, our guidance now assumes that we deploy $7.6 billion of capital in 2025, $4 billion on the recently closed acquisitions, $3 billion on already completed share buybacks and $600 million of capital returned to shareholders through dividends. And finally, we estimate the full year average diluted share count will be approximately 378 million shares.

So to conclude, we delivered an excellent Q3 and we're in a great position to deliver on our 2025 objectives.

With that, I'll turn the call back over to Raf.

Thank you, Stephen. So with that, let's get started for the Q&A portion of the call.

[Operator Instructions] Our first question comes from Michael Ryskin from Bank of America.

Congrats on another strong print, guys. I'll start just on market conditions and what you're hearing and what your customers, Marc? I mean a lot has changed since we last were on the 3Q call, especially on Pharma. There's been a lot of progress and, I would say, de-escalation on some of the MFN and tariff concerns with Pharma. So just wondering if anything has changed in your conversations with your major customers over the last couple of weeks and months? Talk of reshoring longer-term. Could you just talk about how Thermo would benefit from that, both from a facility build-out perspective, but also from Patheon and some of the other Pharma services and your fill-finish capacity in the U.S. just sort of how that come up in conversations.

Mike, thanks for the question. Very topical. So in terms of our dialogue with our pharma and biotech customers. As you know, we're very engaged, right, with this customer set, the senior executives. And if I say what are they focused on probably is the first thing, right? There's a lot of excitement around scientific breakthroughs. A lot of confidence actually in their pipelines, and they're partnering with us to help them drive their success.

As we talk about the actual environment, right, which is a part of how you think about the world and the decisions they make, there's a quiet confidence actually that they're going to be able to navigate the government policies effectively. And you're seeing that in some of the announcements that have been made on pricing as well as on re-shoring more activity in the U.S. in terms of not being exposed to potential tariffs. On that dynamic, what I would say is we're very engaged in helping those customers think about new sites, how to best equip them and support our customers in that effort. And that will benefit our channel business, it will benefit our Bioproduction business, our Analytical Instruments businesses. It will all benefit from those new construction. And that's really a large '27, '28 by the time ground is broken on new things for expansions within existing facilities, it could be a little bit faster than that. So that is something we're actively engaged in, but it takes some time to gestate.

More rapidly than that, and in a way, more cost effectively for our customers is leveraging our Pharma Services network to be able to move more of their volume to the U.S. You know that we are the industry leader in drug products, sterile fill-finish. We have very strong capabilities here. We've had very strong demand for those capabilities and our arrangement with Sanofi where we acquired one of their sites, gives us another production node in the U.S. that is well-trained, great workforce and the ability to expand that facility as well. So we're excited to be able to enable our customers and Pharma Biotech has been a good environment for us. So thanks, Mike.

That's all really helpful. And then maybe on the academic and government front, I mean, I think you called out a low single-digit line in the quarter. It seems like slight improvement from last quarter, but a lot of updates there as well. It looks like we're on track for hopefully flat NIH budget next year, which is encouraging, but on the other hand, you've got government shut down over the last couple of weeks now. So just give us an update on what you're hearing there? Is there any risk from the government shutdown starting to hurt some of that potential recovery in A&G and just sort of how you think about that playing out?

Yes. So Mike, when I think about academic and government in the quarter, the improvement was really slightly better in Europe. U.S. was very similar. China was very similar to what we experienced in Q2 and both of those markets have headwinds, obviously, different drivers of those headwinds, and when I think about -- so -- and government shutdown is kind of post-quarter, so I'll talk about that in a moment. But if I see what's going on in the environment in Q3 in the U.S. customers actually feel better about the idea of a more stable funding environment.

Obviously, we'll have to get a budget in place and all of those things. But I think there's more consensus around relatively a flattish budget. And I think that we'll remove a headwind over time as the market stabilizes once we get that funding in place. So I actually say from that perspective, while the conditions were muted, I would say, actually, the noise or the -- it's less noise, no way it feels a little bit better.

On government shutdown, the way I would say is obviously post-quarter, we're in the middle of it right now. I think it adds a little bit to customer hesitancy, right? It does add some uncertainty. And it obviously will delay some expenditures directly by the U.S. government as well on the things that they actually purchase we put into our implied guidance range for the fourth quarter, a reasonable set of outcomes based on the government shutdown and based on our own experience and how we think it's playing out and feel well positioned to navigate that. So that's how we thought about it at this point in time.

Our next question comes from Tycho Peterson from Jefferies.

Marc, I want to maybe unpack some of the Analytical Instrument strengths. Certainly better than we've been modeling. I appreciate your comments on academic and pharma, but maybe just a little bit more color? Is this mostly mass spec? Is it Cryo-EM, any particular segments that are emerging? And I guess, importantly, how do you think about kind of momentum on Analytical Instruments in the year-end? Any thoughts on budget flush and '26 at this point? Obviously, a little bit too early to see a real pickup from on-shoring it sounds like.

Yes. So Tycho, thank you for the question. So the team has been doing a good job in our Analytical Instruments business. I'm proud of the efforts. The innovation that we've been talking about is really being incredibly well adopted, right? So I say what is one of the drivers. It's a great launches in both mass spec and cryo-electromicroscopy, it makes a real difference. And many of you have heard me say over the years, irrespective of funding environments because they ebb and flow over time, if you have relevant innovation and you think about what our customers are actually doing, they're doing their life's work with this innovation. And if they don't have the best tools, effectively, they're really wasting their time.

And because of that, you see an incredibly resilient and entrepreneurial set of customer is getting funding. So the team has done a good job in that respect, and I'm proud of the mid-single-digit growth that we delivered in the quarter. When I think about what drove it, it's really electromicroscopy and chromatography and mass spectrometry were the drivers. We still have headwinds in our chemical analysis business. It was a little better than the previous quarter but still pressure in some of the industrial and environmental segments. So largely, the 2 big businesses drove the strong performance.

When I think about the momentum going into the fourth quarter, really, the only thing that's different. We have a much stronger comparison in the fourth quarter. We had very strong high single-digit growth last year. So comparison is different. So that really is the -- will be the factor, but the underlying health of the business is quite good.

Great. And then a follow-up on Diagnostics. You did flagged China. Obviously, this has been a pressure point for some of your peers in China Diagnostics. Maybe just give us a sense of what's going on, on the ground there? What would Specialty Diagnostics have done ex that China drag? And then overall, I guess, just what are your assumptions around China for the remainder of the year and early '26?

Yes. So when I think about our Specialty Diagnostics business, we provide high-value, medically relevant critical testing, right? And you think about that it's transplant diagnostics, it's immunodiagnostics, it's our protein diagnostics, which is our multiple myeloma business, which is part of our Clinical Diagnostics business, our biomarkers for sepsis. These are just critical capabilities and businesses that are a healthy long-term set of prospects.

When I think about the environment in China, we have a much smaller presence than the market average for the Diagnostic businesses in China in terms of what we do. So we saw very weak conditions based on the pricing and reimbursement environment. It's not different than what we expected and those pressures flow through, but it's a relatively modest proportion of our business. And we saw a little bit of improvement relative to the prior quarter in terms of what the growth rate was in the business. So I think we're well positioned there over time and not much beyond that, I would say.

Our next question comes from Jack Meehan from Nephron Research.

First question Marc, just wanted to test your pulse. Last quarter, you gave some initial framing thoughts around 2026 and kind of progression around the 3% to 6% organic growth. I guess just based on everything you've seen and the dialogue that you've had with customers, it would just be great to get your latest thoughts on how you felt like you were tracking relative to that?

Yes. So when I think about the progression and the midterm outlook and the long-term outlook, we feel very good about that, right? So nothing has changed about our confidence in the next couple of years, 3% to 6% organic is the right level of assumptions and strong operating margin and operating income growth coming out of that. So that's consistent.

When I think about the first few agreements on MFNs between the pharmaceutical companies and the government in the U.S., that's what we expected to happen. So that's a good thing, right, which is we expected that companies or the vast majority of companies would navigate environment successfully. You're seeing the early ones do that and that gives us confidence that the market conditions will continue to progress. I think it's worth remembering that today, we're basically at 2% organic, and it's about 1 full-point of headwind from the COVID runoff which doesn't -- which won't repeat next year. So we're kind of running at the 3% range.

And over time, over this next couple of year period, the absence of negatives, meaning that academic and government won't decline as much. China, at some point, will stabilize. That in and of itself without even improvement in market conditions ultimately get us higher in the range and then ultimately, continued share gain and market conditions will get us further and further in the range over time. So I feel very good about the position. I think for Stephen, it's worth commenting on a couple of things that have changed, which are still a little bit more color.

Yes, yes. So Jack, a couple of things to think about when you're doing the modeling for '26. So based on current FX rates, there will be a tailwind to revenue of a couple of hundred million dollars. Obviously, monitor how rates change between now and the end of the year, we'll give more details in terms of the current view in early '26. And then in terms of the recent M&A, maybe worth actually taking a step back and giving a little bit more detail on kind of the implications for the current guide for '25 and some stores in terms of modeling for you going forward.

So starting with the Filtration and Separation business, revenue for this business for the full year 2025, not just the period we own it, but as I think about the full calendar year, expected to be just under $750 million in scale, so a good-sized business. When I think about going forward, the revenue growth there will be likely around or above the average for the company going forward. So a good growing business. For the first 12 months of ownership, we continue to expect the transaction to be $0.06 dilutive just under half of that is occurring in 2025, and then we're bringing this company -- this business into the company is a low double-digit margin business and that quickly gets up to mid-teens and above once the integration standup costs are behind us.

At that point, strong top line growth, including strong synergies, will be nicely accretive to both margins and earnings for the business.

Then moving to the Sanofi site acquisition. This comes with as Marc mentioned, an existing book of business from Sanofi, approximately $75 million. And over the next couple of years, we're investing in additional lines that will drive much stronger utilization of that site going forward. And as we go through the investment phase over the first 12 months of ownership, we expect the transaction to be dilutive by about $0.05. As you get into '27, the revenue and profitability builds nicely as the new lines start to generate revenue there. So hopefully, that's some good color that will help you with modeling in.

Yes, that was all great. I wanted to follow up and talk about the Clinical Research business. Marc, just any additional color you can share on trends in new authorizations? How you feel like pharma customers are feeling about getting back to work on trials? And any just color around traction there would be great.

Jack, thanks for the questions. They never stop working. It's really -- the business has progressed really well. I'm very, very proud of how the team is executing. The year has played out strongly. When I think about Q3, revenue growth stepped up. So we're growing in the quarter. Remember, we were just slightly positive in Q2. We're back to low single-digit growth. Authorization is incredibly strong. So well ahead of that. So that positions that step-up that we're expecting over time is playing out nicely.

We're also innovating in what we do in Clinical Research, right? And if you think about why that's relevant is because it is the lifeblood of the pharmaceutical and biotech industry is to be able to improve the speed and efficiency of the drug development process because that creates opportunities to improve the ROI on drug development, which creates a virtuous cycle of more investments by our customers. A couple of examples in the clinical research business where one is actively being implemented.

We talked about Accelerated Drug Development about a year ago. We're winning significant business. It's resonating incredibly well because what it's allowing us to do is shave time and cost out for our customers and leveraging our capabilities of not only our CRO business, but also our Pharma Services business to help our customers bring exciting medicines to market.

The OpenAI collaboration is what we're creating together and what's new, right, which is we're deploying artificial intelligence in a way to help improve the cycle time of our clinical trials, and we're co-creating new capabilities, right, in terms of effectively leveraging the large repository of data that we have to be able to add new value to our customers. So it's in a super exciting time. In our Clinical Research business and the business is progressing nicely during the course of this year.

Our next question comes from Dan Arias from Stifel.

Marc, maybe just following up on your Biopharma comments. I'm just curious whether demand from smaller emerging biotech is getting any better from where you sit? I mean, obviously, the BTK index is doing better, but I'm wondering if spending is loosening up at all?

Yes. So Dan, in terms of biotech, I'm sure it was a strong quarter, right? When I look at what was going on sort of in a little more detail. We really saw a very nice momentum in our Clinical Research business. Some of the early activities in Pharma Services, obviously, in Pharma Services can be smaller dollars as you get going. But -- there was a really nice progression there, which I feel good about. So I think that is encouraging. I actually think some of the M&A transactions that were done by large pharma acquiring biotech also helps sort of the ecosystem more broadly. So if I say, not only do the equities perform better, but I think also you're seeing deal activity and that deal activity ultimately will help drive a reinvestment cycle or cycling in of new capital to the market over time. So I think Q3 was a nice progression from that perspective.

Yes. Okay. That's great. And then maybe just taking the other side of Tycho's China question as it relates to pricing and just the initiatives that they have going on over there to control price. The diagnostics markets are evolving, obviously, but what are you seeing on the research and industrial side. Is that fluid in a way that you think introduces some additional risk? Or do you kind of have your hands around the pricing dynamic such that you can think about it being stable into year-end or into the beginning of '26?

Yes, Dan, thanks for the question. So maybe if I step back on China, right? Because we've been able to deliver strong growth around the world now for some period of time, China has become a smaller percentage of the company's total. It's still an important market but smaller.

When I look at what's going on in China, academic and government does benefit from some of the stimulus programs, but relatively pressured as the government has tried to manage its own economic challenges, which are meaningful. But what was encouraging was that Pharma Biotech grew in the quarter modestly, but it was nice to see that happen. When I think about the quarter, we declined in the mid-single digits. That was an improvement versus Q2. Really, the difference over those trends was we had that month of [ cession ] of trade activities back in the April timeframe, that absence really allowed us to have a bit more moderate declines. I would expect China for this year, full year to be down between mid- and high single digits.

The pricing dynamics, less government affected in the industrial sector in Pharma and Biotech. They are more private enterprises or state-backed enterprises, but they don't have the same reimbursement dynamics that you could see in the diagnostics and healthcare market. So that's a bit more manageable.

Our next question comes from Dan Brennan from TD Cowen.

Marc and Stephen. Maybe, Marc, just going back to the on-shoring announcements since there's been a tremendous focus in the investor community, how to think about that. You gave a lot of color already in response to some questions. But I was hoping you can elaborate a little bit on 2 parts. First is, we ultimately think like kind of CapEx and capacity following drug volumes. So if drug volumes aren't necessarily changing. Just trying to understand how to think about like what will be incremental in the U.S. versus kind of that wasn't there before. So any way to help us think about that at this point?

I know you talked about for the greenfield, that would come with time, maybe like '27 and beyond. Just trying to think about that. And then I know you did talk about maybe more near-term, maybe some of the brownfield, there could be some equipment uptake in '26. Any way to kind of frame sizing, magnitude or just any way to kind of contemplate what this could mean for Thermo Fisher?

Yes. So Dan, thanks for the question. So when I think about what is the aggregate dynamic, let's all what the dollars are for us, but just what's going on? It is true incremental onetime demand. right? And what I mean by that is there's going to be new equipment, new initial stocking inventory, new labs, all these things. I mean none of these things are material in itself, but -- but you just go through that process of getting a facility online, you do qualification runs. You just -- there's just a bunch of activity that will generate demand over the next few years.

But the volume in the industry hasn't changed, right? So it is really incremental in terms of that start-up. But effectively, it doesn't mean that your ongoing consumables business grows more quickly because you're producing the exact same amount of medicines around the world, you're just producing in different sites.

So from that perspective, it's kind of an unexpected positive over the next few years. We have a strong presence there. And interestingly enough, we have a much stronger presence today than when those facilities were built many years ago in Europe, right? Just if you think about how strong our production business is, how strong the capabilities we're bringing in from Solventum and Filtration, the product launches around DynaSpin, which is our bioreactor technology. These are great things that position us to actually have a higher share in the new facilities than the existing installed base.

I feel very good about the prospects. Can we do it site by site in terms of what the opportunity is. So I don't have a good number to say how big is it in total, but should be a tailwind a bit in Bioproduction. What I would say is our Bioproduction business is doing incredibly well, right? So when I was able to look at a few of the companies that have reported, very strong growth in Thermo Fisher, clearly faster than what the others have reported, broad-based strength geographically across our different businesses there. Really, the team did an excellent job bookings outpacing the strong teens growth and revenues is really the team is just doing great work. So it's an exciting business for us and one with great momentum in the market.

Terrific. And then just a follow-up, maybe to Stephen, just on the EPS impact on tariffs, could you just kind of level set? I know you gave the impact in the quarter and you said you mark-to-market the European tariffs, but you had the $0.50 potential from China. I think you recaptured some of that. Could you just kind of bottom line, like how much ultimately kind of the tariff changes occurred and kind of what's happening in 4Q?

Yes. So thanks, Dan. So when I think about the tariffs and the kind of the actual experience in Q3 came in favorably to what we've had in the prior guide. In my prepared remarks, I called out the $0.11 pickup, and that's a combination of tariffs and the related FX in terms of the changes in those kind of tariff and trade environment.

Looking to Q4, given the tariffs increased, i think from the time of last guide, most materially between U.S. and Europe. Our initial view is that kind of the assumptions we had around tariffs pretty much hold for Q4. So I'm not expecting a significant pickup in Q4. That's kind of how we've kind of framed the guidance for -- in terms of this update.

Our next question is from Andrew Cooper from Raymond James.

Maybe just first, would love a little bit more color on the contract research side of the house. And maybe in particular, how that accelerator bundled program has gained traction and kind of layering that into the context of all the discussion that's already occurred in terms of onshoring, how that changes the applicability of the customers and how they look at that kind of wrap around 360 partnership versus CRO and CDMO kind of separately historically?

Yes. So Andrew, thank you for the question. So when I think about accelerator, right, we are one of the largest Clinical Research organizations. We are also one of the largest Pharma Services organization that's developing medicines on the physical side from early development all the way through commercial scale production, both in drug substance and drug product and all of the physical clinical trials activities around there. So we are touching these pipeline, these molecules in many different ways. And a hypothesis that we had at the time of deciding to acquire PPD back in 2021 was that there would be insights and capabilities that could streamline the way the companies develop medicines and how they produce them ultimately.

We didn't bake that into our models, but we had a strong hypothesis. We spent a couple of years doing a significant number of co-creation with our customers, to bring that to life. We launched the official capabilities a year ago, and the adoption has been very strong. You see it very aggressively in biotech because effectively, they outsource pretty much all of their work, right? So when they think about it, they are looking for a partner that can help them bring insights, not only in how to design and execute their trials. But also, how do you develop and produce the medicines, and it's been very compelling and it's built us a nice book of authorizations.

That turns into revenue over time, right? It takes a while for this to flow through the pipeline. And in large pharma, there's been great interest in our leading clinical trials, the physical capabilities, the logistics packaging, distribution of experimental medicines. And what that has allowed us to do is to continue to drive share gain momentum because, again, there the linkages with clinical research shaves time and cost out of the process as well. So it's been -- it's early days, but they've been very positive.

That's helpful. And then maybe just 1 kind of financial question. $0.20 operational beat in 3Q, you had the FX and tariff tailwinds as well. But you're raising the range about $0.20 in the midpoint as well. Maybe what's going on to offset some of that operational traction as we think about 4Q? Is it reinvestment? Is it a little bit of mix? Is there something different to think about now and we have that $0.05 of dilution in the acquisitions you called out as well? Just would love a little bit of color on kind of 3Q to 4Q.

Yes. Andrew, so we peaked by $0.30 in Q3. As you mentioned, we have $0.05 of additional dilution from the acquisitions. And overall, $0.20 raise at the midpoint given where we are in the year, how we're performing, what the end markets are like, I think this -- on an even stronger raise on the low end of our guide, I think that's a good position to be in as we think about going into the fourth quarter. We're in a good position for us to finish the year. I don't overread into -- we're raising our guidance by $0.20 in the midpoint. We're significantly raising on the low end. I think that's a strong statement. Thanks, Andrew.

Our next question comes from Patrick Donnelly from Citi.

Marc, maybe one for you on just the capital allocation side. You obviously continue to buy back stock as you talked about. Can you just talk about the M&A appetite, what the discussions look like? Any areas you're focused on? I know you guys always have a good pulse on that front. So just curious what the appetite there looks like in the conversation. And I just have a quick follow-up.

Yes. So we have been active all year, right? We've deployed about 7.5 -- a little over $7.5 billion, $4 billion on M&A, $3.5 billion on return on capital through buybacks and dividends. We have a very busy pipeline. It's exciting. I like this environment because there are good companies that struggle in environments where it's all about execution. And so we're busy and we're looking at some interesting things.

Obviously, those things will always fit well with our strategy. It's going to be whether we can generate really good returns. And for those that we feel good about, you'll see us continue to be active. And there are many parts of the company given how fragmented our industry is, to expand our offerings that would be highly valued for our customers. So we're going to execute well against what we closed and at the same point in time, continue to look for great opportunities to build more value.

Okay. That's helpful. And then as we look ahead, it seems like the exit rate for 4Q is somewhere at 2% or 3% organic. Obviously, you talked a little bit about 26% last quarter. Is the view that growth just continues to accelerate throughout next year? It sounds like China is turning the corner to a degree, Pharma sounds a little bit better. I guess, what segments are holding you back, if any, in terms of when you look at what's improving right now? And again, as that acceleration happens next year, what are the key drivers? And what are you looking for to still turn the corner?

We are looking forward to our call at the beginning of the year to give you all the details. We'll benefit from, obviously, the perspective on how we exit the year. And our view is, over the next couple of years, growth is going to build over time, and I'm very excited about exiting this year with a couple of percent organic and 3% when you have the non-repeats of the final bits of COVID runoff. So we entered the year at a good part, and we're going to execute really well and turning the revenue growth into excellent, excellent earnings growth and like we did in the quarter and finish up on a great note in '25 and set ourselves up for a great '26 and beyond.

So Patrick, thank you for the final question. Let me wrap up. Thanks, everyone, joining us on the call today. We're very pleased to deliver another strong quarter. We're well positioned to deliver differentiated performance in 2025 and continue to create value for all of our stakeholders and build an even brighter future for our company. We look forward to updating you on the fourth quarter and the full year performance early in 2026. And as always, thank you for your support of Thermo Fisher Scientific. Thanks, everyone.

This concludes today's call. Thank you all for joining. You may now disconnect your lines.

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Perfect. Good afternoon, everyone. This is Rachel Vatnsdal from the Life Science Tools and Diagnostics team here at JPMorgan. I'm joined today by Marc Casper, CEO of Thermo Fisher Scientific as a part of our JPMorgan CEO Call Series. So as we typically do with this, this will be Q&A focused. It will be roughly 30 minutes. So thank you again for everyone on the line for joining us.

So Marc, thank you as well for joining us today. I wanted to kind of kick off the discussion with just kind of a lay of the land and state of the union. Obviously, this has been a really dynamic time for the broader life science tools industry, not only from a fundamental standpoint, but also from a policy perspective, the last 9 months with the new administration.

So can we get your perspective on the overall market environment, how Thermo is uniquely positioned within that? And then why should investors feel confident and excited about the opportunity within Thermo?

Rachel, thanks for doing this today. And yes, so when I think about the environment, the state of the union, if you will, I think it starts with where are we with performance, right? And Q2 was strong performance. We were able to raise our outlook. And you see the active management of the company in terms of not only focusing on driving share gain, but also on the cost management side of the equation so that we deliver strong performance, and we're excited about that.

When I think about from the dynamic environment perspective, things are starting to play out in a way that are predictable, and you're seeing that step up slowly in the growth rates of the industry as well. And across the industry, largely, it was a reasonable quarter as well in terms of the market conditions.

So that is also encouraging because I think one of the things that's great about our industry, if you take a long perspective, is the predictability around it. So from that perspective, we feel good about it. And I think about what did we do the day after earnings call because I think it brings a little bit to life about the environment.

So I actually traveled to Greenville, North Carolina, where we have our largest drug product facility and was meeting with the executive team of one of our largest customers at the site and where we produce a lot of medicines for them. And we talked about the environment, right? And how are they thinking about navigating the environment and great enthusiasm about the opportunities ahead in their own pipeline as a large pharmaceutical company, but also some of the changes in policies and how they want to rely on Thermo Fisher to take advantage of production in the United States, where we can collaborate in an efficient way to help them navigate this environment successfully.

So when we talk about things like trusted partner, which I'm sure we'll talk about, to be able to literally start the cycle for Q3 and our customers are just rolling up their sleeves with us and looking for new opportunities to work even more closely together, I'm quite enthusiastic about what lies ahead.

Perfect. I wanted to dig into some of the end market discussion. So maybe going off of some of the policy uncertainty. I think academic and government is an area that touches on that a lot. Academic and government is roughly 7% to 8% of Thermo Fisher's revenues.

So can you walk us through how is performance within that end market tracked so far relative to your expectations? How are you thinking about your assumptions for the back half of the year? And then has your perspective on the outlook for NIH funding on 2026 changed at all given some of the recent developments and also some of the new funding mechanisms that we're hearing about things like multiyear funding rates as well?

Yes. So when I think about the academic and government end markets in the U.S., it's about 7% to 8% of our total revenue. And in the first half of the year was down mid-single digits in terms of the performance. What we've embedded in our guidance is that it gets a little bit weaker for the balance of the year, and that's been consistent for the last couple of quarters.

And the view is that customers' hesitancy as they figure out exactly where their budgets are, how funding is getting released, that there'll be some level of caution through that, and that seems to be a reasonable assumption. When I think about -- we've had the opportunity to have quite a bit of interactions with the administration in this area.

There's a very clear understanding of the importance of innovation in this country to our economic health and job creation and America standing in the world. So there's actually a very high level of commitment to having policies that will foster strong investments and innovation in the country.

So actually, in the midterm, I actually feel good about where direction will go. And when I think about the budget process and that's going on, it is very much as I saw it at the end of Q2, where you see that both in the House proposal, the Senate proposals, relatively flattish budgets is what's being proposed. And that stability in budget should allow for an environment that actually over time is actually going to be better than what we're facing right now. As you get to more of a flattish environment, that actually will become a tailwind for us going forward.

Got it. That's helpful. Maybe what about pharma biotech? This is your largest end market. It's roughly 60% of your revenues at Thermo. So can you remind us of the performance this past quarter? And really what were the drivers within that pharma biotech segment? We have a lot of ongoing questions regarding tariffs, MFNs, some of the funding volatility within biotech as well. So what are you hearing from customers? And again, remind us how does Thermo serve these customers across the pharma and biotech end market across the entire value chain?

Yes. So we had a very strong performance in Q2. We had mid-single-digit growth serving pharma and biotech, a nice organic versus the prior year, a nice step-up in growth versus the prior quarter. So you're seeing that market continue to improve. And it was very broad-based for us in terms of the strength. We had very, very strong performance in bioproduction.

We had very strong growth in Pharma Services. You saw clinical research turn to slightly positive growth with very strong authorizations performance. So -- and the channel did very well, right? So when I look across our business, we really serve this customer base from facilitating what goes on in early research in the labs, right, all of the reagents and chemicals and equipment and consumables, we equip the labs and restock them all the way through we design and execute the clinical trials on the clinical development side.

We help our customers develop the physical molecule in terms of our drug -- our Pharma Services business, all the way through commercial scale up and actually from a physical standpoint, also help them supply the medicines in all of the studies that they do. So a very strong set of capabilities in serving that customer base, and we're seeing that picking up nicely, and that bodes well for the future.

The tone, I mean, there's a lot that the customer base is absorbing in terms of exactly how pricing mechanisms are going to work and what does the tariff environment mean for them from a production standpoint. And when I sit down with executives in the customer base, it's actually remarkably positive, right?

It's not that there won't be challenges and that there won't be issues, but they feel good about their ability to work with government to help shape policies and ultimately feel like they will come through this period successful. And probably part of that is because they're very confident in their pipelines, right?

The science is good. The medical understanding is good, and they actually feel that they're going to bring new medicines to market. When I was thinking about my own experience, right, during the course of August, I had the opportunity to spend a meaningful time with the leadership at the FDA, really just discussing what their vision is and understanding that.

And they're looking to make the approval process of medicines more streamlined, effective so that patients that are waiting for hope and a cure can get those medicines. They want it to be safe. They want to make sure it's effective. But the interest in doing it in a better way, I think, is incredibly compelling for what that will create for our industry.

Perfect. That's helpful. You mentioned Pharma Services. I wanted to dig into a few of your businesses here. So with your CDMO business, can you update us on how that has performed year-to-date relative to your expectations? How you're thinking about the back half and also the visibility into 2026?

Another topic I wanted to touch on here was just the idea of this administration's focus on domestic manufacturing. You mentioned the Sanofi acquisition from earlier this year. So how should we think about the opportunity within Pharma Services going forward here?

Yes. So Pharma Services was a real highlight in Q2. We had high single-digit growth in the business. And when I think about the outlook here, we have an incredibly strong position in sterile fill-finish in the drug product side of incredibly important for biologics, for the GLP-1s and any of the injectables.

And we're the leader in all of the clinical trials, logistics, packaging, distribution of medicines where we have a very high share as well. And the demand has been incredibly robust, right? Customers trust us. They see our leading set of expertise. So we've had very strong new wins in that business, expansions of relationships.

And when we talk about trusted partner, in a certain respect, it is not only to help them with the biggest challenges that a pharmaceutical company is trying to work through, but it creates new opportunities. And the Sanofi example is a good one because we have a good long-standing relationship there. They have a high-quality drug product site in North America. It's underutilized, but a very talented team producing critical medicines.

And they sold it to us at a win-win for both companies where we would give them assurance of supply of their medicines and be able to leverage that site by expanding its capacity to serve the market. And given the real focus on moving medicines from outside the U.S. to the U.S., it is a great way of cost effectively serving the market by leveraging the existing footprint, just adding some lines, scaling up the facility. It's going to have really great returns for the company and solve some of the challenges that our clients are facing right now.

Along those same lines in terms of services assets, your CRO business. So the clinical research, you saw really sustained momentum within the second quarter. It was slightly above positive growth for the quarter. And you noted strong authorization activity. So can you talk about -- you maintained that outlook of the flattish organic revenue growth for the year, returning to positive growth in the back half.

So what trends you're really seeing within those pharma biotech customers within the CRO? Can you give us some color on book-to-bill exiting the quarter? And then what's driving that strong authorization momentum here? And how should we think about that as we look into '26?

Yes. So Rachel, when I think about our CRO capabilities, actually, the year has been playing out as we expected, right? And there's been obviously lots of investor questions across the industry about the CRO space. But it is a business with a reasonable level of predictability.

You have a view within the pipeline. And the team has done a good job of executing against its plans. And what has been really compelling is the impact of our accelerated drug discovery set of capabilities or drug development capabilities. And there, it's leveraging our knowledge and insights from both being one of the largest clinical research organizations and also one of the largest clinical development organizations, but how do you take time out of the clinical development process.

And that is allowing us to win a lot more business. And when we talk about the strong authorizations growth, you saw authorizations start to pick up in some of the larger players in the industry, and we did very favorably relative to that. So the trends are very encouraging. And it's a long-cycle business. So that really means that you see that in '26 and '27 in revenue, but those authorizations position us well.

But we've seen great strength there. Biotech really benefits from the accelerator drug development capabilities because they are, in a way, smaller and it's easier for them to fully capitalize on what are we developing for them and then the actual clinical research process, and we're seeing really great momentum there. We have great strength in pharma, and that continues to progress well.

Perfect. And just book-to-bill color, if you had any color on that one.

Yes. It's well over 1. We don't give out the exact number, but it was a very strong performance.

Okay. Great to hear. Last business I wanted to touch on was just Analytical Instruments. So can you walk through how did organic revenue growth in the second quarter track relative to your expectations? And what stood out across some of those individual businesses?

One question that I think we're getting on is electron microscopy, where growth seemed to be below trend given it had been such a strong performing business in prior quarters. And then looking ahead, how do you kind of see growth playing out within the Analytical Instruments business? You also highlighted some of the product releases at ASMS. So what excites you about some of those introductions? How are customers kind of viewing innovation at this part of the CapEx cycle?

Yes. So there's a lot to that question. First of all, I think at the highest level, our Analytical Instruments business played out in Q2 as we expected. It's the business that has the most headwinds from the market conditions because it has a large presence in China, and it has a large academic presence, right?

So when you think about funding, we were expecting more muted conditions, and we declined in the mid-single digits and in line with what we would have expected for Q2. When I look at the -- in the quarter, we had a very strong set of product launches. And because we typically play at the higher end of the instruments business, the $1 million price point on really breakthrough innovations.

The interesting thing is that it's not that correlated with funding. When you have a really relevant innovation, customers actually get the money, right? And if I think about the 2 mass spectrometers that we launched at ASMS, the next generation of the Astral -- Orbitrap Astral Zoom, demand has been incredibly strong.

And same thing, we're seeing real interest in the Excedion as well. And we also launched our next-generation cryo-electron microscope and the order book is very strong there. So when you really bring out relevant innovation, customers get the money. So I feel good about that. Electron microscopy largely played out as we expected and largely because of the comparisons. We had -- in the prior year, we had double-digit growth. And I think that part of explained the particular dynamic in Q2.

Makes sense. You touched on China. It's not a tools fireside chat if we don't dig into China.

Yes. Absolutely.

So you mentioned organic growth within the region declined high singles in the second quarter. How did that play out relative to your expectations? And can you walk us through some of the specific factors that are impacting those results? Also, I know you've traveled to China recently. So what are you hearing from customers and the team in the region? And how should we think about demand in China going forward?

Yes. So I think, Rachel, starting with the context, about 8% of our revenue. It's an important market. We have about -- on a percentage basis, about half the average exposure to the industry. So normally, that would be a liability. Right now, it seems to be a positive, right, in terms of the environment.

We declined high single digits in the quarter. And that was actually a bit favorable to what we expected because in the beginning of the -- at the end of Q1, that was really the area where tariffs were so high that it was almost like a trade stoppage, and that quickly rolled out. So versus our expectations, China was actually a little bit better.

But holding aside the tariff environment, the market growth is pressured, right? And when I think about that right now in the instrument business, it really has been -- customers are still in that recovering economic situation and really has been cautious on spending. I got to spend a week in China in the -- at the end of July into early August, had lots of meetings with both customers, our team and then with the very senior members of government.

And what I came away with is a couple of things. One is our 40-plus years of history in the country really serves us well, right? We have incredibly strong relations. We're a trusted supplier to the customer base. And in an environment where there's a lot of noise and tension, that history helps us in terms of navigating it.

So I feel good about our ability to continue to be successful in China, and we'll see good opportunities there. And I also come away with customers are still in that recovery mode. They don't yet have that full confidence. And our expectation is that while China market conditions are going to improve in the not-distant future, it's more about flattening out, if you will, than it is robust growth in the short term.

That makes sense. Shifting to capital deployment. You even announced that you closed the Solventum deal earlier this week. So can you walk us through what you guys are seeing from an M&A pipeline currently? How should we think about size and just mix of deals as well? And then as you look across Thermo's current businesses, do you see any meaningful gaps that you'd like to address inorganically?

Yes. So when I think about capital deployment, I always -- the strategy has been consistently executed for a very long period of time. And it's around -- for M&A, it's following a disciplined criteria of does the transaction strengthen the company strategically? Does it help our customers and want to be valued by our customers? And does it generate strong returns for our shareholders in terms of strong returns on invested capital, strong internal rates of return so that we are creating value.

And our track record here is excellent. We are incredibly disciplined. We look at many transactions. We pick a few. You're here in a perfect week because we closed 2 transactions this week, both Solventum, as you noted, and the Sanofi transaction, both closed at the beginning of the week. When I think about those transactions, the tangible ones, these are ones that our customers are excited by. I already talked about the Sanofi one.

On Solventum, we have a very strong position in bioproduction. This adds filtration to the capabilities. Our customers are excited to build out the presence further with us, and we will take a very strong position and make it an even faster-growing business over time. So we're excited about that.

When I look to the future, we have an active pipeline. We have a strong balance sheet. We serve a very fragmented market. And you'll continue to see us actively evaluate the opportunities out there. And when the right ones generate the right returns, you'll see us continue to be very active in terms of capital deployment.

So I feel good about what our pipeline looks like and our ability to continue to build out our portfolio and capabilities. And that will be incredibly valued by our customers. Our customers are excited when we add new capabilities because it helps them have even more opportunity to achieve their goals and leverage a trusted partner.

And are there any gaps in the portfolio that you currently...

Yes. I don't really think so much as gaps as I think about how do we strengthen our offering, right? We have an incredibly strong set of positions in the vast majority of what we do, we're the #1 or #2 player in the market. So I think about there are opportunities in our Specialty Diagnostic businesses. There are opportunities in our Life Sciences Solutions business to continue to build out our product offerings there. So...

That's helpful. Shifting to some financial questions. So you guys gave us a lot of information on the second quarter earnings call in terms of financial framing. You laid out expectations of 3% to 6% organic growth in 2026 and 2027 and then 7-plus percent organic growth in 2028 and beyond.

So can you walk us through why is 3% to 6% the right range for the next 2 years? And what gives you confidence in achieving that 7-plus percent long term? And then also on margins, I think this is an area that comes up a lot. What are the key drivers of the margin expansion in the next 2 years? And how should we think about margin progression in the context of that 7-plus percent long-term growth?

So Rachel, when we thought about going into the Q2 call, what we wanted to do was give our best view of what does the shorter-term environment look like and how are we managing the company. And today, when you look at where are we operating at, we're operating around the 3% range on an organic perspective.

And while we don't have a crystal ball as exactly 8 quarters ahead, over the next couple of years, assuming that the conditions are similar, just the absence of the negatives, meaning that academic and government stabilizes even at 0, that the authorizations that we're winning in clinical research just flows into revenue and that China slowly stabilizes from meaningful declines of mid-single-digit decline to getting a bit better, you move very progressively through the 3% to the 6% range, right?

And so we understand that the world doesn't have to be particularly different to operate within that range. And with that assumption, we want to deliver really strong earnings growth. And we're putting our time about driving the productivity and the cost management to actively manage the company so that this is a great place to invest, right? And which is why we talked about the mid- to high single-digit earnings growth before capital deployment because in this environment that we are in right now, that's what we're going to focus on.

Obviously, if there's more growth opportunities, we're going to seize them, right? So it's not that [ NAH ]. But when we think about it, we see the opportunity to drive compelling investment returns in this environment. Our belief is that the fundamentals of our industry, the demand for health care, the unmet health care needs is compelling. What's going on in the understanding of science within our pharmaceutical and biotech customers drives the market growth and the opportunity.

So do we believe that 7% plus is the right midterm growth of the business? We do, right? And our view is that what's embedded in that is that the market growth returns to around 4% and that we continue to drive share gain of the 2 to 3-plus points on top of that. And we feel that from our experience in the industry and understanding our customer dynamics that, that's a very reasonable set of assumptions for the not-too-distant future.

So we'll be able to deliver very strong earnings growth off of both of those top line scenarios. And when I think about margins, in the shorter term, we think that the 50 to 70 basis points of margin expansion seems like the right set of objectives. And then longer term, you're probably in that 40, 50 basis points when you're in that 7% plus because you're at a slightly higher reinvestment rate cycle if the markets are supporting the higher growth rates.

Yes. That's helpful. Maybe just in the final few minutes here, just in closing, what do you think is the most underappreciated aspect of the Thermo Fisher story today?

Yes. So when I think about the reflections on the company, actually, it's one of the few times where I say that we haven't yet articulated to our investors just how compelling of an investment Thermo Fisher is. When I think about the strength of our market position, the long-term fundamentals that are attractive in our industry and the proven track record of just consistently gaining share, executing a growth strategy and a capital deployment strategy that works, this is an incredibly exciting time.

And we're going to manage the company very actively in the short term to deliver great results while strengthening for an even brighter future down the road as well. So this is really an exciting time. Our customers are enthusiastic about working with us and the opportunities we have to help them navigate this environment successfully in a way that they will thrive and we'll be behind the scenes helping them do that and seizing new opportunities. And so it's an incredibly exciting time at the company, and it's one that we're leaning in, in an incredible way to make sure that we do a great job for our customers and create meaningful shareholder value for our investors.

That sounds great. With that, we are unfortunately out of time. So Marc, thank you so much for joining us today. And everyone on the line, thank you for joining as well. Hope you have a great rest of your afternoon.

Thank you, Rachel.

Welcome, and thank you for standing by. I would like to inform all participants that this conference call as well as any Q&A may be recorded. Where a company is presenting, any recording may also be posted on their website. Views and opinions expressed by any external speakers on this call are those of the speakers and not of JPMorgan. Parts of this conference call may be reproduced in JPMorgan Research. If you have any objections, you may disconnect at this time. Unless otherwise permitted by internal JPMorgan policy, members of JPMorgan Investment and Corporate Banking are not permitted on this call and should disconnect now.

I would now like to turn the call over to your host.

Perfect. Good afternoon, everyone. This is Rachel Vatnsdal from the Life Science Tools & Diagnostics team here at JPMorgan. I'm joined today by Marc Casper, CEO of Thermo Fisher Scientific as a part of our JPMorgan CEO Call Series.

So as we typically do with this, this will be Q&A focused, will be roughly 30 minutes. So thank you again for everyone on the line for joining us. So Marc, thank you as well for joining us today.

I wanted to kind of kick off the discussion with just kind of the lay of the land and state of the union. Obviously, this has been a really dynamic time for the broader life science tools industry, not only from a fundamental standpoint, but also from a policy perspective, the last 9 months with the new administration. So can we get your perspective on the overall market environment, how Thermo is uniquely within that? And then why should investors feel confident and excited about the opportunity within Thermo?

Rachel, thanks for doing this today. And yes, so when I think about the environment, the state of the union, if you will, I think it starts with where are we with performance, right? And Q2 was strong performance. We were able to raise our outlook. And you see the active management of the company in terms of not only focusing on driving share gain, but also on the cost management side of the equation so that we deliver strong performance, and we're excited about that.

When I think about from the dynamic environment perspective, things are starting to play out in a way that are predictable, and you're seeing that step up slowly in the growth rates of the industry as well. And across the industry largely, it was a reasonable quarter as well in terms of the market conditions. So that is also encouraging because I think one of the things that's great about our industry, if you take a long perspective, is the predictability around it.

So from that perspective, we feel good about it. And I think about what did we do the day after earnings call because I think it brings a little bit to life about the environment. So I actually traveled to Greenville, North Carolina, where we have our largest drug product facility and was meeting with the executive team of one of our largest customers at the site and where we produce a lot of medicines for them. And we talked about the environment, right, and how are they thinking about navigating the environment. And great enthusiasm about the opportunities ahead in their own pipeline as a large pharmaceutical company, but also some of the changes in policies and how they want to rely on Thermo Fisher to take advantage of production in the United States, where we can collaborate in an efficient way to help them navigate this environment successfully.

So when we talk about things like trusted partner, which I'm sure we'll talk about, to be able to literally start the cycle for Q3 and our customers are just rolling up their sleeves with us and looking for new opportunities to work even more closely together, I'm quite enthusiastic about what lies ahead.

Perfect. I wanted to dig into some of the end market discussion.

Sure.

So maybe going off of some of the policy uncertainty, I think academic and government is an area that touches on that a lot. Academic and government is roughly 7% to 8% of Thermo Fisher's revenues. So can you walk us through how is performance within that end market tracked so far relative to your expectations? How are you thinking about your assumptions for the back half of the year? And then has your perspective on the outlook for NIH funding on 2026 changed at all given some of the recent developments, and also some of the new funding mechanisms that we're hearing about, things like multiyear funding grants as well.

Right. Yes. So when I think about the academic and government end markets, in the U.S., it's about 7% to 8% of our total revenue. And in the first half of the year, it was down mid-single digits in terms of the performance. What we've embedded in our guidance is that it gets a little bit weaker for the balance of the year, and that's been consistent for the last couple of quarters. And the view is that customers' hesitancy as they figure out exactly where their budgets are, how funding is getting released, that there'll be some level of caution through that. And that seems to be a reasonable assumption.

When I think about -- we've had the opportunity to have quite a bit of interactions with the administration in this area, there's a very clear understanding of the importance of innovation in this country to our economic health and job creation and America's standing in the world. So there's actually a very high level of commitment to having policies that will foster strong investments and innovation in the country.

So actually, in the midterm, I actually feel good about where direction will go. And when I think about the budget process and that's going on, it's very much as I saw it at the end of Q2, where you see that both in the House proposal, the Senate proposals, relatively flattish budgets is what's being proposed. And that stability in budget should allow for an environment that actually over time is actually going to be better than what we're facing right now. As you get to more of a flattish environment, that actually will become a tailwind for us going forward.

Got it. That's helpful. Maybe what about pharma/biotech? This is your largest end market. It's roughly 60% of your revenues at Thermo. So can you remind us of the performance this past quarter? And really, what were the drivers within that pharma/biotech segment? We have a lot of ongoing questions regarding tariffs, MFN, some of the funding volatility within biotech as well. So what are you hearing from customers? And again, remind us how does Thermo serve these customers across the pharma and biotech end market across the entire value chain.

Yes. So we had a very strong performance in Q2. We had mid-single-digit growth serving pharma and biotech, a nice organic versus the prior year, a nice step-up in growth versus the prior quarter. So you're seeing that market continue to improve. And it was very broad-based for us in terms of the strength. We had very, very strong performance in bioproduction. We had very strong growth in Pharma Services. You saw clinical research turn to slightly positive growth with very strong authorizations performance, and the channel did very well, right?

So when I look across our business, we really serve this customer base from facilitating what goes on in early research in the labs, right, all of the reagents and chemicals and equipment and consumables. We equip the labs and restock them, all the way through we design and execute the clinical trials on the clinical development side. We help our customers develop the physical molecule in terms of our drug Pharma Services business, all the way through commercial scale-up. And actually, from a physical standpoint, also help them supply the medicines in all of the studies that they do. So a very strong set of capabilities in serving that customer base, and we're seeing that picking up nicely, and that bodes well for the future.

The tone, I mean, there's a lot that the customer base is absorbing in terms of exactly how pricing mechanisms are going to work and what does the tariff environment mean for them from a production standpoint. And when I sit down with executives in the customer base, it's actually remarkably positive, right? It's not that there won't be challenges and that there won't be issues, but they feel good about their ability to work with government to help shape policies and ultimately feel like they will come through this period successful. And probably part of that is because they're very confident in their pipelines, right? The science is good, the medical understanding is good, and they actually feel that they're going to bring new medicines to market.

When I was thinking about my own experience, right, during the course of August, I had the opportunity to spend a meaningful time with the leadership of the FDA, really just discussing what their vision is and understanding that. And they're looking to make the approval process of medicines more streamlined, effective so that patients that are waiting for hope and a cure can get those medicines. They want it to be safe. They want to make sure it's effective. But the interest in doing it in a better way, I think, is incredibly compelling for what that will create for our industry.

Perfect. That's helpful. You mentioned Pharma Services. I wanted to dig into a few of your businesses here. So with your CDMO business, can you update us on how that has performed year-to-date relative to your expectations, how you're thinking about the back half and also the visibility into 2026? Another topic I wanted to touch on here was just the idea of this administration's focus on domestic manufacturing. You mentioned the Sanofi acquisition from earlier this year. So how should we think about the opportunity within Pharma Services going forward here?

Yes. So Pharma Services was a real highlight in Q2. We had high single-digit growth in the business. And when I think about the outlook here, we have an incredibly strong position in sterile fill-finish in the drug product side of incredibly important for biologics, for the GLP-1s and any of the injectables. And we're the leader in all of the clinical trials, logistics, packaging, distribution of medicines where we have very high share as well. And the demand has been incredibly robust, right? Customers trust us. They see our leading set of expertise. So we've had very strong new wins in that business, expansions of relationships.

And when we talk about trusted partner, in a certain respect, it is not only to help them with the biggest challenges that a pharmaceutical company is trying to work through, but it creates new opportunities. And the Sanofi example is a good one because we have a good long-standing relationship there. They have a high-quality drug product site in North America. It's underutilized but a very talented team producing critical medicines. And they sold it to us at a win-win for both companies, where we would give them assurance of supply of their medicines and be able to leverage that site by expanding its capacity to serve the market.

And given the real focus on moving medicines from outside the U.S. to the U.S., it is a great way of cost effectively serving the market by leveraging the existing footprint, just adding some lines, scaling up the facility. It's going to have really great returns for the company and solve some of the challenges that our clients are facing right now.

Yes, for sure. Along those same lines in terms of services assets, your CRO business. So the clinical research, you saw really sustained momentum within the second quarter. It was slightly above positive growth for the quarter. And you noted strong authorization activity. So can you talk about, you maintained that outlook of the flattish organic revenue growth for the year, returning to positive growth in the back half. So what trends are you really seeing within those pharma/biotech customers within the CRO? Can you give us some color on book-to-bill exiting the quarter? And then what's driving that strong authorization momentum here? And how should we think about that as we look into '26?

Yes. So Rachel, when I think about our CRO capabilities, actually, the year has been playing out as we expected, right? And there's been obviously lots of investor questions across the industry about the CRO space. But it is a business with a reasonable level of predictability. You have a view within the pipeline. And the team has done a good job of executing against its plans. And what has been really compelling is the impact of our accelerated drug discovery sort of capabilities, our drug development capabilities.

And there, it's leveraging our knowledge and insights from both being one of the largest clinical research organizations and also one of the largest clinical development organizations, but how do you take time out of the clinical development process. And that is allowing us to win a lot more business. And when we talk about the strong authorizations growth, you saw authorization start to pick up in some of the larger players in the industry, and we did very favorably relative to that.

So the trends are very encouraging. And it's a long cycle business, so that really means that you see that in '26 and '27 in revenue, but those authorizations position us well. But we've seen great strength there. Biotech really benefits from the accelerator on drug development capabilities because they are in a way smaller and it's easier for them to fully capitalize on what are we developing for them and then the actual clinical research process, and we're seeing really great momentum there. We have great strength in pharma, and that continues to progress well.

Perfect. And just book-to-bill color, if you had any color on that one, book-to-bill.

Yes, it's well over 1. We don't give out the exact number, but it was a very strong performance.

Perfect. Great to hear. Last business I wanted to touch on was just Analytical Instruments. So can you walk through how did organic revenue growth in the second quarter track relative to your expectations? And what stood out across some of those individual businesses? One question that I think we're getting on is electron microscopy, where growth seemed to be below trend given that had been such a strong performing business in prior quarters.

And then looking ahead, how do you kind of see growth playing out within the Analytical Instruments business? You also highlighted some of the product releases at ASMS. So what excites you about some of those introductions? How are customers kind of viewing innovation at this part of the CapEx cycle?

Yes. So there's a lot to that question. First of all, I think at the highest level, our Analytical Instruments business played out in Q2 as we expected. It's the business that has the most headwinds from the market conditions because it has a large presence in China and it has a large academic presence, right? So when you think about funding, we were expecting more muted conditions and we declined in the mid-single digits, in line with what we would have expected for Q2.

When I look at in the quarter, we had a very strong set of product launches because we typically play at the higher end of the instruments business, the $1 million price point on really breakthrough innovations. The interesting thing is, is that it's not that correlated with funding. When you have a really relevant innovation, customers actually get the money, right? And if I think about the 2 mass spectrometers that we launched at ASMS, the next generation of the Astral, Orbitrap Astral Zoom, demand has been incredibly strong. And same thing we're seeing real interest in the Excedion as well. And we also launched our next-generation cryo electron microscope, and the order book is very strong there.

So when you really bring out relevant innovation, customers get the money. So I feel good about that. Electron microscopy largely played out as we expected and largely because of the comparisons. We had -- in the prior year, we had double-digit growth. And I think that part of explained the particular dynamic in Q2.

Makes sense. You touched on China. It's not a tools fireside chat if we don't dig into China.

Yes, absolutely.

So you mentioned organic growth within the region declined high singles in the second quarter. How did that play out relative to your expectations? And can you walk us through some of the specific factors that are impacting those results? Also, I know you've traveled to China recently. So what are you hearing from customers and the team in the region? And how should we think about demand in China going forward?

Yes. So I think, Rachel, starting with the context, about 8% of our revenue. It's an important market. We have about, on a percentage basis, about half the average exposure to the industry. So normally, that would be a liability. Right now, it seems to be a positive, right, in terms of the environment. We declined high single digits in the quarter. And that was actually a bit favorable to what we expected because in the beginning of the -- at the end of Q1, that was really the area where tariffs were so high that it was almost like a trade stoppage, and that quickly rolled out. So versus our expectations, China was actually a little bit better. But holding aside the tariff environment, the market growth is pressured, right? And when I think about that right now in the instrument business, it really has been -- customers are still in that recovering economic situation and really has been cautious on spending.

I got to spend a week in China in the -- at the end of July into early August, had lots of meetings with both customers, our team and then with the very senior members of government. And what I came away with is a couple of things. One is our 40-plus years of history in the country really serves us well, right? We have incredibly strong relations. We're a trusted supplier to the customer base. And in an environment where there's a lot of noise and tension, that history helps us in terms of navigating it. So I feel good about our ability to continue to be successful in China, and we'll see good opportunities there.

And I also come away with customers are still in that recovery mode. They don't yet have that full confidence. And our expectation is that while China market conditions are going to improve in the not-distant future, it's more about flattening out, if you will, than it is robust growth in the short term.

That makes sense. Shifting to capital deployment. You announced that you closed the Solventum deal earlier this week. So can you walk us through what you guys are seeing from an M&A pipeline currently? How should we think about size and just mix of deals as well? And then as you look across Thermo's current businesses, do you see any meaningful gaps that you'd like to address inorganically?

Yes. So when I think about capital deployment, I always -- the strategy has been consistently executed for a very long period of time. And it's around -- for M&A, it's following a disciplined criteria of does the transaction strengthen the company strategically? Does it help our customers and would it be valued by our customers? And does it generate strong returns for our shareholders in terms of strong returns on invested capital, strong internal rates of return so that we are creating value?

And our track record here is excellent. We are incredibly disciplined. We look at many transactions. We pick a few. You're here in a perfect week because we closed 2 transactions this week: both Solventum, as you noted; and the Sanofi transaction both closed at the beginning of the week.

When I think about those transactions, the tangible ones, these are ones that our customers are excited by. I already talked about the Sanofi one. On Solventum, we have a very strong position in bioproduction. This adds filtration to the capabilities. Our customers are excited to build out the presence further with us, and we will take a very strong position and make it an even faster-growing business over time. So we're excited about that.

When I look to the future, we have an active pipeline. We have a strong balance sheet. We serve a very fragmented market. And you'll continue to see us actively evaluate the opportunities out there. And when the right ones generate the right returns, you'll see us continue to be very active in terms of capital deployment.

So I feel good about what our pipeline looks like and our ability to continue to build out our portfolio and capabilities, and that will be incredibly valued by our customers. Our customers are excited when we add new capabilities because it helps them have even more opportunity to achieve their goals and leverage a trusted partner.

And are there any gaps in the portfolio that you currently [ want to talk about ]?

Yes. I don't really think so much as gaps as I think about how do we strengthen our offering, right? We have an incredibly strong set of positions. In the vast majority of what we do, we're the #1 or #2 player in the market. So I think about there are opportunities in our Specialty Diagnostics businesses. There are opportunities in our Life Science Solutions business to continue to build out our product offerings there. So...

That's helpful. Shifting to some financial questions. So you guys gave us a lot of information on the second quarter earnings call in terms of financial framing. You laid out expectations of 3% to 6% organic growth in 2026 and 2027 and then 7-plus percent organic growth in 2028 and beyond. So can you walk us through why is 3% to 6% the right range for the next 2 years? And what gives you confidence in achieving that 7-plus percent long term?

And then also on margins, I think this is an area that comes up a lot. What are the key drivers of the margin expansion in the next 2 years? And how should we think about margin progression in the context of that 7-plus percent long-term growth?

So Rachel, when we thought about going into the Q2 call, what we wanted to do was give our best view of what does the shorter-term environment look like and how are we managing the company? And today, when you look at where are we operating at, we're operating around the 3% range on an organic perspective. And while we don't have a crystal ball as exactly 8 quarters ahead, over the next couple of years, assuming that the conditions are similar, just the absence of the negatives, meaning that academic and government stabilized even at 0, that the authorizations that we're winning in clinical research just flows into revenue and that China slowly stabilizes from meaningful declines of mid-single-digit decline to getting a bit better, you move very progressively through the 3% to the 6% range, right?

And so we understand that the world doesn't have to be particularly different to operate within that range. And with that assumption, we want to deliver really strong earnings growth. And we're putting our time about driving the productivity and the cost management to actively manage the company so that this is a great place to invest, right? And which is why we talked about the mid- to high single-digit earnings growth before capital deployment because in this environment that we are in right now, that's what we're going to focus on. Obviously, if there's more growth opportunities, we're going to seize them, right? So it's not that not. But when we think about it, we see the opportunity to drive compelling investment returns in this environment.

Our belief is that the fundamentals of our industry, the demand for health care, the unmet health care needs is compelling. What's going on in the understanding of science within our pharmaceutical and biotech customers drives the market growth and the opportunity. So do we believe that 7% plus is the right midterm growth of the business? We do, right? And our view is that what's embedded in that is that the market growth returns to around 4% and that we continue to drive share gain of the 2- to 3-plus points on top of that. And we feel that from our experience in the industry and understanding our customer dynamics that, that's a very reasonable set of assumptions for the not-that-distant future. So we'll be able to deliver very strong earnings growth off of both of those top line scenarios.

And when I think about margins, in the shorter term, we think that the 50 to 70 basis points of margin expansion seems like the right set of objectives. And then longer term, you're probably in that 40, 50 basis points when you're in that 7% plus because you're at a slightly higher reinvestment rate cycle if the markets are supporting the higher growth rates.

Yes. That's helpful. Maybe just in the final few minutes here, just in closing, what do you think is the most underappreciated aspect of the Thermo Fisher story today?

Yes. So when I think about the reflections on the company, actually, it's one of the few times where I say that we haven't yet articulated to our investors just how compelling of an investment Thermo Fisher is. When I think about the strength of our market position, the long-term fundamentals that are attractive in our industry and the proven track record of just consistently gaining share, executing a growth strategy and a capital deployment strategy that works, this is an incredibly exciting time. And we're going to manage the company very actively in the short term to deliver great results while strengthening for an even brighter future down the road as well.

So this is really an exciting time. Our customers are enthusiastic about working with us and the opportunities we have to help them navigate this environment successfully in a way that they will thrive, and we'll be behind the scenes helping them do that and seizing new opportunities. And so it's an incredibly exciting time at the company, and it's one that we're leaning in, in an incredible way to make sure that we do a great job for our customers and create meaningful shareholder value for our investors.

That sounds great. With that, we are unfortunately out of time. So Marc, thank you so much for joining us today. And everyone on the line, thank you for joining as well. Hope you have a great rest of your afternoon.

Thank you, Rachel.